Kitron — Investor Presentation 2017

Jul 13, 2017

First half year and Q2 results 2017

Peter Nilsson, CEO Cathrin Nylander, CFO

13 July, 2017

Financial highlights Q2:

Strong growth and milestone EBIT margin of 7%

Strong revenue growth Underlying growth 16.1% Strong profitability EBIT margin 7.0% (5.9%) Solid order backlog Underlying growth 2.2% Net working capital Improved operating cash flow Higher capital efficiency NOK mill. Revenue 648.7 EBIT 45.5 Order backlog 1017.8 Operating cash flow 63.1 Net working capital 565.3 Q2 2017 vs Q2 2016 15.2 % 37.5 % 2.9 % 3.4 % 8.4 %

Financial highlights First half year:

Strong revenue growth and improved profitability

• Strong revenue growth
• Underlying growth 19.4%
• Strong profitability
• EBIT margin 6.2% (5.1%)
• Solid order backlog
• Underlying growth 2.2%
• Net working capital
• Improved operating cash flow
• Higher capital efficiency

NOK mill.		2017 vs 2016
Revenue 1233.7		16.4 %
EBIT 76.3		42.5 %
Order backlog 1017.8		2.9 %
Operating cash flow 47.6		33.3 %
Net working capital 565.3		8.4 %

Major new orders:

Important agreements in the second quarter

• Kitron received communications order from KONGSBERG
• Kitron received a NOK 34 million order from Kongsberg Defence Systems for military communications equipment.
• Kitron will supply various communications products related to an existing contract for deliveries to Hungary.
• Deliveries will take place in 2018.
• Manufacturing and technical services will be provided by Kitron in Arendal.

Major new orders:

Important agreements in the second quarter

Kitron signed contract with Husqvarna Group

• The new agreement includes five products for the Husqvarna Robotic Lawn Mowers product range and is in addition to existing manufacturing volumes.
• The potential contract value is NOK 600 million over a five-year period.
• The production will take place at Kitron's plant in Kaunas, Lithuania.

Highlights: Investing for further growth

• Over the past years, Kitron has invested in its facilities, ensuring that they are modern, highly competitive and able to handle expected growth.
• In the second quarter, the move and major upgrade of the Swedish plant in Jönköping was completed, with the official opening being celebrated in May.
• In the second half of 2017
• Kitron will invest in SMT equipment for increased capacity in the US, Lithuania and China.
• Further investments in Norway, Sweden and Lithuania will focus on automation and robotics.

Financial statements First half year and Q2 2017

Revenue Q2:

Continued strong growth in several sectors

	Q2 2017 vs Q2 2016	Share of total revenue
Industry	 31.6 %	36.9 %
Defence/Aerospace	 18.1 %	29.5 %
Medical devices	 -10.7 %	16.6 %
Energy/Telecoms	 21.6 %	15.4 %
Offshore/Marine	 -36.4 %	1.6 %

Revenue First half year:

Continued strong growth in several sectors

Revenue by country Q2*:

Continued strong growth in Lithuania and Sweden

Revenue by country First half year*:

Continued strong growth in Lithuania and Sweden

	2017 vs 2016	Share of total revenue
Norway	 -3.0 %	29.1 %	408 396	357	422 346	2016 2017
Sweden	 29.2 %	26.3 %		276
Lithuania	 21.9 %	31.0 %				184 170
Others	 8.5 %	13.6 %	on milli K O N Norway	Sweden	Lithuania	Others

Quarterly EBIT: EBIT margin milestone of 7% reached

• Strong volume and profitability
• Cost reductions take effect
• Inefficiencies due to relocations in Q1 and Q4 2016 and Q1 2017
• Profitability in Q1 2016 includes negative oneoffs of MNOK 5

EBIT by country Q2: Profits improved for all sites

• Norway
• Cost reductions drive margin improvement.
• Sweden
• Strong volume and margin improvements
• Lithuania
• EBIT improvement driven by strong revenue growth
• Other
• Revenue growth and improved profitability in China, US has improved

EBIT by country First half year: Profitability improvements

• Norway
• Cost reductions drives margin improvement. Relocation Q1 2016.
• Sweden
• Efficiency challenges and relocation in Q1 2017, improved Q2
• Lithuania
• EBIT improvement driven by strong revenue growth
• Other
• Revenue growth and improved profitability in China, US has improved

Balance sheet:

Cash flow and working capital

• Cash flow
• Q2 Cash flow MNOK 63.1 (61.0)
• YTD Cash flow MNOK 47.6 (35.7)
• Low financial gearing
• NIBD / EBITDA 1.3 (1.4)

Working capital

• Capital efficiency further improved
• NOWC (R3*) at 20.6%, a reduction from 23.4%
• Cash conversion (R3*) cycle 73, a reduction from 88 last year
• ROOC (R3*) at 23.0%, improved from 17.6% last year

Operating cash flow

* Three months rolling average

Market development

Order backlog: Solid order backlog

Order backlog MNOK

• 1018 vs. 989 last year. Increase of 2.9% with 2.2% underlying growth.
• Defence: 403 -16% (480)
• Medical: 162 -3% (167)
• Industry: 318 +46% (217)
• Energy/Telecom: 123 +14% (109)
• Offshore: 12 -29% (17)
• Fluctuations to be expected within

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

Outlook

Outlook

• For 2017, Kitron expects revenue to grow to between NOK 2 150 and 2 350 million. EBIT margin is expected to be between 5.6 and 6.4 per cent.
• Revenue is now expected to be in the higher end of the indicated range.
• The growth is primarily driven by customers in the Industry sector.
• The profitability increase is driven by cost reduction activities and improved efficiency.

Thank you!