Kitron — Earnings Release 2019

Oct 24, 2019

Kitron: Q3 2019 - Strong growth continues

Kitron: Q3 2019 - Strong growth continues

(2019-10-24) Kitron today reported strong growth of revenue and order backlog in

the third quarter, led by the Defence/Aerospace and Offshore/Marine market

sectors.

Kitron's revenue for the third quarter was NOK 738 million, an increase of 31

per cent compared to last year. Organic growth, excluding the acquisition of the

EMS division of API Technologies Corp., was 21 per cent.

The order backlog ended at NOK 1 572 million, an increase of 40 per cent

compared to last year. Organic order backlog growth, excluding the API

acquisition, was 27 per cent.

Profitability expressed as EBIT margin was 5.4 per cent in the third quarter,

compared to 5.3 per cent in the same quarter last year.

Peter Nilsson, Kitron's CEO, comments:

"Our business grew robustly in the third quarter, and we ended the quarter with

a very strong order backlog. We also completed the construction of our new

factory in Poland, where production is ramping up during the fourth quarter. We

will focus on working capital efficiency and further margin improvements as we

move into 2020."

Strong revenue growth

Kitron's revenue in the third quarter amounted to NOK 738 million, compared to

563 million in the same quarter last year. All market sectors grew. In absolute

numbers, third quarter revenue growth compared to the same quarter last year was

particularly strong in the Defence/Aerospace and Offshore/Marine market sectors.

Strong order backlog

The order backlog ended at NOK 1 572 million, compared to 1 122 million last

year, and similar to the revenue development the order backlog increase was

particularly strong in the Defence/Aerospace and Offshore/Marine market sectors.

Improved profitability

Third quarter operating profit (EBIT) was NOK 39.6 million, compared to 30.0

million last year. EBITDA was NOK 59.7 million, compared to 42.7 million last

year. The effect on third quarter EBITDA and EBIT from implementation of the

IFRS 16 accounting standard is an increase of NOK 5.0 million and NOK 0.8

million respectively.

Profit after tax amounted to NOK 24.6 million, compared to 21.8 million in the

same quarter the previous year. This corresponds to earnings per share of NOK

0.14, up from 0.12 last year.

Inventory build-up to secure deliveries and future growth

Net working capital increased by 47 per cent compared to the same quarter last

year to NOK 887 million. The increase is primarily related to the deliberate and

temporary inventory build-up to avoid supply disruptions in the face of the

previously reported electronic components shortages that peaked in late 2018. As

previously announced, Kitron expects that a continued gradual improvement in

component availability during 2019 will lead to a reduction of working capital,

both in absolute numbers and as a percentage of revenue.

Operating cash flow was positive NOK 19.2 million, compared to negative 41.0

million in the third quarter of 2018.

New factory in Poland

During the third quarter, construction of Kitron's new factory in Grudzia?dz,

Poland, was finalized, and production is ramping up in the fourth quarter, as

planned..

Flooding in the US

The facility of Kitron Technologies in Windber, Pennsylvania, was damaged by

flooding in July and production has been moved to a temporary site. This has led

to some inefficiencies in production and increase in net working capital, but

the effect on customers has been, and is expected to be, minimal. On a group

level Kitron does not expect significant financial impact from this incident.

Outlook

For 2019, Kitron expects revenue to grow to between NOK 3 200 and NOK 3 400

million. Earnings in value are above previous outlook, however EBIT margin is

expected to be between 5.9 and 6.3 per cent. Ramp-ups of new customer programs

due to strong growth temporarily result in lower efficiencies in existing

facilities. Start-up of the Polish facility is also expected to affect margins.

We expect the margin challenges to be resolved as we move into 2020. Growth is

primarily driven by the acquisition of the EMS division of API Technologies

Corp. and growth for customers in the Defence/Aerospace, Industry and

Offshore/Marine sectors.

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:

https://webtv.hegnar.no/presentation.php?webcastId=98161578

For further information, please contact:

Peter Nilsson, President and CEO, tel. +47 94 84 08 50

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

E-mail: investorrelations@kitron.com (mailto: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, Poland, Germany, China and the United States. Kitron had revenues of

about NOK 2.6 billion in 2018 and has about 1 700 employees. www.kitron.com

(http://www.kitron.com)

This information is subject to the disclosure requirements pursuant to section

5 -12 of the Norwegian Securities Trading Act.