Kitron — Interim / Quarterly Report 2020

Jul 10, 2020

First half year and Q2 results 2020

1

Peter Nilsson, CEO Cathrin Nylander, CFO 2020-07-10

Record performance

NOK Million	Q2 2020 vs Q2 2019
Revenue 1 040.8		21.0 %
EBIT		55.8 %
88.0
Order Backlog		44.6 %
2 101.8
Operating cash flow 5.5		-89.7 %
Net working capital		13.5 %
1 059.2

NOK Million		2020 vs 2019
Revenue		14.7 %
1 918.4
EBIT		35.9 %
146.3
Order Backlog		44.6 %
2 101.8
Operating cash flow 108.0		36.9 %
Net working capital 1 059.2		13.5 %

Highlights and important events

• Revenue growth 21 % in Q2: Defence/Aerospace and Medical devices very strong
• EBIT margin 8.5% (6.6%): Strong overall performance. On track for 2020 full year target.
• EPS NOK 0.36 (0.20): 80% increase and in line with revenue and profitability improvements. First half 2020 EPS: 0.59 (0.41)
• Order backlog growth 45%: Strong contribution from Defence/Aerospace and Medical devices
• Working capital: improved capital efficiency
• Capacity upgrade in China completed
• Facility and capacity upgrade and relocation in U.S. completed
• Ramp-up of facility in Poland continues

Important orders in the quarter

• Northrop Grumman Awards Contracts to Kitron
• o Production of Integrated Communications, Navigation and Identification (ICNI) modules for the F-35 Lightning II program
• o Deliveries will secure a backlog into 2021 and have a total value of more than USD 18 million.
• o The sub-contract relates to the Long-Term Supply Agreements announced on 21 September 2015 and 24 November 2016 and covers Lot 12 through Lot 14.
• o Production will take place at Kitron's plant in Norway.
• Kitron wins New business with Energy /Telecom
• o Measurement technology
• o The award covers a period of five years, expected annual value is between EUR 3.5-5 million.
• o Serial production is expected to start in the first quarter of 2021
• o Production at Kitron's plant in Poland

Financials

Very strong revenue growth in Defence/Aerospace, Industry and Medical devices sectors

	Q2 2020 vs Q2 2019		Share of total revenue
Industry 435.0	29.3 %		41.8 %
Defence/Aerospace 247.8	37.5 %		23.8 %
Medical devices 292.5	104.5 %		28.1 %
Energy/Telecoms 45.7	-63.1 %		4.4 %
Offshore/Marine 19.8	-74.2 %		1.9 %

	Q2 2020 vs Q2 2019		Share of total revenue
Norway 235.2	7.2 %		22.6 %
Sweden	0.1 %		17.4 %
181.4
CEE	10.4 %		31.9 %
332.4
Others	82.1 %		34.4 %
358.4

Before group entities and eliminations

Improved profits and profitability

• Record Q2 EBIT
• EBIT driven by profitable growth
• EBIT margin improved from 6.6% to 8.5%

Q2 EBIT by country: Improved profits and profitability

• Norway and Sweden at target margin levels and with improved profitability.
• o Norway a substantial profitability and profit improvement
• o Sweden improving profitability
• CEE (Poland 6.4 % and Lithuania 7.3%),
• o Polish facility established Q3 LY
• Others show strong performance due to growth with medical devices and industry sectors

Norway	Sweden	CEE	Other
6.9 %	6.8 %	7.2 %	11.0 %
6.0 %	6.6 %	7.8 %	4.1 %

Balance sheet: Working capital efficiency improvement

• Working capital ratios
• o NOWC* 24.5% (27.4%)
• o Cash conversion cycle* 93 (102)
• o ROOC* 22.1% (16.7%)
  • exclusive IFRS16 ROOC% 24.1%

Net working capital

▪ Cash flow

• o YTD Cash flow from operations MNOK 108.4 (78.8)
• Financial gearing
• o NIBD/EBITDA 2.3 (2.9)
  • exclusive IFRS16 NIBD/EBITDA 2.0

Operating cash flow

Market development

Strong order backlog

• Particularly strong growth in Defence/Aerospace and Medical devices
• Growth 45%, underlying growth 36%

	Q2 2020 vs Q2 2019	Share of total revenue
Industry	 24.9 %	21.5 %			Order Backlog
450.9
Defence/Aerospace
832.3	 23.4 %	39.6 %				2 064	2 102
Medical devices				1 572	1 884
444.1	 154.6 %	21.1 %	1 453 n
Energy/Telecoms			o milli
277.1	 109.3 %	13.2 %	K O			44,6%
Offshore/Marine			N Q2-2019	Q3-2019	Q4-2019	Q1-2020	Q2-2020
97.5	 -11.9 %	4.6 %

Outlook

Outlook

• For 2020, Kitron has previously indicated a revenue outlook of between NOK 3 300 and 3 700 million and EBIT margin between 6.4 to 7.0 percent.
• Due to increased growth primarily the Defence/Aerospace, Industry and Medical devices sectors, overall profitability improvement and favorable currency, revenue is now expected to be between 3 500 and 3 800 million and EBIT margin is expected to be between 6.7 and 7.5 per cent

Key takeaways Summary Q2 2020

• Strong growth in order backlog
• Record Q2 revenue and half year
• Increased margins
• Outlook updated

Thank You!