Kitron — Earnings Release 2018

Oct 19, 2018

Kitron: Q3 2018 - Strong order growth, including oil and gas

Kitron: Q3 2018 - Strong order growth, including oil and gas

(2018-10-19) Kitron today reported quarterly figures that show continued growth

and improved earnings per share despite challenges on the component market

Kitron's revenue for the third quarter was NOK 563 million, an increase of 5 per

cent compared to last year. The order backlog increased by 27 per cent on a

comparable basis.

Profitability expressed as EBIT margin was 5.3 per cent in the third quarter.

Peter Nilsson, Kitron's CEO, comments:

"We continued on our growth path in the third quarter, delivering the highest

third quarter revenue in the company's history. I am especially pleased that we

were able to do this in the face of industry-wide problems with component

availability and some postponed customer programs. The excellent order intake

during the quarter strengthens our confidence in the coming months and quarters.

We maintain our 2018 outlook and our strategic targets for 2020."

Continued revenue growth

Kitron's revenue in the third quarter amounted to NOK 563 million, compared to

535 million in the same quarter last year. Revenue growth compared to the same

quarter last year was particularly strong in the Industry market sector.

Marine/Offshore is now growing, albeit from a very low level. Defence/Aerospace

declined. As previously reported, Defence/Aerospace will fluctuate, and growth

is expected to resume in 2019. Excluding the Defence/Aerospace market sector,

revenue growth in the third quarter was 18 per cent compared to last year.

Strong order intake and backlog

The order backlog is noticeably affected by the implementation of the new

accounting standard IFRS 15. Without the effect from implementation of IFRS 15,

the backlog would have been NOK 1 279 million, which equals a growth of 27 per

cent. Due to the IFRS 15 implementation, the booked order backlog ended at NOK

1 123 million.

Early signs of increasing activity among customers in the oil and gas industry

have led to a substantial backlog increase in the Marine/Offshore market sector,

although the absolute numbers are still low.

Improved earnings per share

Third quarter operating profit (EBIT) was NOK 30.0 million, compared to 29.2

million last year. EBITDA was NOK 42.7 million, compared to 42.6 million last

year.

Net profit amounted to NOK 21.8 million, an increase of 33 per cent. This

corresponds to earnings per share of NOK 0.12, compared to NOK 0.09 last year.

Inventory build-up to secure deliveries and future growth

Net working capital increased by 35 per cent compared to the same quarter last

year to NOK 605 million. Operating cash flow was negative NOK 41.0 million,

compared to positive 22.4 million in the third quarter 2017.

The increase in working capital is partly related to postponed production

programs and partly to a deliberate and temporary inventory build-up to avoid

supply disruptions in the face of previously reported electronic components

shortages. Component shortages have been an ongoing issue for the Electronics

Manufacturing Services business since last year. The situation has not improved,

and it is expected to be challenging throughout the year and into 2019.

Expansion in Poland

In July, Kitron announced plans to expand its Eastern European presence through

a facility in northern Poland. Production at the 8,000 square meter facility is

now scheduled to begin in the fourth quarter 2019.

Outlook

For 2018, Kitron expects revenue to grow to between NOK 2 500 and 2 700 million.

The EBIT margin is expected to be between 6.1 and 6.5 per cent. Growth is

primarily driven by customers in the Industry and Energy sectors. Profitability

is driven by cost reduction activities and improved efficiency.

Enclosed in PDF are the quarterly report and the presentation.

The interim report is presented today at 8:30 a.m. CEST. The presentation will

be given in English by CEO Peter Nilsson and CFO Cathrin Nylander, and will be

webcast at the following link:

http://webtv.hegnar.no/presentation.php?webcastId=97451313

For further information, please contact:

Peter Nilsson, CEO, tel: +47 948 40 850

Cathrin Nylander, CFO, tel: +47 900 43 284

E-mail: investorrelations@kitron.com

Kitron is one of Scandinavia's leading electronics manufacturing services

companies for the Defence/Aerospace, Energy/Telecoms, Industry, Medical devices

and Offshore/Marine sectors. The company is located in Norway, Sweden,

Lithuania, Germany, China and the United States. Kitron had revenues of about

NOK 2.4 billion in 2017 and has about 1 450 employees. www.kitron.com

This information is subject to the disclosure requirements pursuant to section

5 -12 of the Norwegian Securities Trading Act.