Kitron: Q2 2018 - Continued growth and solid profitability
(2018-07-12) Kitron today reported quarterly figures that confirm the company's progress towards its strategic ambitions.
Kitron's revenue in the second quarter amounted to NOK 667 million, an increase of 3 per cent compared to the same quarter last year.
Profitability expressed as EBIT margin was 6.8 per cent in the second quarter.
Peter Nilsson, Kitron's CEO, comments:
"This is the highest second quarter revenue in Kitron's history. In general, the financial results increase our confidence in the 2018 outlook and our strategic ambitions, which include revenues of NOK 3 billion and an EBIT margin of 7 per cent in 2020. It is especially gratifying that we make progress in the face of industry-wide issues with component availability. This is a testament to our robust supply chain. The second quarter showed record levels of future prospects: a growth of 60 per cent compared to last year in the new quote pipeline. In addition, the oil and gas market sector shows signs of recovery, and we expect significant improvement from 2019."
Revenue and order backlog grew
Kitron's revenue in the second quarter amounted to NOK 667 million, compared to 649 million in the same quarter last year. Revenue growth compared to the same quarter last year was particularly strong in the Industry market sector.
The order backlog increased by 12 per cent on a comparable basis. After adjustment for the introduction of the new IFRS 15 accounting rules, the order backlog ended at NOK 1 009 million. There are early signs of increased investments in the offshore industry, translating into increased order backlog in the Offshore/Marine market sector, albeit from a very low level.
Second quarter operating profit (EBIT) was NOK 45.0 million, compared to 45.5 million last year. EBITDA was NOK 58.6 million, compared to 59.0 million last year.
Net profit amounted to NOK 34.5 million, an increase of 10 per cent. This corresponds to earnings per share of NOK 0.20, compared to NOK 0.18 last year.
Effective actions to counter component shortages
Net working capital increased by 7 per cent compared to the same quarter last year to NOK 603 million. Operating cash flow was NOK 42.7 million, compared to 63.1 million in the second quarter 2017.
The increase in working capital is partly related to a deliberate and temporary inventory build-up to avoid supply disruptions in the face of previously reported electronic components shortages.
Component shortages have been an ongoing issue for the Electronics Manufacturing Services industry since last year, and the situation is expected to be challenging throughout the year and into 2019. Kitron works closely with its customers to alleviate the situation and its timely and systematic approach combined with its preferred partner program has prevented serious supply disruptions.
New accounting standard
Kitron implemented the new accounting standard IFRS 15 "Revenue from Contracts with Customers" from 1 January 2018. In the second quarter, this had minimal effect on revenue and profits, but it reduced the order backlog. It also affected certain balance sheet items. See the quarterly report for details
For 2018, Kitron expects revenue to grow to between NOK 2 500 and 2 700 million. The EBIT margin is expected to be between 6.1 and 6.5 per cent. Growth is primarily driven by customers in the Industry and Energy sectors. Profitability is driven by cost reduction activities and improved efficiency.
Enclosed in PDF are the quarterly report and the presentation.
The interim report is presented today at 2.00 p.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:
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, Germany, China and the United States. Kitron had revenues of about NOK 2.4 billion in 2017 and has about 1 450 employees. www.kitron.com