While passenger travel across international borders has been subdued due to the pandemic, aviation developments for unmanned vehicles have accelerated with Aussie tech company Orbital Corporation (ASX: OEC) ticking off another milestone of their ambitious drone engine development plans.
Specialists in unmanned aerial vehicles (UAV) for military use, Orbital has strengthened ties with a strategic partner in Singapore (unnamed by Orbital) with the delivery of the second engine system to be used in a multi-fuel unmanned aerial vehicle.
Delivery is part of an echoing agreement which saw the first engine delivered in March 2021, while a third is in construction and expected to be delivered before the end of the year.
This is another major milestone in the engine development program for our prestigious Singapore customer,” said Orbital Managing Director, Todd Alder.
“This program represents an exciting opportunity to develop and commission another world class engine production line from our operations in Australia.”
Given the pandemic’s impact on the global economy which has slowed shipping lanes and reduced international transit activity, interest in drone technology continues to rise. Having developed jet propulsion systems which are lightweight with low fuel consumption, the engines are primarily used in military UAVs. Existing customers include the Australian Army, Royal Australian Navy, Northrop Grumman and Insitu, a Boeing-owned company.
Further interest in their ongoing developments are expected. Once a third engine is delivered to the Singapore customers and their evaluations are completed, there may be an opportunity for Orbital to rollout a production run of the multi-fuel engine.
For FY21, Orbital reported $31.2 million in revenue but a net loss of $11.4 million was attributed to a reduction in orders from Boeing-Insitu and delays caused by engine design revisions. Orbital was also on the wrong end of foreign currency conversions resulting in a $1m loss however the underlying fundamentals remain strong with gross margins on their products sound at 42%.
The Company remains well positioned to be beneficiaries from rising geopolitical tensions and spending within the global defence industry on unmanned aerial systems.
In 2020, global defence spending reached US$1.83 trillion which represented a 3.9% annual increase. Capitalising on these trends which they expect will see evaluation deals converted into production deals, Orbital is targeting a return to net profitability in FY22.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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