Kitron — Earnings Release 2021

Oct 21, 2021

Kitron: Q3 2021 - Very strong demand, revenue constrained by component supply

Kitron: Q3 2021 - Very strong demand, revenue constrained by component supply

(2021-10-21) Kitron today reported third quarter results showing very strong

demand, but also revenue constraints due to the component supply.

Kitron's revenue for the third quarter was NOK 831 million, compared to NOK

1 054 million last year. The decrease is explained by last year's Corona-related

and exceptional volumes within Medical devices, which are now normalized. For

the other market sectors combined, demand is very strong, but revenue growth was

limited by ongoing component shortages. More than NOK 200 million of demand has

been delayed into later quarters.

Profitability expressed as EBIT margin was 6.0 per cent in the third quarter,

compared to 8.6 per cent in the same quarter last year. The EBIT margin in the

quarter is affected by inefficiencies caused by the component shortage and the

fact that the third quarter is seasonally softer. Last year's EBIT margin was

affected by the exceptional Corona-related volumes within the Medical devices

sector.

The order backlog ended at NOK 2 568 million, an increase of 38 per cent

compared to last year.

Peter Nilsson, Kitron's CEO, comments:

"Demand continues to be very strong for both 2021 and 2022 with significant

growth opportunities in most market sectors. However, the general material

supply situation deteriorated rapidly in the third quarter and continues to be a

challenge to lead times and deliveries. We currently believe that we are at the

worst of these constraints, and we expect the situation to start showing some

improvements as we progress into 2022. After last year's high deliveries of

medical devices driven by the Corona pandemic, 2021 has returned to more normal

levels with normal seasonality in the third quarter. Given the constraints in

the supply chain, I'm satisfied with the results we deliver in the quarter."

"Currently the raw materials and component supply chain will not support higher

output, even though Kitron stands ready to deliver more. Given this year's

increase of inventory and working capital, we now turn our focus to executing

demand into deliveries, improving our cash flow, and protecting competitiveness

and profitability."

Mixed sector development

There was revenue growth in the third quarter within the Electrification,

Connectivity and Industry sectors, while revenue declined within

Defence/Aerospace and, in particular, within Medical devices.

Record order backlog

The order backlog ended at NOK 2 568 million, compared to 1 863 million last

year. This is a record and reflects a strong total demand situation but also

includes revenue delays due to the component shortage. The order backlog

increased within all market sectors. In absolute numbers, the order backlog grew

the most within Electrification and Defense/Aerospace, while the percentage

growth was particularly strong within Connectivity.

EBIT margin 6.0%

Third quarter operating profit (EBIT) was NOK 50.1 million, compared to 90.5

million last year. EBITDA was NOK 75.7 million, compared to 115.7 million last

year.

Profit after tax amounted to NOK 19.5 million, compared to 60.9 million in the

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

0.11, down from 0.34 last year.

Constraints in supply chain

Operating cash flow was negative NOK 70.2 million, compared to negative NOK 3.2

million in the third quarter last year.

Net working capital was NOK 1 158 million, an increase of 2 per cent compared to

the same quarter last year. Net working capital as a percentage of revenue was

31.8 per cent, compared to 25.1 per cent last year. Capital efficiency ratios

are heavily affected by the supply shortage, which deteriorated rapidly in the

third quarter, with material decommitments and new delivery dates. The material

constraints now seem to have levelled out. Management's focus in the quarter and

going forward is on balancing demand with the constraints in supply, executing

demand into deliveries and improving cash flow.

Outlook

Total demand is very strong and the order backlog at a record level. However, in

the very short term, supply shortages has somewhat limited Kitron's ability to

turn demand into revenues, and the outlook for 2021 is adjusted to reflect this.

For 2021, Kitron has previously indicated a revenue outlook of between NOK

3?900 and 4.200 million and an EBIT margin between 6.8 and 7.4 per cent.

Due to the constraints in the supply chain and the resulting delays of revenue,

the revenue for 2021 is now expected to be between 3 700 and 3?900 million. EBIT

margin is expected to be between 6.8 and 7.1 per cent.

Growth is expected within the Connectivity, Electrification and Industry

sectors, whereas there will be a decline within the Medical devices and

Defence/Aerospace sectors.

Although the outlook 2021 is adjusted, the backlog and demand situation implies

that Kitron remains on the long-term strategic trajectory for revenue and

profitability.

The corona situation has so far had limited direct effects but nevertheless

brings uncertainty to the outlook together with the constraints in the material

supply situation.

Enclosed in PDF are the quarterly report and the presentation. The interim

report is presented today at 08:30 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://channel.royalcast.com/hegnarmedia/#!/hegnarmedia/20211021_4

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

Kitron is a leading Scandinavian electronics manufacturing services company for

the Connectivity, Electrification, Industry, Medical devices and

Defence/Aerospace sectors. The company is located in Norway, Sweden, Lithuania,

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

4.0 billion in 2020 and has about 1 800 employees. www.kitron.com

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act