Kitron — Investor Presentation 2023

Dec 13, 2023

Capital Markets Presentation

Kitron Group, 13 December 2023

AGENDA

• Kitron in brief
• Markets, positioning and growth strategy
• European EMS market landscape
• Defence sector outlook
• Sales & Strategic expansion
• Long-term financial targets
• Sustainability
• Summary, Q&A and wrap up

Peter Nilsson President & CEO Cathrin Nylander CFO

Mindaugas Sestokas VP CEE

H.P. Thomassen VP Nordics & North America.

Kristoffer Asklöv COO

Kitron in brief

Kitron Group, 13 December 2023

Peter Nilsson President & CEO

Core business and operations

• Our business: Industrial partner with focus on electronics.
• Operations: Manufacturing services of electronics and related products
• Modern, highly competitive facilities globally
• Continuous equipment investments of 2-3% of sales
• Global footprint of more than 105 000 m2
• Over 3000 employees spread over 12 locations
• Corporate headquarters in Billingstad, Norway

DEVELOPMENT 2019 – 2023*

SHARE PRICE

• Share price up from NOK 8.70 to ~ 33 since 2019
• Dividend every year contributing to total shareholder return of over 300%.
• Dividend policy: Annual dividend of 20 to 60 per cent of the company's consolidated net profit before non-recurring items.

Long-term growth and value creation

FULL YEAR 2023 OUTLOOK

• Record revenues
• Strong EBIT margin and capital efficiency improving
• Outlook maintained

2023 outlook: Revenue between EUR 750 and EUR 800 million. Operating profit (EBIT) between EUR 65 million and EUR 75 million.

Proven track record

REVENUE GROWTH

• Annual growth 10% (ex. M&A)
• Customer development
• From 4 to 10 factories globally

PROFITABILITY – EBIT MARGIN IMPROVED

• World-class operations management
• Proven economies of scale concept
• OPEX reduced from 35% to 21%

CAPACITY EXPANSION

• 2 international acquisitions
• Greenfield Poland and Malaysia, multiple site upgrades
• More than EUR 50 million invested in new equipment and capabilities KEY TAKE-AWAY

Our ambition for 2027: EUR 1 Billion, 9% margin

2027

• With organic growth achieve:
  • o Revenue: €1 Billion
  • o EBIT margin 9%
• Potential M&A adds upside

KEY TAKE-AWAY Kitron is in growth markets supported by strong megatrends.

Markets, positioning and growth strategy

Kitron Group, 13 December 2023

Peter Nilsson President & CEO

Customers and positioning Kitron's customers are often market leaders in their

• Long-term, repeat business
• Customers often market leaders
• Often high-complexity products
• Regionalized supply chains and manufacturing

business. Our partnerships generally date back a decade or more. Sales is strongly characterized by repeat business continuously renewed by new product generations.

General features by market sector

▪ Fixed infrastructure

increases drive

flexibility

▪ High entry barriers, cyber, aviation, security clearances

▪ Long life-cycle drives price pressure

Growth strategy in market sectors

CONNECTIVITY: Medium-term 5%-10% annual growth

• Focus: IOT, Sensors, Optical networks, Intelligent asset tracking
• Drive for high utilization, high automation economies of scale
• Take advantage of application know-how and rapid time-to-market

ELECTRIFICATION: Medium-term 7%-15% annual growth

• Focus: E-Mobility, energy storage, power grid solutions, load balancing.
• Manage emerging tech and build high-level assemblies
• Deliver on scale, technology and time-to-market

INDUSTRY: Medium-term 7%-15% annual growth

• Focus: Industrial automation, robotics, infrastructure
• Manage cost competitiveness, use purchasing strength, effective automation and rapid demand-change flexibility

MEDICAL DEVICES: Medium-term 0-5% annual growth

• Focus: Ventilators, cardiovascular diagnostics, digital morphology
• Position as strategic partner for innovation and product management

DEFENCE/AEROSPACE: Medium-term 20-30% annual growth

• Focus: Surveillance, communication, infrastructure, training and more
• Take advantage of market entry barriers
• Capitalize on long-term relationships, NATO defence spend and localization of manufacturing

KEY TAKE-AWAY

Kitron operates in growing market segments. European EMS market expected to grow 7% CAGR, reaching \$70 billion by 2028 – no meaningful barrier to Kitron's growth.

¹Medium-term = 2025-2027

2024 EMS market sentiment

• Global EMS Growth: Digital transformation drives expansion; high inventory levels may suppress early demand.
• Asia: Manufacturing dominance persists; export and local demand growth is tempered by China's domestic challenges.
• Europe: IoT and Greentech demand rises yet dampened by slow stock turnover due to economic caution.
• Nordics & U.S.: Defense and aerospace sectors surge, bolstered by security needs and stable demand. Multiple production transfers to solve short term capacity restrictions.
• Connectivity: IoT and 5G expansion fuel sector growth, with possible inventory-induced delays in immediate uptake.
• Industry: CEE sees gradual industrial automation growth amidst reevaluations of capital expenditures.
• Electrification: EV and energy storage solutions growth, paced by consumer spending trends. Fixed grid infrastructure developments show strong growth.
• Medical Devices: Consistent growth trajectory, driven by telehealth and pandemic-induced technological adoption.
• Defence/Aerospace: Increased spending on geopolitical tensions predicts sector resilience.

KEY TAKE-AWAY

Quarterly Projection: Q1 and Q2 sees short term capacity restrictions and inventory adjustments; Q3 and Q4 likely to rebound as market conditions improve and load is rebalanced between sites and regions.

Outlook 2024

• Growth is expected to continue strong on sectors advanced Electrification - power grid solutions, Defence/Aerospace and security. These sectors show solid growth for the year.
• Tepid demand for first half of year in Europe and China with significant stock re-balancing, contributes to conservative outlook for 2024.
• Customers have noted a cautious approach to demand in the first quarter, with a more optimistic outlook for steady improvement toward end of the second quarter.

For 2024,

• Kitron expects revenues between EUR 700 and 800 million.
• Operating profit (EBIT) is expected to be between EUR 60 and EUR 74 million.

2024 GUIDANCE Revenue: EUR 700 to 800 million EBIT: 60M to 74M

• Soft outlook in Europe and China in start of 2024
• Growth on power grid solutions
• Growth on defence and security
• Strong performance in Nordic and U.S. Kitron sites

European EMS Market Landscape

Kitron Group, 13 December 2023

Mindaugas Sestokas VP CEE

European EMS Market Landscape

Geopolitical and Sustainability trends drives regionalization

• Regionalization is being accelerated by geopolitical shifts and a push for sustainability, with a focus on reducing carbon emissions and addressing trade, cyber security, and intellectual property concerns.
• Opportunities lie in diversifying production and increasing outsourcing from OEM/ODM, especially in Germany.
• Defense budgets in regions like Poland are on the rise, presenting further opportunities for market penetration and revenue growth.
• Kitron is well positioned to tap into the growing European EMS market, forecasted to reach €45 billion by 2026.

KEY TAKE-AWAY

Geopolitical and sustainability trends, cost and capacity concerns are prompting regionalization, emphasizing quicker market access. Kitron is set to capitalize on the robust growth.

European EMS growth (€B)

Source: Reed Electronics Research: The EMEA Electronic Manufacturing Services Industry 2021-2026

CEE regional focus

CEE region manufacturing facilities will focus on Electrification, Connectivity & Industry customers.

Organizational resilience | Harmonization & Best practice | Global scalability and flexibility

Kitron in CEE

Central and Eastern Europe (CEE) Growth Projections

• Forecasting €300 million in revenue in 2023, more than a 55% growth.
• The electrification sector is a strong driver.
• Customer base expansion is catalyzing growth.
• Notable development across all locations, with Poland demonstrating remarkable progress.

Future Growth Outlook for CEE region

• Setting a goal of surpassing €430 million by 2027.
• Capacity is on track to reach nearly €400 million.
• A 4,000 sqm facility expansion in the Czech Republic by end of 2023, bringing the total to 10,000 sqm.
• Secured 83,000 sqm land for further expansion in Poland, with plans unfolding from 2025 onwards.
• Focusing on growing sectors and investing in talent, productivity, and automation to drive growth.

The CEE region: Aiming for a €430 million turnover by 2027, the region is poised for ~10% annual growth and is actively seeking to secure over €50 million in new business annually.

Defence sector outlook

Kitron Group, 13 December 2023

H.P. Thomassen VP Nordics and North America

KEY TAKE-AWAY

Expect sustained growth in defense demand, driven by strategic alliances and increased global security initiatives.

Evolving Dynamics in the Defense Sector

• The security landscape is experiencing increasing challenges.
• NATO's engagement, including new commitments from member countries, is strengthening in response to conflicts such as the situation in Ukraine.
• With Finland and Sweden's prospective NATO membership, there's a strategic shift in the Nordic defense posture.
• Collaboration in defense procurement is intensifying within the Nordic region and the broader EU, signaling more unified defense strategies.
• The US is accelerating its foreign military sales, indicating a quicker pace in defense-related transactions.

KEY TAKE-AWAY

Entry barriers into the defense industry remain high. Contracting processes are complex and cumbersome. Kitron's advanced capabilities and strategic market presence position it for robust growth within the defense industry.

Kitron's Strategic Defense Sector Positioning

• Kitron demonstrates a robust, long-standing commitment to the defense sector, guided by a strategic vision that aligns with industry growth.
• The company has nurtured strong, sustainable partnerships with leading defense OEMs.
• Management protocols are meticulously designed to be fully compliant with intricate defense contracting requirements.
• Kitron prioritizes stringent security measures, with a comprehensive cybersecurity framework that meets rigorous regulatory demands.
• A strategic geographic expansion of factory locations enables Kitron to efficiently serve leading OEMs across the transatlantic sphere.
• Proactively scaling up production capabilities and infrastructure, Kitron is set to accommodate and drive further sector growth.

Kitron's Defense Sector Growth Forecasts

• Kitron is set to expand its defense sector presence, capitalizing on existing relationships and seizing new opportunities with OEMs across Europe and the US.
• The company's defense-focused plants are projected to see a revenue boost by 50% in 2024.
• Future outlooks suggest a sustained growth for the next decade.
• The value of Request for Quotation (RFQ) opportunities is on a steady climb, mirroring the rate of revenue increase and indicating consistent yearover-year growth.

KEY TAKE-AWAY

Amid escalating security concerns and NATO's expansion, including Sweden and Finland's integration, Kitron is positioned for strong, sustained growth in the defense sector.

Sales & Strategic expansion

Kitron Group, 13 December 2023

Kristoffer Asklöv COO

Kitron sales funnel - New & existing customers

Robust Sales Potential Across Diverse Market Conditions:

• Innovative product offerings tailored for our existing customer base
• Expansion into new customer segments and untapped markets
• Strategic outsourcing to enhance efficiency and cost-effectiveness
• Seamless transfers and adaptations to evolving market demands

Robust Sales Pipeline and Strategic Market Penetration

• A well-distributed sales funnel demonstrating strong market reach
• Targeted hit-rate reflecting competitive edge in the market
• Emphasis on cultivating new business opportunities with both new and established clientele
• Penetration into high growth segments through new customer acquisition
• Dedicated efforts in retaining and expanding business with existing clients

Year end capacity by production region (€M)

KEY TAKE-AWAY

Kitron's strategic growth is marked by efficient capacity expansion and robust organizational scaling.

Strategic expansion and capacity enhancement

Footprint - Global scalability and flexibility

• Expanding current manufacturing facilities.
• Developing a new site in Malaysia.
• Land in Poland acquired for potential extension.

People - Organizational resilience

• BB organization is merging into "One Kitron".
• Harmonization, Standardization & Digitalization
• Our shared service center in India is expanding.

Machines - Harmonization & Best practice

• Highlight operational efficiency and capacity utilization.
• Accelerate digitalization and process automation.
• Drive economy of scale and regional resilience through standardized equipment investments.

Strategic Initiatives for Expansion

Greenfield Projects:

• Targeting capacity expansion through existing growth avenues.
• Investment anchored by CAPEX 2-3%.
• Focused on regional access and labor market engagement.
• Aligned with strategic growth objectives.

Acquisitions:

• Seeking long-term growth through strategic acquisitions.
• Leveraged through debt and equity financing.
• Criteria: regional presence, customer base expansion, and value addition to Kitron.

Malaysia Expansion:

• Initiating a new facility in Malaysia to enhance service to the Asian market. Integration of support and services from Kitron China to streamline operations.
• The facility is designed for scalability beyond the initial 3000m².
• Production set to commence in Q1 2024.

KEY TAKE-AWAY

Kitron is strategically expanding with greenfield investments and targeted acquisitions to enhance global market presence and operational capacity.

Long term financial targets

Kitron Group, 13 December 2023

Cathrin Nylander CFO

Peter Nilsson President & CEO

Financial ambitions for 2027

2027

• Targeting a revenue milestone of €1 billion driven by organic growth.
• Aiming for an EBIT margin of 9%.
• Projecting an annual organic growth rate of 10%
• Anticipating additional growth potential from strategic mergers and acquisitions.

KEY TAKE-AWAY

Kitron is strategically positioned for robust growth, leveraging market trends and mergers and acquisitions to achieve its financial ambitions by 2027.

Setting the course for sustainable financial success

REVENUE: ~10% ORGANIC GROWTH

▪ Targeting 10% yearly revenue growth organically.

PROFITABILITY: 9% EBIT MARGIN

▪ 9% EBIT margin, leveraging growth and efficiency.

ROOC: > 25%

▪ ROOC above 25%, indicating a strong business model.

CASH FLOW: 80% OF EBITDA

▪ Cash from operations projected at 80% of EBITDA, driving reinvestment.

NIBD / EBITDA: < 2.5

▪ NIBD to EBITDA ratio maintained below 2.5 for financial health.

KEY TAKE-AWAY

The company's financial goals promote enduring profitability and a robust balance sheet for strategic growth and shareholder value.

Sustainability

ENVIRONMENTAL TARGET

Sustainable energy supply

Current status: 83%

100%

EU TAXONOMY TARGET

20%

Sales aligned with taxonomy Current status: 33 %

Women across all levels Current status: 53 %

SOCIAL TARGET

40%

29

KEY TAKE-AWAY

Kitron has strong stakeholder requirements, and we are as committed to their ambitions as our own.

Key take-aways

• High growth on sectors Electrification-fixed infrastructure and Defence /Aerospace for 2024
• Tempered demand for first half of year in Europe and China contributes to a conservative outlook for 2024
• Over mid to long term Kitron's ambition is to achieve more than 10% organic growth each year from market sectors and product applications supported by strong megatrends.
• Focus on capacity utilization and maximizing economies of scale ensuring competitiveness and profitability
• Continue delivering superior performance to customers and shareholders

2027 TARGETS Revenue: > EUR 1000 million ROOC: >25% EBIT Margin: 9%

Q&A

Kitron Group, 13 December 2023

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

32

Equity ratio Total Equity / Total Assets

EPS Earnings Per Share