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Kitron Investor Presentation 2010
3643_rns_2010-02-04_54a3edfc-a857-4900-bac2-439031455f3c.pdf
Investor Presentation
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Q4 results 2009
4 February 2009
Jørgen Bredesen, CEO
Björn Wigström, CFO
Positive trend in Q4
Financial highlights
- Strong cash generation: NOK 62.3 million in Q4
- Backlog increased for the third quarter in a row
- Revenue down 35.3% vs Q4 last year but trend is positive
- Profitability is recovering - operating margin 3.7% in Q4
- Strong performance vs peers through 2009
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Strategic steps to expand market
Operational highlights
- Improved market conditions
- Expanding market coverage and manufacturing network
- Small front end EMS company in Germany acquired (subject to financial closing)
- Decision taken to set up manufacturing unit in China
- Lease agreement signed
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Focus on streamlining operations
Operational highlights
- Positive effect of completed downsizing
- Headcount reduced by 350 FTE’s in 2009
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Significant reduction of cost base (about NOK 130 million on annual basis)
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Decision taken to divest development department
- Entering a structured sales process
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Looking for a strategic alliance with a larger development house
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Continued focus on operational streamlining and margin improvements
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Major New Orders (up to 31.01.2010)
- Major new orders booked in Q4
- Medical ventilator systems for Maquet (NOK 40 million)
- Complex communication equipment for KDA (NOK 28 million)
- Protector, weapon control system for KDA (NOK 23 million)
- Service order for offshore client (NOK 20 million)
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Long term agreement with Otrum (NOK 35 million over 3 years)
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Major new orders in January 2010
- New order within medical equipment segment (NOK 80 million)
- Long term agreement with Danaher Motion (more than NOK 100 million) – First contract based on China manufacturing!
- Protector, weapon control system for KDA (NOK 20 million)
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Financial statements Q4 2009
Revenue as expected
- Revenue at NOK 424 million, 35% lower than last year
- Q4 change by market segment:
- Q4 2009 vs Q4 2008
- Data/Telecoms -38.5%
- Defence/Offshore -44.1%
- Medical equipment -15.3%
- Industry -40.3%
- Offshore segment down while trend in Defence is positive
- Positive trend quarter by quarter and strong activity towards the end of Q4
Revenue Group
Revenue by market segment
Total revenue NOK 424 million
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Revenue by country
- Norway and Lithuania negatively affected by drop in Offshore segment
Q4 2009 vs Q4 2008 - Norway -28.4%
- Sweden -33.4%
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Lithuania -48.9%
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All operations adjusted to lower revenue level
- Positive trend quarter by quarter across all units
- Component shortage and other bottlenecks to ramp up production held back revenue growth in Q4
Revenue by country *
Total revenue NOK 424 million
* Before group entities and eliminations
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Profitability improving
- Operating profit in Q4 was NOK 15.8 million (NOK 58.1 million) and margin was 3.7% (8.9%)
- Main factors behind lower profit vs Q4 2008:
- Revenue lower and different product mix
- Cost and productivity issues related to the capacity adjustment
- Operational streamlining yields positive effect:
- Cost base reduction NOK 130 million on annual basis
- Global sourcing, manufacturing efficiency and transfer program give positive improvement
- Relative payroll costs 26.6% of revenue (21.1%) and other operating costs 5.9% of revenue (5.8%)
Operating profit Group
Operating margin Group
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Profit by country
- All sites deliver positive results and the trend quarter on quarter is positive.
- Actions to turn around Swedish operations are gradually yielding results.
- NOK 2.5 million early retirement provision included in Q4 result for Sweden
Operating profit by country *
Operating margin by country
- Before group entities and eliminations
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Cash flow
- Cash flow was NOK 62.3 million (NOK 66.5 million)
- Investment level reduced
- Reduction in working capital is driving positive development
- Inventory down NOK 70 million vs Q4 2008
- Receivables down NOK 166 million vs Q4 2008
- Partly off set by NOK 104 million lower payables
- Low exposure for bad debt and inventory write offs
Operating cash flow Group
Net working capital Group
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Strong equity ratio
- Equity of NOK 450.3 million (480.4) and an equity ratio of 45.9% (38.4%)
- Increase in equity ratio driven by total balance reduction
- Exchange rate fluctuations and divestments had a negative impact on equity in absolute value
Equity ratio
38.4% 40.8% 46.9% 47.2% 45.9%
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Kitron Development reclassified to discontinued operations
- Decision taken to divest Kitron Development (an operation within Kitron AS)
- Reclassification done in financial statements
- Balance sheet reclassification of assets (NOK 8.3 million) and liabilities (NOK 5.8 million)
- Key financials (full year) of reclassified operation:
- Revenue NOK 19 million
- EBIT NOK -11 million
- All comparative numbers restated to only reflect continued operation
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Market development
Improved market conditions expected
- Medical equipment continues strong trend
- several companies ramping up manufacturing
- Significant drop in Offshore but signs of stronger market ahead
- Defence segment maintains strong development
- Data/Telecoms trend mixed
- Industry segment is stable
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Order intake improving
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Order backlog is recovering
- Order backlog at NOK 796 million (NOK 971 million)
- Backlog increasing for the third quarter in a row
- Expected long-term positive development in the Medical equipment and Defence segments
- Offshore expected to recover in second half of 2010
Definition of order backlog includes firm orders and four month customer forecast
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Expanding market coverage
- A smaller EMS engineering and NPI company acquired
- The German EMS market is the largest in Europe
- Focus on front-end engineering and NPI
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Based primarily on manufacturing in Lithuania and China
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Decision taken to establish a manufacturing operation in China
- Lease agreement signed
- Factory expected to be operational in 2H 2010
- Offering another lower cost manufacturing alternative and opening up new markets
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Outlook
Outlook
- Order intake and backlog expected to continue to improve quarter by quarter
- Capacity adjustments expected to yield positive effect on profitability in 2010
- Continued focus on operational improvements (supply chain management, ERP, exit or turn around loss making activities etc)
- Strong focus on balance sheet management and cash flow continues
- Profitability expected to improve in 2010
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Thank you!
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