Kitron — Earnings Release 2017

Apr 26, 2017

Q1 results 2017

Peter Nilsson, CEO Cathrin Nylander, CFO

26 April, 2017

Financial highlights Q1:

Strong revenue growth and improved profitability

• Strong revenue growth
• Underlying growth 23.1%
• Strong profitability
• EBIT margin 5.3% (4.1%)
• Solid order backlog
• Underlying growth 19.9%
• Net working capital
• Higher capital efficiency
• Low financial gearing
• NIBD / EBITDA 1.3 (1.6)

NOK mill.		Q1 2017 vs Q1 2016
Revenue 585.1		17.7 %
EBIT 30.8		50.5 %
Order backlog 1058.7		17.4 %
Operating cash flow -15.5		38.8 %
Net working capital 553.5		6.0 %

Major new orders:

Important agreements in the first quarter

• Kitron received communications order from KONGSBERG
• Kitron received a NOK 120 million order from Kongsberg Defence Systems (KONGSBERG) for military communications equipment.
• Kitron will supply various communications products, materials kits, technical services and test equipment.
• The contract scope has an estimated value of NOK 120 million, and deliveries will take place from 2017 to 2020.
• Manufacturing and technical services will be provided by Kitron in Arendal.

Major new orders:

Important agreements in the first quarter

Kitron signs contract with Rheinmetall

• Kitron signed an agreement with Rheinmetall MAN Military Vehicles
• The potential contract value is NOK 250 million over a five-year period.
• The agreement covers manufacturing of electronics, measuring instruments and control devices.
• The production will take place at Kitron's plant in Kaunas, Lithuania.

Financial statements Q1 2017

Revenue Q1:

Strong growth in several sectors

Revenue by country Q1*:

Continued strong growth in Lithuania and Sweden

Quarterly EBIT: Profitability level stabilised at a higher level

• Cost reductions take effect
• Inefficiencies due to relocations in Q1 and Q4 2016 and Q1 2017
• Profitability in Q1 2016 includes one-offs of MNOK 5

EBIT by country Q1:

Lithuania and Norway drives profitability

Norway

• Cost reductions drives margin improvement. Relocation Q1 2016.
• Sweden
• Efficiency challenges and relocation
• Lithuania
• EBIT improvement driven by strong revenue growth
• Other
• Revenue growth and improved profitability in China, US has improved profitability due to cost reductions

EBIT*

Balance sheet: Cash flow

• Cash flow
• Q1 Cash flow MNOK -15.5 (-25.3)

Working capital

• Working capital up 6% from last years level
• NOWC (R3*) at 22% a reduction from 24.3%
• Cash conversion (R3*) cycle 80, a reduction from 91 last year
• ROOC (R3*) at 16.2% improved from 11.5% last year

Net working capital

Market development

Order backlog: Solid order backlog

Order Backlog MNOK

• 1059 vs. 902 last year. Increase of 17.4% with 19.9% underlying growth.
• Defence: 466 +16% (401)
• Medical: 143 -4% (149)
• Industry: 295 +22% (243)
• Energy/Telecom: 140 +60% (88)
• Offshore: 14 -36% (21)

Order backlog

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

Outlook

Outlook

• For 2017, Kitron expects revenue to grow to between NOK 2 150 and 2 350 million. EBIT margin is expected to be between 5.6 and 6.4 per cent.
• The growth is primarily driven by customers in the Industry sector.
• The profitability increase is driven by cost reduction activities and improved efficiency.

Thank you!