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Kitron Investor Presentation 2019
3643_rns_2019-10-24_59db7f93-be81-4678-bce2-2b18322de074.pdf
Investor Presentation
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First three quarters and Q3 results 2019
Peter Nilsson, CEO Cathrin Nylander, CFO
24 October, 2019
Peter Nilsson, Kitron's CEO comments
- Strong revenue growth increasing 31 % in Q3 and 28% year to date with particularly strong growth within Defence/Aerospace and Offshore/Marine market sectors.
- EBIT margin at 5.4% with margin improvements in Norway and Sweden
- Strong order backlog, with strong contribution from the Defence/Aerospace and Offshore/Marine sectors
- Working capital stabilized and the improvement in component availability is expected to affect the working capital positively
- US flooding production has been removed to a temporary site after flooding in July
- Increased capacity with new Kitron facility in Grudziądz, Poland. Production will ramp in Q4
Strong revenue growth and order backlog Financial highlights Q3:
- Revenue
- Continued strong growth 31.0 %
- Organic growth 21%
- Continued strong growth 31.0 %
- Operating Margin/EBIT
- Operating margin at 5.4% (5.3%)
- EPS 0.14 (0.12) NOK
- Cash flow 19 (-41) MNOK
- Order Backlog
- Organic growth 27%
| NOK Million | Q3 2019 vs Q3 2018 | |
|---|---|---|
| Revenue 737,5 |
| 31,0 % |
| EBIT 39,6 |
| 31,9 % |
| Order Backlog 1 572,4 |
| 40,1 % |
| Operating cash flow 19,2 |
| 146,8 % |
| Net working capital 886,7 |
| 46,6 % |
Continued strong growth and profitability Financial highlights First three quarter:
- Revenue
- Continued strong growth 28 %
- Organic growth 20%
- Continued strong growth 28 %
- Operating Margin/EBIT
- Operating margin at 6.1% (6.0%)
- EPS 0.55 (0.47) NOK
- Cash flow 98 (-18) MNOK
- Order Backlog growth
- Organic growth 27%
| NOK Million | 2019 vs 2018 | |
|---|---|---|
| Revenue 2 410,6 |
| 28,2 % |
| EBIT 147,3 |
| 29,4 % |
| Order Backlog 1 572,4 |
| 40,1 % |
| Operating cash flow 98,0 |
| 653,7 % |
| Net working capital 886,7 |
| 46,6 % |
Flooding in the US
- The facility of Kitron Technologies in Windber, Pennsylvania, was damaged by flooding in July
- Production has been moved to a temporary site.
- This has led to some inefficiencies in production and increase in net working capital
- Minor effects on customers
- No significant financial impact is expected
New factory in Poland
- Finalized construction of Kitron's new factory in Grudziądz, Poland
- 8,000 square meter facility
- Production is ramping up in the fourth quarter
- Contributes to growth in the number of employees during the quarter
Financial statements First three quarter and Q3 2019
Revenue Q3:
Strong revenue growth in Defence/Aerospace and Offshore/marine
| Q3 2019 vs Q3 2018 | Share of total revenue | |
|---|---|---|
| Industry | 12,3 % |
36,7 % |
| Defence/Aerospace | 96,4 % |
23,0 % |
| Medical devices | 4,8 % |
18,9 % |
| Energy/Telecoms | 25,0 % |
15,5 % |
| Offshore/Marine | 306,6 % |
5,9 % |
Revenue First three quarters :
Strong revenue growth in all sectors
| 2019 vs 2018 | Share of total revenue | |
|---|---|---|
| Industry | 13,8 % |
39,5 % |
| Defence/Aerospace | 47,4 % |
20,3 % |
| Medical devices | 10,0 % |
17,3 % |
| Energy/Telecoms | 28,2 % |
16,2 % |
| Offshore/Marine | 447,3 % |
6,7 % |
Continued strong growth from several regions Revenue by country Q3:
| Q3 2019 vs Q3 2018 | Share of total revenue | |
|---|---|---|
| Norway | 25,4 % |
24,0 % |
| Sweden | -3,3 % |
19,4 % |
| Lithuania | 21,1 % |
33,1 % |
| USA | 4394,7 % |
11,6 % |
| Others | 24,8 % |
11,9 % |
Before group entities and eliminations
Continued strong growth from several regions Revenue by country First three quarters:
| 2019 vs 2018 | Share of total revenue | |
|---|---|---|
| Norway | 26,8 % |
25,2 % |
| Sweden | 4,1 % |
20,7 % |
| Lithuania | 17,5 % |
35,0 % |
| USA | 779,9 % |
8,9 % |
| Others | 36,4 % |
10,2 % |
Before group entities and eliminations
Improved profits Quarterly EBIT:
- Strong EBIT at 39,6 million, an increase of 32 per cent compared to last year
- Q3 is affected by seasonality
- EBIT margin was 5.4% (5.3%)
- Ramp-ups of new customer programs due to strong growth temporarily result in lower efficiencies in existing facilities
- Start-up of Polish facility affects margins negatively short-term
Margin improvements in Norway, Sweden, Lithuania EBIT by Country Q3:
- Another quarter with continued profitability improvements in Norway, Sweden, Lithuania
- US margins turn positive this quarter
- Kitron Technologies profit at expected margins in spite of flooding.
- Other
- China is performing well
- Poland startup costs included
EBIT
| Norway | Sweden | Lithuania | USA | Other |
|---|---|---|---|---|
| 4,6 % | 6,0 % | 6,1 % | 5,6 % | 3,9 % |
| 3,7 % | 5,6 % | 5,1 % | -215,8 % | 14,9 % |
Margin improvement in Norway and Sweden EBIT by Country First three quarters:
- Continued profitability improvements in Norway, Sweden
- Lithuania, lower margins due to ramp-up affects
- US margins turn positive
- Kitron Technologies profit at expected target
- Other
- China is performing well
- Poland startup costs included
| Norway | Sweden | Lithuania | USA | Other |
|---|---|---|---|---|
| 5,1 % | 6,3 % | 7,5 % | 2,4 % | 6,8 % |
| 4,4 % | 4,8 % | 8,2 % | -23,0 % | 8,9 % |
Working capital Balance sheet:
- Cash flow
- Q3 Cash flow from operations 19,2 (-41,0)
- YTD Cash flow from operations 98,0 (-17,7)
- Financial gearing
- NIBD / EBITDA 3.0 (1.5)
- exclusive IFRS16 NIBD/EBITDA 2.6
- NIBD / EBITDA 3.0 (1.5)
- Working capital
- NOWC* 29.4% (25,1%)
- Cash conversion cycle* 116 (94)
- ROOC* 12.2% (14.4%)
- exclusive IFRS16 ROOC% 13.1%
Working capital – improvements expected
- Supplier shortage/constraints has started to ease and lead times have come down
- Allocation of components are substantially reduced compared to peak in Q3-2018
- Raw materials in inventory have peaked in value, further reductions are expected
Market development
Strong order backlog Market development:
Particularly strong order growth in the Defence/Aerospace and Offshore/Marine sectors
Comparable:
- MNOK 1 572 (1 122) +40,1%
- Defence: 657,6 +72,1%
- Medical: 207,1 +35,7%
- Industry: 399,6 +1,2%
- Energy/Telecom: 174,7 +14,0%
- Offshore: 133,4 +242,1%
- Organic growth 27%
1 122 1 335 1 466 1 453 1 572 Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 NOK million 40,1%
Order Backlog
Outlook
Outlook
- For 2019, Kitron expects revenue to grow between NOK 3 200 and NOK 3 400 million.
- Earnings in value are above previous outlook, however EBIT margin is expected to be between 5.9 and 6.3 per cent. Ramp-ups of new customer programs due to strong growth temporarily result in lower efficiencies in existing facilities. Start-up of Polish facility also expected to affect margins. We expect the margin challenges to be resolved as we move into 2020.
- Growth is primarily driven by the acquisition of the EMS division of API Technologies Corp. and growth for customers in the Defence/Aerospace, Industry and Offshore/ Marine sectors.
