Kitron — Earnings Release 2019

Jul 11, 2019

Kitron: Q2 2019 – All-time high operating profit

Kitron: Q2 2019 – All-time high operating profit

(2019-07-11) Kitron today reported strong growth and record operating earnings

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

sectors.

Kitron's revenue for the second quarter was NOK 860 million, an increase of 29

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

EMS division of API Technologies Corp., was 19 per cent.

The order backlog ended at NOK 1 453 million, an increase of 44 per cent

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

acquisition, was 28 per cent.

Profitability expressed as EBIT margin was 6.6 per cent in the second quarter,

compared to 6.8 per cent in the same quarter last year.

Cathrin Nylander, Kitron's CFO and acting CEO, comments:

"The second quarter was characterized by strong growth, leading to record

revenues. Meanwhile, we have been preparing to handle further growth through our

announced capacity expansions in the US, Poland and China. I am also happy that

the challenging component situation in the industry is now improving, and this

is expected to gradually reduce working capital over the coming quarters."

Strong revenue growth

Kitron's revenue in the second quarter amounted to NOK 860 million, compared to

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

numbers, second 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 1 453 million, compared to 1 009 million last

year. All market sectors except Energy/Telecom increased the order backlog

substantially. Increasing activity among customers in the oil and gas industry

has led to a particularly strong backlog growth in the Offshore/Marine market

sector.

All-time high operating profit

Second quarter operating profit (EBIT) was NOK 56.4 million, compared to 45.0

million last year. EBITDA was NOK 75.1 million, compared to 58.6 million last

year. Both figures are all-time highs.

Profit after tax amounted to NOK 36.3 million, compared to 34.5 million in the

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

0.20, in line with last year.

Inventory build-up to secure deliveries and future growth

Net working capital increased by 55 per cent compared to the same quarter last

year to NOK 933 million. The increase is primarily related to the deliberate and

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

previously reported electronic components shortages.

This situation is now improving. The number of components on allocation are

reduced by half compared to the peak in the third quarter 2018 and supplier lead

times have a similar development but are still above the levels before the

allocation situation. Kitron expects that a continued gradual improvement over

the year will lead to a reduction of working capital, both in absolute numbers

and as a percentage of revenue.

Operating cash flow was NOK 45.7 million, compared to 42.7 million in the second

quarter of 2018.

Outlook

For 2019, Kitron expects revenue to grow 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. Stronger growth than expected due

to ramp-up of customers temporarily drive inefficiency in existing facilities.

Start-up of 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 2:00 p.m. CEST. The presentation will

be given in English by CFO and acting CEO Cathrin Nylander, and will be webcast

at the following link:

https://webtv.hegnar.no/presentation.php?webcastId=98041301

For further information, please contact:

Cathrin Nylander, CFO and acting CEO, 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, 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.