Kitron: Q3 2019 – Strong growth continues

(2019-10-24) Kitron today reported strong growth of revenue and order backlog in the third quarter, led by the Defence/Aerospace and Offshore/Marine market sectors.

Kitron's revenue for the third quarter was NOK 738 million, an increase of 31 per cent compared to last year. Organic growth, excluding the acquisition of the EMS division of API Technologies Corp., was 21 per cent.

The order backlog ended at NOK 1 572 million, an increase of 40 per cent compared to last year. Organic order backlog growth, excluding the API acquisition, was 27 per cent.

Profitability expressed as EBIT margin was 5.4 per cent in the third quarter, compared to 5.3 per cent in the same quarter last year.

Peter Nilsson, Kitron's CEO, comments:

“Our business grew robustly in the third quarter, and we ended the quarter with a very strong order backlog. We also completed the construction of our new factory in Poland, where production is ramping up during the fourth quarter. We will focus on working capital efficiency and further margin improvements as we move into 2020.”

Strong revenue growth

Kitron's revenue in the third quarter amounted to NOK 738 million, compared to 563 million in the same quarter last year. All market sectors grew. In absolute numbers, third quarter revenue growth compared to the same quarter last year was particularly strong in the Defence/Aerospace and Offshore/Marine market sectors.

Strong order backlog

The order backlog ended at NOK 1 572 million, compared to 1 122 million last year, and similar to the revenue development the order backlog increase was particularly strong in the Defence/Aerospace and Offshore/Marine market sectors.

Improved profitability

Third quarter operating profit (EBIT) was NOK 39.6 million, compared to 30.0 million last year. EBITDA was NOK 59.7 million, compared to 42.7 million last year. The effect on third quarter EBITDA and EBIT from implementation of the IFRS 16 accounting standard is an increase of NOK 5.0 million and NOK 0.8 million respectively.

Profit after tax amounted to NOK 24.6 million, compared to 21.8 million in the same quarter the previous year. This corresponds to earnings per share of NOK 0.14, up from 0.12 last year.

Inventory build-up to secure deliveries and future growth

Net working capital increased by 47 per cent compared to the same quarter last year to NOK 887 million. The increase is primarily related to the deliberate and temporary inventory build-up to avoid supply disruptions in the face of the previously reported electronic components shortages that peaked in late 2018. As previously announced, Kitron expects that a continued gradual improvement in component availability during 2019 will lead to a reduction of working capital, both in absolute numbers and as a percentage of revenue.

Operating cash flow was positive NOK 19.2 million, compared to negative 41.0 million in the third quarter of 2018.

New factory in Poland

During the third quarter, construction of Kitron’s new factory in Grudziądz, Poland, was finalized, and production is ramping up in the fourth quarter, as planned..

Flooding in the US

The facility of Kitron Technologies in Windber, Pennsylvania, was damaged by flooding in July and production has been moved to a temporary site. This has led to some inefficiencies in production and increase in net working capital, but the effect on customers has been, and is expected to be, minimal. On a group level Kitron does not expect significant financial impact from this incident.

Outlook

For 2019, Kitron expects revenue to grow to 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 the Polish facility is 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.

Enclosed in PDF are the quarterly report and the presentation.

The interim report is presented today at 8.30 a.m. CEST. The presentation will be given in English by CEO Peter Nilsson and CFO Cathrin Nylander, and will be webcast at the following link:

For further information, please contact:

Peter Nilsson, President and CEO, tel.

Cathrin Nylander, CFO, tel:

E-mail:

Kitron is one of Scandinavia's leading electronics manufacturing services companies for the Defence/Aerospace, Energy/Telecoms, Industry, Medical devices and Offshore/Marine sectors. The company is located in Norway, Sweden, Lithuania, Poland, Germany, China and the United States. Kitron had revenues of about NOK 2.6 billion in 2018 and has about 1 700 employees.  

This information is subject to the disclosure requirements pursuant to section 5 -12 of the Norwegian Securities Trading Act.

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