Kitron Reports Strong Growth in Revenue and Order Backlog

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Kitron’s revenue for the second quarter was NOK 563 million (NOK 489 million), which represents an increase of 15.2% compared to the same period last year. Growth adjusted for foreign exchange effects in consolidation was 9.8%.

The growth pattern from the first quarter continued into the second quarter. The Industry sector showed growth of 37%, with strong progress in Lithuania and Sweden, which increased revenues by 46% and 21%, respectively. The Defence/Aerospace, Medical devices, and Energy/Telecoms sectors all grew around 14-15%. The Offshore/Marine downward trend continues and revenue was further reduced by 57%.

The order backlog ended at NOK 989.4 million, an increase of 19 percent compared to last year. Growth in order backlog was especially strong in the Defence/Aerospace and Industry sectors, showing increases of 30% and 33% respectively.

As in preceding quarters, the order backlog within Offshore/Marine continues to fall due to the general downturn in the oil service market. Orders received in the quarter were NOK 658.8 million.

Improved Profitability

The second quarter EBITDA was NOK 45.2 million (NOK 32.1 million), an increase of 41% compared to last year. Operating profit (EBIT) for the second quarter ended at NOK 33.1 million (NOK 22.1 million).

Profitability expressed as EBIT margin was 5.9% (4.5%). This is an improvement not only from the second quarter last year but also from the first quarter this year. Profit after tax was NOK 21.4 million (NOK 13.3 million), corresponding to NOK 0.12 earnings per share (NOK 0.08).

Defence communications order

Kitron received an order from Kongsberg Defence & Aerospace

As for military communications equipment, for supplies to an existing contract for deliveries to Hungary.

Kitron will supply various communications products, and production will take place by Kitron in Norway. The contract has a value for Kitron of NOK 37 million, and deliveries will take place in 2016 and 2017.

For the last twelve months Kongsberg have placed orders totaling 157 MNOK to Kitron for advanced tactical communications equipment.

Capacity adjustments

Due to the strong revenue growth, Kitron decided to increase production capacity by investing in two new SMT lines, one in Lithuania and one in Sweden. They will be in place in the fourth quarter 2016 in Lithuania and in the first quarter 2017 in Sweden.

The temporary drop in efficiency in the factory in Norway due to the relocation has now been remedied.

During the third quarter, Norway is adjusting the indirect resources with 16 personnel to compensate for the longer-term downturn in the Offshore/Marine sector. In addition, due to short-term reduction of activity and change in product mix to less labour-intensive products, up to 60 employees might be furloughed during the third quarter.

Improved capital efficiency

Our consistent efforts to reduce working capital are yielding results. Net working capital was reduced by 6.7% from NOK 559 million to NOK 521 million compared to the same quarter last year.

Return on operating capital (ROOC) was 17.6% compared to 11.8% in the second quarter last year. Net working capital as a percentage of revenue was 23.8 percent, compared to 28.8% last year.

Cash conversion cycle (CCC) was at 86 for the quarter. This is down from 106 last year, an improvement of 20 days.

Operational cash flow was NOK 61.0 million (NOK 48.6 million) for the quarter. The improvement compared to last year is attributable to increased profitability.


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