Reading time ( words)
Kitron reported solid revenue and profitability for the second quarter as well as record order backlog. Strong growth within other market sectors compensated for lower demand within Medical devices.
Kitron's revenue for the second quarter was NOK 994 million, compared to NOK 1 041 million last year. Underlying revenue growth in the second quarter was 5 per cent, as revenue for the first half and second quarter is negatively affected by currency effects compared to last year of around 10 per cent, due to the Norwegian krone having strengthened against Kitron’s invoicing currencies.
Profitability expressed as EBIT margin was 7.4 per cent in the second quarter, compared to 8.5 per cent in the same quarter last year. The EBIT margin is at the top end of the company’s guidance for 2021, and in line with the strategic target path, although lower than last year, when there where economies of scale due to exceptional volumes within Medical devices.
The order backlog ended at NOK 2 294, an increase of 9 per cent compared to last year.
Peter Nilsson, Kitron's CEO, comments, “Despite currency headwind, Kitron had another solid quarter. Other market sectors have picked up the slack as the Corona-related demand surge within Medical devices ebbed. The underlying growth and profitability is on track for our annual guidance and strategic ambitions, the record-high order backlog and very strong demand in several market sectors make us confident in the last half of the year.”
Electrification and Industry show strong growth
There was strong growth within the Electrification, Connectivity and Industry sectors, while revenue declined within Defence/Aerospace. As expected, revenue within Medical devices has gradually been normalized after the pandemic-related demand surge during 2020.
Record order backlog
The order backlog ended at NOK 2 294 million, compared to 2 102 million last year. This is a record and reflects the strong total demand situation within IOT and warehouse automation. Adjusted for currency effects the order backlog increased by 13 per cent.
The order backlog increased within the Electrification, Connectivity and Industry sectors, while it declined within Defence/Aerospace. As expected, the order backlog within Medical devices has gradually been normalized.
EBIT margin 7.4%
Second quarter operating profit (EBIT) was NOK 73.1 million, compared to 88.0 million last year. EBITDA was NOK 97.5 million, compared to 113.8 million last year.
Profit after tax amounted to NOK 49.5 million, compared to 64.3 million in the same quarter the previous year. This corresponds to earnings per share of NOK 0.28, down from 0.36 last year.
Strong operating cash flow
Operating cash flow was NOK 109.3 million, compared to 5.5 million in the second quarter last year.
Net working capital was NOK 1 034 million, a decrease of 2 per cent compared to the same quarter last year. Net working capital as a percentage of revenue was 25.8 per cent, compared to 24.5 per cent last year. Longer term, capital ratios are expected to improve going forward.
Material supply situation challenging
The general material supply situation continues to be a challenge to deliveries. Kitron expects some relief during the fourth quarter and further relief during the first half of 2022.
For 2021, Kitron expects revenue between NOK 3 900 and 4 200 million. EBIT margin is expected to be between 6.8 and 7.4 per cent. The outlook for 2021 implies that Kitron is back on its long term trajectory for revenue and profitability after exceptional growth in 2020, largely driven by Corona-related demand within the Medical devices sector. Growth is driven by Connectivity, Electrification, and Industry sectors. The Medical devices sector is expected to be normalised and in line with previous years. The outlook for Defence/Aerospace is slightly down.