Kitron — Investor Presentation 2010

Nov 10, 2010

Your ambition. Our passion. Kitron

Q3 results 2010

10 November 2010

Jørgen Bredesen, CEO

Björn Wigström, CFO

Increased revenue and profit in Q3

Financial highlights

• Order backlog increased by 9% vs Q3 2009
• Activity level improving, revenue up by 4.8% vs Q3 2009
• Positive profitability trend, operating margin at 3.2%
• Karlskoga remains a challenge with a loss of NOK 4.2 million in Q3
• Component situation leading to inefficiencies in operations, working capital build up, and negative cash flow of NOK 39.8 million

Your ambition. Our passion. Kitron

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Slow recovery due to component situation

Operational highlights

• Recovery slowed by component shortage
• Loss of Data/ Telecoms client. Production will continue until end of March 2011, and will impact annual turnover of about NOK 100 million
• Stepping up initiatives to transfer manufacturing to lower cost countries (Lithuania and China)

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Your ambition. Our passion.
Kitron

Major new orders in Q3

• Medical equipment contracts of about NOK 67 million
• Delivery in 1H 2011
• New orders from BAE Systems AB of about NOK 26 million.
• Complex control systems for the Archer project.
• Deliveries will take place in 2011 and 2012.
• New Data / Telecom order of about NOK 25 million
• Complex products for fiber optical networks.
• Deliveries in the fourth quarter of 2010.
• New orders from Saab Dynamics of about NOK 34 million.
• Missile control systems.
• Deliveries will take place during 2011 and 2012.

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Your ambition. Our passion.
Kitron

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Your ambition. Our passion. Kitron

Financial statements Q3 2010

Positive revenue development

• Revenue at NOK 352 million, a growth of 4.8% vs Q3 2009
• Q3 change by market segment:

Q3 2010 vs Q3 2009

Data/Telecoms -20.4%
Defence 29.7%
Industry 24.7%
Medical equipment 12.0%
Offshore/Marine -38.9%

• Data/Telecoms decline related to phase out of a specific customer
• Strong trend in Defence, Industry and medical segments
• Offshore / Marine bottoming out and is expected to start recovery

Revenue Group

Revenue by market segment
Total revenue NOK 352 million

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Your ambition. Our passion. Kitron

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Revenue by country

• Revenue growth across all entities:
• Norway 6% higher - Mixed trends with slow development in Offshore and strong trend in Medical Equipment and Industry
• Sweden 3% higher – Strong recovery in the Swedish Industry sector
• Lithuania 9% higher – Negative trend in Offshore while other segments show strong development

Revenue by country
Total revenue NOK 352 million

* Before group entities and eliminations

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Your ambition. Our passion.

Kitron

Increased operating profit

• Operating profit in Q3 was NOK 11.2 million (NOK 7.7 million) and margin was 3.2% (2.3%)
• Margin improvement driven by cost base reductions and revenue growth:
• Relative salary cost reduced from 24.8% to 23.3%
• Negative impact from component shortage:
• Lower revenue growth due to lack of components
• Lower productivity due frequent interruptions

Operating profit Group
Operating margin Group

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Your ambition. Our passion.

Kitron

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Profit by country

• Mixed performance
• Norway and Lithuania show better performance driven by revenue recovery and cost base focus.
• Sweden mixed
• Kitron AB in Karlskoga reported a loss of NOK 4.2 million in the quarter. Further actions required to turn to profitability.

• Kitron ME AB continue the positive trend and delivered a solid profit.

• Before group entities and eliminations

Operating profit by country

Operating margin by country

• NOK million. Our passion. Kitron

Negative operating cash flow

• Cash flow was negative at NOK 39.8 million (NOK 11.0 million)
• Negative operating cash flow due increased working capital and weak performance in H1 2010:
• Low operating profit in H1 2010
• Increasing activity level / revenue is driving working capital needs
• Lack of components require higher safety stock / inventory and lead to higher work in progress.

Operating cash flow Group

Net working capital Group

• NOK million. Our passion. Kitron

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Solid equity ratio

• Equity of NOK 444.7 million (445.1) and equity ratio of 44.1% (47.2%)
• Among the strongest in the EMS industry

Equity
Equity ratio

47.2% 45.9% 45.7% 44.1% 44.1%

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Your ambition. Our passion. Kitron

Market development

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Your ambition. Our passion. Kitron

Challenging markets, but positive signs

• Data/Telecoms mixed - lost a client but strong growth with others
• Defence trend positive – several long term contracts secured
• Industry continue strong recovery but from a low level
• Medical equipment positive trend continues
• Offshore at a lower level – rebound expected 2011

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Your ambition. Our passion. Kitron

Order backlog at higher level

• Order backlog at NOK 848.2 million (NOK 778.2 million)
• Positive backlog development in the Medical equipment, Industry and Defence segments
• Replacing major Data / Telecom client lost will be challenging but possible
• 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
• Strong market interest
• China establishment on plan and key positions recruited
• Factory expected to be operational in Q1 2011
• US establishment on plan
• Location selected and basic infrastructure being implemented.
• Key positions recruited.
• Operational from Q2 2011

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Your ambition. Our passion. Kitron

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Outlook

• Market recovery expected to continue
• Slow growth partly due to the difficult component situation
• Cost base adjustments expected to yield positive effect on profitability
• Continued focus on operational improvements (supply chain management, ERP etc.)
• Operational adjustments to secure profitability at Kitron AB in Karlskoga required
• Operational profitability for the group expected to improve in Q4 2010

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Your ambition. Our passion.

Kitron

Thank you!