Kitron : Earnings Document

2024 Q2 Presentation

Kitron Group | 2024-07-11

CEO comments

• Robust Profitability: Kitron has demonstrated robust profitability, particularly in the Defense & Aerospace sector, where scale continues to drive profits.
• Signs of market turnaround: Despite initial setbacks, there are promising signs of recovery in several key markets, including Asia and Europe.
• Continued Growth in Key Markets: New MNOK 500 million defence order, strategic focus new sales, strong development on Defense, Connectivity, AI, potential turn around on green technologies, and investment in industrial base positions Kitron for sustained growth.
• Restructuring Program Nears Completion: The restructuring efforts have been effective, with expected cost-savingbenefits largely materializing in the quarter. Final savings are expected when full integration of IT systems is achieved in the third quarter.

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Second quarter sector trends

Sector trends 2024-Q2

• Connectivity:

1. Sector decline 19% (+6% vs LQ)

1. Continued quarter-on-quarter growth vs. Q1 and in outlook.

1. Growth on products supporting infrastructure investments and fleet management or tracking equipment.

1. Electrification:

1. Sector decline 26% (-8% vs LQ)

1. Greentech products suffer from reduced consumer spending on big- ticket items

1. Strong growth on network grid infrastructure.

1. Industry:

1. Sector decline 38% (-16% VS LQ)

1. Industrial activity is cooling off due to a combination of economic slowdown, reduced consumer demand, and overstocked supply chains.

1. Strong growth is observed in infrastructure supporting advanced chip design.

1. Medical Devices:

1. Sector decline 12% (+1% VS LQ) o Demand stabilizing
   o Continued demand increase for in vitro diagnostics.

1. Defence/Aerospace:

1. The sector shows a growth of 40% (+9% vs LQ)

1. There is increased demand for defense and security products as defense spending rises amid global security concerns, regional conflicts, and heightened government investment in defense and aerospace capabilities.

Connectivity

Expect slow growth returning to the sector in mid 2024

Electrification

Expect strength returning to the sector in early 2025

Industry

Expect strength returning to the sector in mid 2025

Medical Devices

Expect strength returning to the sector in 2025 with new product generations

Defense/Aerospace

Continued double digit growth over next several years

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Order backlog

Order Backlog

• Order backlog: 454.5 €M, -15% (534.9 €M) year-over year. Sequentially the order backlog is increased with 10M€ or 2% compared to the previous quarter.
• The Defence/Aerospace sector remains robust due to increased defense spending driven by global security concerns, regional conflicts, and higher government investment in defense and aerospace capabilities.
• The Connectivity sector continues to demonstrate quarter- on-quarter improvement.
• Other sectors exhibit shorter customer order horizons, reflecting current market sentiment, reduced lead times, and ongoing de-stocking of customer inventory.

Forward demand

• Rolling six-month outlook 323 €M

▪	This contains all customer demand, firm demand and forecast	The Order backlog features all firm customer orders and the
first 4 months of customer forecast. Historically, the Order
		backlog has been a good representation of the next 5-6
		months of sales.	4

Second quarter 2024 Highlights

• Revenue: 167.6 -18.8% (206.3)
• EBIT: 15.0, -21.9% (19.2)
• EBIT margin: 8.9% (9.3%)
• ROOC: 22.3% (28.2%)
• Cash Cycle Conversion days: 112 (84)
• Operating Cash flow 18.8 (12.7)
• NIBD: 122.9 (142.5)
• NIBD/EBITDA 1.6 (1.8)
• Net Gearing: 0.7 (0.9)
• Equity %: 33.9% (27.0%)
• Order Backlog: 454.5, -15% (534.9)
• Net Income 10.4 (15.7)
• EPS (EUR): 0.05, -35% (0.08)

*Performance measures expressed in €M

First half year 2024 Highlights

• Revenue: 341.5 -14.0% (396.9)
• EBIT: 25.5, -30.1% (36.5)
• EBIT margin: 7.5% (9.2%)
• EBIT and EBIT % adj for non-recurring items in Q1 24:
  o 30.3 and 8.9%
• Operating Cash flow 27.3 (23.2)
• Net Income 16.9 (29.0)
• EPS (EUR): 0.09, -44% (0.15)

*Performance measures expressed in €M

Business sectors

• Nordics & North America show 15% growth, increased profits and profit margins at 9.3%
• For CEE and Asia; volume reductions of around 40%, compared to last year profit margins at 8.9% and 11.9% respectively.
• Restructuring charge of 4.8 MEUR in Q1 2024
• No of employees 2 547 and reduced with 729 compared to last year

1. Nordics +9%

1. China -36%

1. CEE -36%

Revenue Business Sectors	Q2 2024	Q2 2023		Change	30.06.2024	30.06.2023	31.12.2023
Nordics & North America	94.1	81.7	12.4	186.1	160.8	325.0
CEE	50.7	84.9	-34.2	112.6	155.4	304.8
Asia	24.8	43.2	-18.4	47.4	88.1	157.4
Group and eliminations	-1.9	-3.5	1.6	-4.6	-7.4	-12.0
Revenue	167.6	206.3		-38.7	341.5	396.9	775.2
EBIT Business Sectors	Q2 2024	Q2 2023		Change	30.06.2024	30.06.2023	31.12.2023
Nordics & North America	8.7	7.0	1.7	16.8	14.3	27.3
CEE	4.7	9.0	-4.4	9.9	16.2	29.2
Asia	2.9	5.7	-2.8	4.9	10.3	19.8
Group and eliminations*	-1.3	-2.5	1.3	-6.0	-4.3	-5.6
EBIT	15.0	19.2	-4.2	25.5	36.4	70.7
FTE Business Sectors	Q2 2024	Q2 2023		Change			Full year 2023
Nordics & North America	1 088	997	91			994
CEE	955	1 488	-533			1 376
Asia	504	791	-287			631
FTE	2 547	3 276	-729			001
						3 7

Cash flow and working capital

• Q2 Cash flow from operating activities at 18.8 €M (12.7 €M).
• Dividend paid in the quarter of MEUR 12.8 (8.7)
• Net working capital at 188.0 €M (189.4 €M), down 1 % from last year, down 5% from last quarter.

						€M
Cash Flow	Q2 2024	Q2 2023	Change	30.06.2024	30.06.2023	31.12.2023
Profit before tax	12.4	19.2	-6.8	21.2	35.6	64.7
Depreciations	4.6	4.3	0.3	9.3	8.4	17.6
Change in inventory, accounts
receivable, contract assets and
accounts payable	9.0	-5.7	14.7	5.9	-5.7	-10.2
Change in net other current assets and
other operating related items	-7.3	-5.1	-2.2	-9.0	-15.1	-13.2
Net cash flow from operating activities	18.8	12.7	6.1	27.3	23.2	59.0
Net cash flow from investing activities	-2.1	-3.6	1.5	-4.7	-7.0	-16.3
Net cash flow from financing activities	-23.4	-14.9	-8.5	-21.2	-21.0	-29.5
						€M
Net working capital	30.06.2024	30.06.2023	Change			31.12.2023
Inventory	148.6	183.1	-34.5			166.4
Contract assets	72.5	66.9	5.6			77.9
Trade receivables	126.0	154.1	-28.1			131.3
Trade payables	159.0	214.9	-55.9			181.9
Net working capital	188.0	189.4	-1.1			193.7

Change in factoring debt re-classified from net cash flow from operating activities to net cash flow from financing activities.

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Ratios

• Stable debt position
• Net gearing and NIBD/EBITDA 0.7 and 1.6

Ratios	30.06.2024	30.06.2023	Change	31.12.2023
R3 NWC % sales	28.4 %	22.3 %	6.1 %	24.4 %
R3 ROOC % sales	22.3 %	28.2 %	-5.9 %	26.9 %
R3 Cash Cycle Conversion	112	84	28	95
Net Interest bearing debt €M	122.8	142.5	-19.7	129.4
Net gearing	0.66	0.91	-0.25	0.71
NIBD/EBITDA	1.6	1.8	-0.2	1.5
Equity percent	33.9 %	27.0 %	6.9 %	31.6 %
Earnings per share quarter €	0.05	0.08	-0.03	0.06
Earnings per share ytd €	0.09	0.15	-0.07	0.26

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Outlook full-year 2024

For the full year, we anticipate revenues to be between 660 and 710 EUR million, with an operating profit (EBIT) of 53 to 60 EUR million, including 5 EUR million in restructuring costs incurred in the first quarter.

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