Kitron — Earnings Release 2019

Apr 30, 2019

First quarter results 2019

Cathrin Nylander, Acting CEO and CFO

30 April, 2019

Cathrin Nylander, Kitron's acting CEO comments

• Revenue increased 24.8% in the first quarter, and resulted in record quarterly revenue
• Revenue growth this quarter were particularly strong in the Industry sector. Four out of five sectors had double digit growth.
• Improved profitability with EBIT margins at 6.3%, inline with expectations
• Overall demand trends are positive with all time high order backlog increasing 43% yoy. All sectors, except Energy/Telecom, increased the order backlog substantially.
• Increase in working capital mainly related to temporary inventory build-up to avoid supply disruptions, revenue growth, and the acquisition of the EMS division of API Technologies Corporation.
• Current material constrained environment expected to ease going forward
• Kitron completed the acquisition of the EMS division of API Technologies Corporation in February

Financial highlights Q1:

Revenue, order backlog and operating profit at record levels

• Revenue
  • Strong revenue growth of 24.8 % yoy
  • 20% organic growth
• Operating Margin/EBIT
  • Operating margin at 6.3% (6.0%)
  • EBIT increased 32.2% yoy to 51.2 million

EPS

• EPS 0.21 (0.15) NOK
• Order Backlog
  • All time-high order backlog
  • 28 % organic growth

NOK mill. Revenue 812,8 EBIT 51,2 Order backlog 1465,6 Operating cash flow 25,4 Net working capital 926,9 Q1 2019 vs Q1 2018 24,8 % 32,2 % 43,0 % 230,2 % 76,3 %

Major new orders:

Important agreements in the first quarter

Kitron receives communication order

• In January, Kitron received an order for a new product within industrial communication
• Annual revenues are NOK 25 million for at least five years
• Production will take place at Kitron's plants in Lithuania and China

Financial statements First quarter 2019

Very strong revenue growth of 24.8% in the first quarter Revenue Q1:

	Q1 2019 vs Q1 2018	Share of total revenue
Industry	 18,4 %	44,2 %
Defence/Aerospace	 9,4 %	17,5 %
Medical devices	 20,9 %	16,3 %
Energy/Telecoms	 37,1 %	16,8 %
Offshore/Marine	 392,3 %	5,2 %

Revenue growth in all countries Revenue by country Q1:

Norway	 32,1 %	25,0 %
Sweden	 11,5 %	20,7 %
Lithuania	 12,2 %	35,5 %
USA	 432,6 %	5,8 %
Other	 27,2 %	13,0 %

Before group entities and eliminations

Improved earnings Quarterly EBIT:

• Strong EBIT growth this quarter. First quarter EBIT increased 12.5 million, an increase of 32 per cent compared to last year.
• EBIT margin was 6.3% (6.0%)
• One-offs reducing Q4-18 with 6.7 million

Strong margin improvement in Norway and Sweden EBIT by Country Q1:

• Profitability improvements seen in both Norway and Sweden.
• Lithuania weaker than last year, but still strong.
• Norway had in-efficiencies related to primarily ramp-ups and product mix.

Before group entities and eliminations

Working capital expected to ease in 2019 Balance sheet:

• Cash flow
  • Positive cash flow from operations (25.4)
• Financial gearing
  • NIBD / EBITDA 2.9 (0.8)
  • Excluding IFRS16 2.6
• Working capital
  • NOWC* 25.0% (19.3%)
  • Cash conversion cycle* 91 (67)
  • ROOC* 17.2% (19.8%)
  • Temporary inventory build-up to avoid supply disruptions, revenue growth, and the acquisition of the EMS division of API Technologies Corporation

Market development

Record order backlog Market development:

• Substantially increase in order backlog within all market sectors, except Energy/Telecom.
• Organic growth of 28%
• MNOK 1 466 (1 025) +43.0%
  • Defence: 589 +54%
  • Medical: 149 +38%
  • Industry: 463 +31%
  • Energy/Telecom: 157 -3%
  • Offshore: 107 +473%

Outlook

Outlook

• For 2019, Kitron expects revenue to grow between NOK 2 900 and 3 200 million.
• EBIT margin is expected to be between 6.2 and 6.6 per cent.
• Growth is primarily driven by the acquisition of the EMS division of API Technologies Corp. and growth for customers in the Industry and Offshore/marine sectors.
• The profitability is driven by cost reduction activities and improved efficiency.

Thank you!