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Kitron Investor Presentation 2010
3643_rns_2010-08-12_6c5810a7-47d6-47ef-acec-ca57b453c410.pdf
Investor Presentation
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Your ambition. Our passion. Kitron
Q2 results 2010
12 August 2010
Jørgen Bredesen, CEO
Björn Wigström, CFO
Positive trend continued in Q2
Financial highlights
- Order intake continued positive trend with an increase by 22% and order backlog increased by 17% vs Q2 2009
- Revenue stable with a 1.3% increase vs Q2 2009.
- Operating profit of NOK 4.5 million. Operating margin of 1.1%
- Significant improvement in Kitron AB towards the end of the quarter (break even in June). Result negative at NOK 4.5 million in the quarter.
- Cash flow negative at NOK 13.7 million. Due to working capital changes
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Expanding operations globally
Operational highlights
New manufacturing plant in the USA decided established:
- Planned to be operational from 1 January 2011
- Will predominantly be concentrated towards the Defense industry
- A suitable location of 20,000 sqf will be available from 1 October 2010
- Recruitment of staff is ongoing
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Your ambition. Our passion. Kitron
Sale of Development Department concluded
Operational highlights
Transaction highlights:
- Transaction closed 1 June
- Sold to local employees and Simpro AS
- The department had about 25 employees, an annual turnover of NOK 22 million and an negative operating result of NOK 11 million in 2009
- Kitron has entered into a cooperation agreement with the new company for the provision of development services
- A loss of NOK 4.5 million was booked in connection with the transaction
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A more flexible cost base
Operational highlights
- Increased efficiency – capacity for growth remains
- Higher revenue per employee
- Strong focus on competence improvement and modernization of systems and machine park to secure capacity for growth.
- Outsourced development department reduces risk
- Kitron increasing focus on NPI and Industrialisation
- Global expansion create new opportunities
- Focus on operational improvement programmes
- Manufacturing efficiency programme continues
- ERP system launched at two sites
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Major new orders in Q2
- Offshore/Marine contract of about NOK 55 million
- Delivery in 2H
- Medical equipment contracts of about NOK 70 million
- Delivery in 2H
- Industry and Energy contracts with a total volume of NOK 180 million over three years
- First delivery in Q4
- Electronics manufacturing and assembly of industrial tools for Atlas Copco Tools AB of about NOK 45 million annually
- First delivery in Q3
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Your ambition. Our passion.
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Your ambition. Our passion. Kitron
Financial statements Q2 2010
Stabilised revenue
- Revenue at NOK 426 million in line with Q2 2009 (1.3% increase)
- Q2 change by market segment:
Q2 2010 vs Q2 2009
Data/Telecoms -14.7%
Defence -1.7%
Industry 22.6%
Medical equipment 38.9%
Offshore/Marine -60.0%
- Reduction in Data/Telecoms related to phase out of a product by the customer
- Strong market recovery in Industry Segment
Revenue Group
Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010
Total revenue NOK 426 million
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Revenue by country
- Relatively stable revenue development across all entities:
- Norway 1% higher - Mixed trends with slow development in Offshore and strong trend in Medical equipment
- Sweden 11% higher – Strong recovery in the Swedish Industry sector
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Lithuania 6% lower – Negative trend in Offshore while other segments show strong development
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Before group entities and eliminations
Revenue by country
Revenue by country Total revenue NOK 426 million
- Your ambition. Our passion. Kitron
Decreased operating profit
- Operating profit in Q2 was NOK 4.5 million (NOK 6.1 million) and margin was 1.1% (1.5%)
- Contribution margin down by 2%
- Margin slippage Kitron AB projects
- Component shortage affect productivity
- Compensated with lower cost base:
- Lower relative payroll costs 27.4% of revenue (29.0%)
- Other operating costs 5.8% of revenue (7.1%)
- Ready for increased turnover
- Revenue growth driving margin
Operating profit Group
Operating margin Group
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Profit by country
- Mixed performance
- Norway – margin improvement correlated with revenue recovery
- Sweden – Kitron AB loss NOK 4.5 million in the quarter. Significant improvement towards the end of the quarter (break even in June)
- Lithuania – strong operating margin given reduction of revenue
Operating profit by country *
Norway Sweden Lithuania
Operating margin by country
Norway Sweden Lithuania
- Before group entities and eliminations
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Your ambition. Our passion. Kitron
Cash flow
- Cash flow was negative at NOK 13.7 million (negative at NOK 14.4 million).
- Negative cash flow partly explained by seasonality effects.
- Increase in working capital due to higher activity level and revenue recovery.
- Low exposure for bad debt and inventory write offs
Operating cash flow Group
Net working capital Group
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Solid equity ratio
- Equity of NOK 438.8 million (453.6) and equity ratio of 44.1% (46.9%)
- Among the strongest in the EMS industry
Equity
Equity ratio
46.9% 47.2% 45.9% 45.7% 44.1%
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Market development
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Improved market conditions in Q2
- Data/Telecoms trend mixed, positive outlook remains
- Defence trend positive – lower revenue in the short term
- Industry recovering from a low level
- Medical equipment continues strong trend
- Offshore at a lower level, recovery expected 2011
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Stronger order intake
Order intake Group
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Order backlog is recovering
- Order backlog at NOK 867.7 million (NOK 741.7 million)
- Positive backlog development in the Medical equipment, Industry and Defence segments
- Data/Telecoms expected to improve going forward
- Significant drop in Offshore – recovery in 2011 expected
Definition of order backlog includes firm orders and four month customer forecast
Order backlog Group
Order backlog Segment
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Expanding market coverage
Update on establishment of new entities – overall implementation on track:
- German operation fully integrated and operational
- China establishment on plan and key positions recruited
- Factory expected to be operational in Q4 2010
- US establishment on plan
- Location selected and basic infrastructure being implemented.
- Recruitment process started
- Operational from Q1 2011
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Outlook
- Order intake and backlog expected to improve further
- Revenue growth combined with cost base adjustments expected to yield positive effect on profitability
- Continued focus on operational improvements (supply chain management, ERP, exit or turn around loss making activities etc.)
- Kitron AB expected to be profitable Q3 – Q4 2010
- Profitability for the group expected to increase in 2H 2010
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