Kitron — Investor Presentation 2014

Feb 11, 2015

Q4 results 2014

Peter Nilsson, CEO Cathrin Nylander, CFO

February 11, 2015

Financial highlights for Q4:

Initiatives yield improved profitability

• Revenue at last year's level
• Profitability improved, all sites profitable in Q4
• Strong order backlog
• Negative development of operating cash flow and net working capital

NOK mill.		Q4 2014 vs Q4 2013
Revenue 476,3		0,0 %
EBIT 14,3		234,5 %
Order backlog 868,4		20,9 %
Operating cash flow 12,9		-75,0 %
Net working capital 565,5		8,4 %

Major new orders:

Important orders in the fourth quarter

Orders from leading company in offshore industry

• Kitron AS received orders within the offshore industry worth approximately MNOK 25.
• Will be fulfilled during 2015.
• Helps secure revenue in 2015, as offshore sector is experiencing reduced order intake.
• Production will take place at Kitron's plant in Arendal, Norway.

Frame agreement signed with Speed Identity

• Kitron AB signed three-year frame agreement with Speed Identity.
• Production and related services for biometric identification systems.
• Value of at least MSEK 30 over three years with options of prolonging.
• Production at Kitron's plant in Jönköping, Sweden.

Operational information:

Improved profitability in the quarter

All sites profitable

• Arendal, Norway, initiatives to improve profitability yield results.
• Johnstown, US, have successfully ramped up revenue by approximately 50% compared to second and third quarter this year.
• Jönköping, Sweden, profitability increase in the quarter.
• Kaunas, Lithuania, continued strong growth.
• Ningbo, China, profitability increase in the quarter.

Additional information:

Kitron invests in Arendal operations

Move to Kilsund

• In December it was decided to move the Arendal operations from Hisøy to Kilsund, both locations in Arendal, Norway.
• Hisøy plant leased, Kilsund plant owned and Kitron's main production facility from 1995- 2005.
• Investments estimated at MNOK 45 to upgrade and expand Kilsund facility and increase efficiency of operations.
• Move is expected to take place early in 2016.
• One-off costs relating to move expected to be MNOK 6.9, charged in Q4 2014.

Financial statements Q4 2014

Revenue:

Strong Industry growth in the fourth quarter

	Q4 2014 vs Q4 2013	Share of total revenue
Offshore/Marine	 -30,7 %	10,3 %
Medical equipment	 1,7 %	27,9 %
Defence/Aerospace	 -3,3 %	23,7 %
Energy/Telecoms	 4,9 %	11,1 %
Industry	 19,5 %	27,0 %

Revenue by country*:

Continued strong growth outside Scandinavia

^* Before group entities and eliminations

EBIT:

Improved profitability

• EBIT margin improved compared to last four quarters
• Cost reduction activities yield results in Arendal
• All sites profitable

EBIT by country: All sites profitable

• Norway
• Includes one-off of MNOK 6.9
• Sweden
• EBIT margin improved in the quarter
• Lithuania
• Revenue growth from existing customers and new orders
• Other
• China and US now both have positive EBIT
• One-off of MNOK 8.7 regarding distribution centre in Q4 2013

* Before group entities and eliminations

Balance sheet:

Negative development of cash flow and working capital

Cash flow decrease

• Temporary inventory increase, primarily project deliveries in work-in-process phase
• Working capital increase
• Cash conversion cycle increased from 100 to 106

Net working capital 51,5 -17,4 9,5 -9,7 12,9 NOK million - 75,0 %

Operating cash flow

Financial highlights 2014

Financial highlights for Q4:

Full year profitability improvement

• Revenue growth
• EBIT improvement
• Strong order backlog
• Negative development of operating cash flow and net working capital
• The board proposes that the Annual General meeting decides on a dividend of NOK 0.05 per share.

NOK mill.		2014 vs 2013
Revenue 1751,3		7,3 %
EBIT 30,0		19,6 %
Order backlog 868,4		20,9 %
Operating cash flow -4,8		-114,9 %
Net working capital 565,5		8,4 %

Market development

Order backlog:

Strong development in Defence and Energy/Telecoms, reductions in Marine & Offshore

Defence

• Increased by 66% (MNOK 144.7) from last year
• Due to previously announced large orders for the US and Norwegian markets
• Energy/Telecoms
• Increase of 41% (MNOK 24.5)
• Offshore/Marine
• Reduction of 20.6% (MNOK 25.5)

Definition of order backlog includes firm orders and four month customer forecast

Market development

Offshore/Marine

General adjustment in the oil service market in Norway

Medical equipment

Stable development

Defence/Aerospace

Strong growth and positive outlook

Energy/Telecoms

Growth in backlog and positive outlook

Industry

Continues to grow, increased revenue from existing and new customers

Outlook

Outlook

• For 2015, Kitron expects growth and a clear improvement in profitability. However during first quarter the revenue outlook is slightly down sequentially due to seasonality.
• Growth driven by increased demand in Defence sector for US and Norwegian markets, as well as increases in Energy/Telecoms and Industry.
• Offshore/Marine will have reduction due to oil service market in Norway.
• Kitron continue to monitor the volatile currency markets and its effect on our operations

Thank you!