Kitron — Investor Presentation 2021

Mar 17, 2021

CAPITAL MARKETS 2021

Disclaimer

This presentation contains certain forward-looking information and statements. Such forward-looking information and statements are based on the current, eShort term Incentivemates and projections of the Company or assumptions based on information currently available to the Company. Such forward-looking information and statements reflect current views with respect to future events and are subject to risks, uncertainties and assumptions. The Company cannot give assurance to the correctness of such information and statements. These forwardlooking information and statements can generally be identified by the fact that they do not relate only to historical or current facts. Forwardlooking statements sometimes use terminology such as "targets", "believes", "expects", "aims", "assumes", "intends", "plans", "seeks", "will", "may", "anticipates", "would", "could", "continues", "eShort term Incentivemate", "milestone" or other words of similar meaning and similar expressions or the negatives thereof.

By their nature, forward-looking information and statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to differ materially from any future results, performance or achievements that may be expressed or implied by the forward-looking information and statements in this presentation. Should one or more of these risks or uncertainties materialize, or should any underlying assumptions prove to be incorrect, the Company's actual financial condition or results of operations could differ materially from that or those described herein as anticipated, believed, eShort term Incentivemated or expected.

Any forward-looking information or statements in this presentation speak only as at the date of this presentation. Except as required by the Oslo Stock Exchange rules or applicable law, the Company does not intend, and expressly disclaims any obligation or undertaking, to publicly update, correct or revise any of the information included in this presentation, including forward-looking information and statements, whether to reflect changes in the Company's expectations with regard thereto or as a result of new information, future events, changes in conditions, currency development or circumstances or otherwise on which any statement in this presentation is based.

Given the aforementioned uncertainties, prospective investors are cautioned not to place undue reliance on any of these forward-looking statements.

Agenda & Introduction AGENDA

Kitron in Brief Markets & Growth Long Term Financial Targets Growth and Profitability Summary, Q&A and Wrap up

Peter Nilsson President & CEO Cathrin Nylander CFO

Israel Losada Salvador

COO /CSO

KITRON IN BRIEF

CEO Peter Nilsson

Kitron at a glance

Kitron is a leading Scandinavian Electronics Manufacturing Services (EMS) company, with global operations, delivering improved flexibility, cost efficiency, and innovation power through the value chain. We serve our customers with world class manufacturing services. Kitron was established in 1962.

Positioning

• Kitron targets the sweet spot between mass-production and customized low volume.
• Products tend to be high in complexity
• We focus on regionalized supply chains and manufacturing

Customers

Kitron's customers are often market leaders in their business. Our partnerships generally date back a decade or more. Sales is strongly characterized by repeat business continuously renewed by new product generations.

Operations

• Modern highly competitive facilities globally
• Continuous equipment investments of 2-3% of sales
• Manufacturing area more than 60 000 m2
• 1800 Employees globally
• Head office in Billingstad, Norway

Financials in brief

Revenue 2020

• 2020 is another record year.
• Sales driven by Medical/Corona pandemic and growth on electrification.
• For 2021 outlook, 500M is coming from new customers won in 2019-2020.

2020 Results

• Revenue growth 20% +
• EBIT margin 7.9% (6.1%)
• Full year 2020 EPS: 1.19 +61%
• Outlook fueled by electrification and connectivity
• Proposed DPS NOK 0.70

Development 2014 - 2020

Shareholder value

• Kitron was listed 1997 on the Oslo exchange.
• Kitron has a strong commitment to dividends.
• Kitron's dividend policy is to pay out an annual dividend of at least 50 % of the company's consolidated net profit before non-recurring items.

Share price

Kitron is listed on Euronext Oslo (ticker: KIT)

Sustainability

Kitron's approach to ESG

• Kitron's approach to Sustainability and corporate responsibility is guided by our Ethical Code of conduct, our commitment to the UN Global Compact and contribution towards the UN Sustainability goals.

Taxonomy

• 20% eligible revenue
• Based on customer end products
• Primarily:
  • Sensors within connectivity
  • Power management and Power distribution within Electrification.

19% 20% 0% 5% 10% 15% 20% 25% 30% 2019 2020 revenue

Taxonomy eligible

Eligible

Global environment

• Kitron works systematically to minimize adverse impact to the environment:
• Energy efficient equipment and buildings
• Responsible sourcing of energy
• ISO 14000 environmental certifications

Working environment

Manifested in our values,

• Our working environment is to be characterized by openness, communication and respect for the individual
• Diversity and gender balance is seen as a strength
• Fair employment practices following local norms, laws and collective bargaining agreements

Gender Equality 2020:

Workplace 2020:

* Market based calculation

**Energy efficiency = Tons C02 Equivalents / MNOK Revenue

Kitron's culture drives performance

Vision

• Your ambition. Our passion:
• Speaks to Kitron's commitment to customer success, employee development as well as interests of other stakeholders.
• We help others shine by delivering outstanding:
  • o Products
  • o Opportunities
  • o Results

Organizational structure

• Our organization is based on a highly decentralized organization, responsible for P&L and balance sheet, supported by strong common base:
  • o Common systems and a digital toolbox.
  • o Strong group functions for: IS/IT, Supply chain, Sales, Technology, Operational excellence and Finance providing leading edge support.
  • o Policies and procedures. We identify best practice and create synergies in finding a common way of working.

Leadership values

• Our culture is based on three values:
  • o Commitment. We keep our promises. We know our numbers. We are committed to being the best we can be.
  • o Innovation. We shall always look for a better way to do things. Change is a constant which fosters creativity.
  • o Engagement. Kitron promotes an inclusive and supportive environment. Continuous development of new skills is encouraged. Pride in what we do and being part of a great team is critical to satisfaction at work.

Incentive plans

• Our teams are highly incentivized to perform and deliver YoY operational and financial improvements.
  • o Short term incentive based on achieving annual targets on revenue, profits, growth and operational excellence.
  • o Long term incentive achieving targets on shareholder value, i.e., share price and dividends over a three-year period.

MARKET OVERVIEW

CEO Peter Nilsson

European Market - Trends

• A few big players, long tail of small, local firms. Total sales ~€35B
• Ongoing consolidation:
  • o Within Europe
  • o Chinese entrants
• Strong demand for Cyber security, contingency planning and sustainability are creating entry barriers planning, Sustainability

The European EMS competitive landscape European Market – regionalization of supply chains

• Supply chains are being regionalized. The drivers are:
  • o Time-to-market:
    • Design complexity requires proximity to manufacturing
  • o Time-to-customer: Agility, Leadtime, flexibility
  • o Trade barriers, Intellectual property, cyber concerns, technological sovereignty and geo-political risks

• The Nordic EMS market expected to grow to > €2B
• Industrial sector has overtaken communication as the driver in the Nordics. It is also forecasted to grow the most.
• Companies are mainly focused on high level assembly and vertical integration of complex products

Nordic growth European growth

• Price pressure on OEM's will drive further outsourcing
• Further economic growth in developing countries will drive increase in technology consumption
• Growth in infrastructures cloud computing, wireless communication, smart homes and cities

• Investments and support from governments to green energy

GROWTH STRATEGY

CEO Peter Nilsson

Five strategies to fuel growth

M2M IOT, Sensors, Wireless, Networking

• Expand customer base
• Drive for high utilization
• Capitalize on know-how and agility

Battery tech and Power grid transmission, Power management

• Grow existing / diversify customer base
• Extend lead and manage emerging tech
• Capitalize on scale and technology

Automation, Transportation, Recycling, Infrastructure

• Expand customer base
• Extend lead on technology capability
• Capitalize on know-how and reputation

Communication, Avionics, Surveillance, Control systems

• Drive high quality execution
• Take advantage of market entry barriers
• Leverage on know-how and EOL management

Diagnostics, Life support, Hospital, Home and Personal care

• Position as strategic partner for innovation and product management
• Capitalize on application and flexibility

General distinguishing features by market sector

Market sector overview and 2025 targets

Existing programs expected to grow by 1 000 MNOK by 2025

New program acquisitions expected to generate an additional 1 000 MNOK

Margin improvement 2025 target upped to 8%

2020 margin affected by economies of scale and exceptional utilization

	2025 Target
Revenue MNOK 6 000		EBIT margin 8%

LONG TERM FINANCIAL TARGETS

CFO Cathrin Nylander

Increased ambition to 6 billion in 2025

2020

▪ Revenue in 2020 almost 1 billion NOK over organic target 3 billion

2025

• Organic ambition: NOK 6 billion
• Annual organic trend growth 2021–2025: approximately 10%
• M&A adds potential upside
• Assuming no major macro or currency changes

New sector development

	CAGR 2016-2020	Share of revenue 2020
Connectivity*	-1 %	8 %
Electrification	25 %	24 %
Industry	24 %	18 %
Medical devices	20 %	25 %
Defenece/ Aerospace	14 %	25 %
Kitron	17 %	100 %

* CAGR adjusted for disengaged customer 20%

Margin improvement - 2025 target upped to 8%

2020

▪ 2020 margin affected by economies of scale and exceptional utilization due to temporary high volumes in medical devices

2025

• Target 8%
• Acquired businesses or start-ups may temporarily be below margin ambition

Capital efficiency: Ambitions maintained

Net working capital

• Target NWC 20% of revenue
• Strong growth the last years in aerospace/defence with longer cycles will over time be re-balanced

Cash conversion cycle

▪ Cash conversion cycle key metric, target 60 days

Cash Conversion Cycle (CCC) = Days inventory outstanding + days sales outstanding - days payable outstanding.

▪ DIO currently drives CCC

CCC is calculated as a 3 months rolling average

Improving return on capital

• Exceptional results in 2020
• Capital efficiency improvements affected by growth
• ROOC% Long-term target 20-25%

Return on operating capital

Return on capital employed

Cash flow strengthening, normal capex

• Strong underlying operating cash flow trend
• Component shortages in 2018 going into 2019. Component shortages also in 2021 but on a different level.
• Normal capex expected to be approximately ~2% of revenue.

Capex (MNOK)

Solid financial platform

• Net interest-bearing debt NOK 758 million
  • NOK 635 million excl. IFRS 16
• NIBD/EBITDA 1.8
  • 1.6 excl. IFRS16
• Net gearing 0.86 ▪ 0.7 excl. IFRS16
• Equity ratio 33.4% (30.8%)
• ROE 24.1% (18.2%)
• Covenants on Equity % and NIBD/EBITDA

NIBD/EBITDA
4.4
		Target below 2.5		2.4
					1.6
2013	2014	2015 2016	2017 2018	2019*	2020*

Net interest-bearing debt divided by earnings before interest, taxes, depreciation and amortization.

			2019	2020
NIBD/EBITDA		Cash and cash Equivalents	204	153
		Long term debt to credit institutions	166	105
		Lease liability IFRS 16	116	102
		Long term debt - Financial leasing	50	60
		Long term financing	332	268
		Debt to credit institutions	323	234
		Factoring debt	249	271
2.4 Target below 2.5		Lease liability IFRS 16	18	20
		Short trem part of long term debt	67	117
	1.6	Short term finanancing	657	643
		Interest bearing debt	989	911
		Net intereast bearing debt	785	758
		Net intereast bearing debt excl IFRS	651	635
* Adjusted for IFRS16 effects

Strong dividend history

• Strong commitment to dividends
• Proposed for 2020:
  • Ordinary dividend NOK 0.70 per share.
  • To be payable in two equal tranches, one in May and
  • one in October.

"Kitron's dividend policy is to pay out an annual dividend of at least 50 % of the company's consolidated net profit before non-recurring items. When deciding on the annual dividend the company will take into account the company's financial position, investment plans as well as the needed financial flexibility to provide for sustainable growth."

DRIVING COMPETITIVENESS AND EFFICIENCY

COO Israel Losada Salvador

Kitron

Semiconductors' shortages

Semiconductors – Demand increase

• Big drop during Q1 and Q2
• Towards the end of Q2, market fear decreased, and demand shot up
• Semi conductor suppliers are struggling to catch up

Integrated circuits - Foundries

• Most semiconductor manufacturers are fabless. They buy their wafers from Pure Play Foundries
• Very few large players in the Pure Play Foundry market
• Everybody must go to the same source for wafers

~90% world capacity

• o TSMC (Taiwan) – 50%
• o Samsung (South Korea) 19%
• o Global Foundries (USA) – 8-9%
• o UMC (Taiwan) – 6-7%
• o SMIC (China) – 4-5%

Semiconductors – Lead time increases

• Q3-Q4 demand exceeded forecast – Emptied manufacturer stock stock
• Q4-Q1- Foundries are overcommitted – Empty Die Bank
• New orders face full manufacturing lead time

Semiconductors - Mitigation

• Shortages made worse by a Panic Effect
• Book to build ratios between 1.6 and 2.1
• Situation is expected to improve for some components by Q4 2021. For others, it will continue well into 2022
• Initiated proactive measures with customers as early as Q3 last year – ahead in the queue
• That combined with long term partnership with distributors and manufacturers ensure on time deliveries to customers

Supporting long term goals

Collaboration with business clusters, universities, research centres/labs, trends in market. Educate exiting work force and attract new talent.

Operational foundation for continued growth

• 6 modern facilities with a footprint of over 60 000 Sqm
• Current footprint utilization around 55%
• Current planned revenue max per facility around MEUR 100
• 6 modern facilities with a footprint potentially > 60 000 Sqm
• Footprint utilization around 85%
  • o Capacity in US and China, Europe at upper end.
• Higher efficiency
• Increased planned revenue max per facility around MEUR 125-150
• To manage capacity in 2026, a further European site will have to be established in 2023/2024.

2025

Profitability expansion

Increased economies of scale

Increased production capacity utilization

Capability Investments

Automation and Digitalization

Efficiency projects

Lean and Operational Excellence

Increasing EBIT margin to 8%

Maintaining current EBIT margin of 7%

SUMMARY

Key take-aways

• New market sector segmentation: Focus on high growth sectors Electrification and Connectivity CAGR 15%
• Overall achieve 10% growth each year with 5% CAGR on existing customer base and adding an additional 5% on new program acquisition.
• Focus on existing capacity utilization and maximizing economies of scale
• Continue delivering a superior performance to customers and shareholders

2021 guidance
Revenue NOK 3 900 to 4 200 million	ROOC 20-25%	Margin 6.8% to 7.4%
	2025 Targets
Revenue NOK 6 000 million	ROOC 20-25%	EBIT margin 8%

Q & A

Appendix

Appendix: Definition of alternative performance measures

Order backlog

All firm orders and 4 months of committed customers forecast at revenue value as at balance sheet date.

Foreign exchange effects

Group consolidation restated with exchange rates as comparable period the previous year. Change in volume or balance calculated with the same exchange rates for the both periods are defined as underlying growth. Change based on the change in exchange rates are defined as foreign exchange effects. The sum of underlying growth and foreign exchange effects represent the total change between the periods.

EBITDA Operating profit (EBIT) + Depreciation and Impairments

EBIT Operating profit

EBIT margin (%) Operating profit (EBIT) / Revenue

Net working capital Inventory + Accounts Receivable – Accounts Payable

Operating capital Other intangible assets + Tangible fixed assets + Net working capital

Return on operating capital (ROOC) % Annualised Operating profit (EBIT) / Operating Capital

Return on operating capital (ROOC) R3 % (Last 3 months Operating profit (EBIT))*4 /(Last 3 months Operating Capital /3)

Return on capital employed (ROCE) EBIT/(Total assets - short term debt)

Return on equity Net Income/Equity

Direct Cost

Cost of material + Direct wages (subset of personnel expenses only to include personnel directly involved in production)

Days of Inventory Outstanding 360/ (Annualised Direct Costs/Inventory)

Days of Inventory Outstanding R3 360/ ((Last 3 months Direct Costs *4) /(Last 3 months Inventory/3))

Days of Receivables Outstanding 360/ (Annualised Revenue/Trade Receivables)

Days of Receivables Outstanding R3 360/ ((Last 3 months Revenue*4)/(Last 3 months Trade Receivables/3))

Days of Payables outstanding 360/ ((Annualised Cost of Material + Annualised other operational expenses) /Trade Payables)

Days of Payables Outstanding (R3) 360/ (((Last 3 months (Cost of Material + other operational expenses)*4) /(Last 3 months Trade Payables)/3))

Cash conversion cycle (CCC) Days of inventory outstanding + Days of receivables outstanding – Days of payables outstanding

Cash conversion cycle (CCC) R3

Days of inventory outstanding (R3) + Days of receivables outstanding (R3) – Days of payables outstanding (R3)

Net Interest-bearing debt

• Cash and cash equivalents + Loans (Non- current liabilities) + Loans (Current liabilities)

Interest-bearing debt Loans (Non- current liabilities) + Loans (Current liabilities)

Net gearing Net Interest-bearing debt / Equity

Free Cash flow Net Cash Flow from operating activities – Cash flows from acquisition of tangible fixed assets – Cash flows from acquisition of other intangible assets

35

Equity ratio Total Equity / Total Assets

EPS Earnings Per Share