Kitron — Earnings Release 2015

Oct 20, 2015

First three quarters and Q3 results 2015

Peter Nilsson, CEO Cathrin Nylander, CFO

October 20th, 2015

Financial highlights Q3:

Sixth consecutive quarter with improved profitability

• Double-digit revenue growth in spite of declining revenues in offshore/marine sector.
• Continued profitability improvement
• EBIT Margin 5.6% (1.8%)
• Defence orders strengthen future position
• Increased operational cash flow

NOK mill.		Q3 2015 vs Q3 2014
Revenue 467,7		22,4 %
EBIT 26,3		283,0 %
Order backlog 915,7		13,5 %
Operating cash flow 32,7		435,5 %
Net working capital 540,8		10,8 %

Financial highlights first three quarters: Significantly improved profitability and cash flow

• Double-digit revenue growth in spite of declining revenues in offshore/marine sector.
• Earnings stabilized on higher level since fourth quarter 2014.
• EBIT Margin 4.8% (1.2%)
• Significantly improved cash flow

NOK mill.		2015 vs 2014
Revenue 1427,3		11,9 %
EBIT 69,1		339,9 %
Order backlog 915,7		13,5 %
Operating cash flow 116,3		759,1 %
Net working capital 540,8		10,8 %

Major new orders:

Important orders in the third quarter

Long-term agreement with Northrop Grumman Corporation

• Kitron Norway has signed a long-term agreement with Northrop Grumman Corporation to supply subassembly electronic modules for F-35 Lightning II aircraft avionics.
• The agreement is effective through 30 June 2036 and includes rights for future extensions.
• Production will take place at Kitron's site in Arendal.

Kongsberg Defence & Aerospace awards order to Kitron AS

• Kitron Norway has received an order from Kongsberg Defence & Aerospace AS for military communications equipment.
• Kitron will supply various communications products.
• The contract has a value of 56 million NOK for Kitron, for deliveries in 2016. Production at Kitron's plant in Arendal, Norway.

Major new orders:

Important orders in the third quarter

• Kitron Norway signs contract with leading supplier of medical equipment
• The agreement specifies that Kitron for specific products will be supplier for a period of approximately two years from 2016
• In this period the expected turnover related to the contract is between NOK 100 million and NOK 120 million.
• Production to take place at Kitron's plant in Arendal.

Rheinmetall AG, Germany signs agreement with Kitron

• The agreement is for delivery of electronics manufacturing services (EMS), including board assembling (PCBA), box build, test development and high-level assembly.
• The contract has a value of 100 million NOK over a three-year period starting in fourth quarter of 2015.
• Kitron's facilities in both Norway and Lithuania will contribute to the contract.

Financial statements first three quarters and Q3 2015

Revenue Q3:

Defence/Aerospace, Energy/Telecoms and Medical growth offsets decline in Offshore/Marine

	Q3 2015 vs Q3 2014	Share of total revenue
Offshore/Marine	 -60,4 %	3,5 %
Medical equipment	 27,2 %	26,4 %
Defence/Aerospace	 71,4 %	28,1 %
Energy/Telecoms	 51,7 %	16,1 %
Industry	 3,5 %	26,0 %

Strong growth in three out of five market sectors Revenue first three quarters:

	2015 vs 2014	Share of total revenue
Offshore/Marine	 -48,2 %	7,0 %
Medical equipment	 4,2 %	22,9 %
Defence/Aerospace	 58,1 %	28,3 %
Energy/Telecoms	 19,5 %	14,1 %
Industry	 14,8 %	27,6 %

Revenue by country first three quarters*:

Growth in all sectors except from Offshore/Marine

Quarterly EBIT: Sixth consecutive quarter of improved profitability

• Improvement in both nominal value as well as EBIT margin
• Stable sales quarter-on-quarter
• Strong contribution from service sales, both from development and engineering

EBIT by country first three quarters:

Strong improvement

• Norway
• Cost reduction actions continue to yield results
• Sweden
• Significantly improved margins and revenue growth
• Lithuania
• Reduction due to higher indirect cost and pressure on margins
• Other
• China and US continue to contribute positively Norway Sweden Lithuania Others

Balance sheet:

Cash flow improvement

Cash flow

• Q3 Cash flow MNOK 32.7 (-9,7)
• YTD Cash flow MNOK 116 (-17.6)
• Improved profitability

Working capital

• Downwards trend continues
• Cash conversion cycle 105 compared to 115 last year

Market development

Order backlog:

Significant overall growth except from Offshore/Marine

Order Backlog MNOK

• 916 vs. 807 September last year (increase of 13.5%)
• Defence: 392 +8% (361)
• Medical: 178 +20% (148)
• Industry: 223 +44% (154)
• Telecom: 82 +42% (58)
• Offshore: 41 -52% (86)

Definition of order backlog includes firm orders and four month customer forecast

Outlook

Outlook

• For 2015, Kitron expects growth and a clear improvement in profitability.
• Growth is driven by increased demand in Defence sector for US and Norwegian markets, as well as increases in Energy/Telecoms and Industry.
• Offshore/Marine will have reduction due to oil service market in Norway.

Thank you!