Kongsberg Automotive

Earnings Release • Feb 28, 2019

Kongsberg Automotive ASA Fourth quarter 2018 - February 28, 2019

Highlights Q4 2018

Sales	▪ Revenues grew by MEUR 21 (7.3%) YoY to MEUR 288 including negative FX effects of MEUR 1. ▪ We booked new business with MEUR 77 in expected annual revenues corresponding to MEUR 338 in expected lifetime revenues.
Performance	▪ Adj. EBIT increased YoY by MEUR 8 to 21 MEUR with no FX effects. ▪ In addition to the fall through from the additional revenues, we also saw improvement in our operations. ▪ Increased costs of raw materials and electronic components continued in Q4 2018 with a YoY effect of negative MEUR 2.
Cash Flow	▪ Free cash flow improved by MEUR 13 to MEUR 4 YoY. ▪ Cash on hand at the end of Q4 2018 of MEUR 59.
Gearing	▪ The LTM adjusted gearing ratio (NIBD/Adj. EBITDA) declined from 2.4 in Q4 2017 to 1.9 in Q4 2018.

2018 Capital Markets Day – a confirmation

	2018 CMD	2018 Actual
In Mill. Euro Sales Adj. EBIT % of sales	1.128 75 6,6%	1.123 75 6,7%
Restructuring & One Off cost	-20	-21
EBIT % of sales	55 4,9%	54 4,8%
Financial Items	-14	-15
Profits Before Taxes	42	39
Taxes % of PBT	-17 -42,0%	-15 -38,2%
Net Income	24	24
EPS (NOK)	0,51	0,53

Revenues and Adjusted EBIT

Revenues and profitability continue to consistently improve YoY

Revenues including HRAR EBIT adjusted for restructuring - see details in the quarterly report.

Market Summary

New business wins

2018 was the strongest booking year in the company's history

Bookings in 2018 were more balanced in 2018 than in previous years.

Expected annualized and lifetime revenues

New business wins LTM (per annum value)

New business wins LTM (lifetime value) MEUR

Q4 2018 market summary

Increased levels of uncertainty affected production output in Q4

Source: IHS Light Vehicle Production Base, January 2019

^{773 775 807 825 864 881}

Source: LMC Global Commercial Vehicle Forecast, Q4 2018

➢ Global Passenger Car Production

• Global light vehicles production in Q4 2018 was 23.9m, a YoY decrease of 5.4%, equivalent to approx. 1.4m units.
• China was the main driver of the global decline in production with a YoY fall of 15.2% or approx. 1.3m units as domestic demand in China has weakened due to concerns about an escalation of the trade war with the United States.
• Production in Europe fell as well with a YoY decrease in output of 4.6% or approx. 260k units. The new WLTP certification process and the uncertainty around Brexit have slowed down production, particularly in Germany and the United Kingdom.
• In North America, production has stabilized and had a YoY growth rate of 2.1% or approx. 90k units.
• In Asia outside of China the YoY growth rate came in at 5.7%.

Global Truck Production, Units in thousands ➢ Global Truck Production

• The production of medium and heavy-duty commercial vehicles fell by 4.6% YoY, equivalent to approx. 40k units.
• A vast majority of this decline was due to China where production YoY declined by 18.3%, equivalent to approx. 63k units, primarily due to the significant advancement of production completed in 2017.
• North and South America continued the strong growth seen in previous quarters with YoY growth rates of 16.8% and 11.8%, respectively as the expansion cycle on the continent continued.
• In Europe, the truck production decreased YoY by 2.8%.

Segment Highlights

Segment financials last five quarters

Interior Powertrain & Chassis

Specialty Products

Interior

We are still on track with the ramp up of the second Poland plant as we expect completion in Q1/Q2 2019.

Annualized revenues

Systems to a major European OEM with lifetime revenues of approximately MEUR 57.

Powertrain and Chassis (P&C)

1.6 5.8 Q4-17 Q4-18 4.2 Q4-17 Q4-18 105 113 8.4 +8.0% Revenues Adj. EBIT The Commercial Vehicle business in North America continues to be the main YoY growth driver in the segment.

The YoY adj. EBIT increase was driven by an increase in North American volumes, benefits from completed restructuring activities and some other effects.

Operations

Successful production ramp up at the Mexican facility to accommodate larger output to American customers within the CV segment.

Significant effort was spent on increasing the capacity for a challenging short notice demand increase for a gear shifter to one of our main OEM customers.

New Business Wins

Annualized revenues

Lifetime revenues Wins includes Clutch Actuation Systems to a major European OEM with lifetime revenues of approximately MEUR 46. SOP is expected to be in 2020.

High sourcing activities among the OEMs during the first nine months affected bookings in Q4.

Q4-17 Q4-18

Specialty Products Segment

12.7 17.2 Q4-17 Q4-18 4.5 Q4-17 Q4-18 ^{98 96} 2.0 +2.1% Revenues Adj. EBIT Strong markets across all regions in the Couplings business unit as well as the Off Highway business unit in North America were the biggest growth drivers. Slight decrease in the OPE and North American FTS businesses. drivers.

New Business Wins

Strong operational performance and fall-through were the main

Higher raw material and freight costs negatively impacted adjusted EBIT.

Operations

Lifetime revenues The expansion of the Couplings facility in Raufoss, Norway, has started and is progressing according to plan.

The ramp up at the new FTS facility in Mexico was completed. Certain supply chain transition activities are still work-in progress.

Q4-17 Q4-18 146 77 -69.0 50 33 -17 Annualized revenues

Significant wins include Air Coupling system to a European OEM with lifetime revenues of approximately MEUR 13.

High sourcing activities among the OEMs during the first nine months negatively affected bookings in Q4.

Q4-17 Q4-18

Financial Update Norbert Loers

Q4 2018 - Revenue development

Revenue growth in all segments

* Variances excluding FX translation effects

Q4 2018 - Adjusted EBIT development

All segments contributing to an increased profitability

► Group

– Adjusted EBIT MEUR 20.7, MEUR 7.7 above Q4 2017.

► Business Segments

• Benefits from improved footprint across the BUs
• Higher operational efficiency
• Increased volumes across all segments
• Costs for new products launches, ongoing operational optimization projects, unfavorable raw material costs and electronic components costs.
• Partially offset by higher administrative costs and other effects

Q4 2018 - Net Profit development

Free Cash Flow*

► Operational cash flow MEUR 34.3

• Stronger decrease of NWC of MEUR 8.7 in Q4 2018 compared to Q4 2017.
• Cash out related to restructuring activities amounted to MEUR 3.3 for Q4 2018.

► Investing cash flow MEUR -30.2

• Investments amounted to MEUR 25.0 mainly to support current and future business growth.
• The remaining MEUR 5.2 related to development and tooling contract assets (non-current)

► Financing cash flow MEUR -0.1

• No drawing or repayment of additional debt in the fourth quarter
• Interest for the bond was accrued for in 2018 and will be paid in January 2019

*Cash Flow from operating activities +/- cash flow from investments – interest

Q4 2018 - Cash development

Net financial items - Breakdown

Financial ratios

Adjusted ROCE** (LTM)

Equity Ratio*** LTM Capital Employed (MEUR)

*Excluding restructuring costs; ** Including IFRS 15 and IFRS 9 adjustments on equities amounting to MEUR +0.7, *** Q2 2018 has accounted for the ~MEUR 40 equity increase

Summary & Outlook

• ➢ We finished 2018 with a record level of new business wins reducing our sensitivity somewhat to potential market challenges.
• ➢ Q4 2018 marks the eighth consecutive quarter with top line, bottom line and margin improvements
• ➢ Continuing increases in raw material pricing and high tariffs was a setback in Q4 and continues into Q1 of 2019.
• ➢ From a market standpoint, we continue to see high levels of uncertainty. For some of our OEM customers, forecasted volumes have been somewhat reduced for the first quarter of 2019. This is particularly true for the UK based OEMs as well as one big global OEM. Although less of a Q1 growth rate than assumed in our plans, this would still lead to a Q1 2019 topline growth rate of 6% YoY. This leads us to estimate Q1 revenues at a level of around MEUR 306.
• ➢ At this stage, it is difficult to understand the drivers for the slight reduction in anticipated revenues for Q1. We can speculate that at least part of the declines are due to Brexit and WLTP issues. It is too early to say whether these effects will continue into the later quarters of 2019.