Kitron: Q1 2014 - Continued revenue growth, but profitability remains challenging

(2014-04-23) Kitron ASA today reported that revenues continued to grow in the first quarter, while profitability was under pressure. Important contracts were secured. In order to improve profitability, Kitron has reorganised the sourcing operations and will downsize the Arendal operations.

Kitron's revenues amounted to NOK 435.8 million, compared to NOK 378.3 million in the first quarter of 2013. EBIT was reduced from NOK 4.0 million to NOK 2.0 million. Net profit amounted to a loss of NOK 1.7 million, a reduction from a profit of NOK 1.4 million. Operating cash flow was minus NOK 17.4 million, compared to minus NOK 15.9 million during the first quarter last year.

Dag Songedal, interim CEO, comments:
"While the increase in revenue was a positive aspect of this quarter, margins are suffering from price pressure and are clearly not satisfactory. Kitron is therefore taking action to improve profitability, as exemplified by the reorganisation of the sourcing operations and the downsizing of the Arendal operations." 

             
Important contracts secured
Kitron has secured important contracts in the first quarter. For instance, Kitron AS in Arendal has received a new order worth approximately NOK 30 million from Kongsberg Gruppen to supply electronics modules for integration in Kongsberg's weapon guidance system Remote Weapon Station (RWS). In addition Kitron has received a prognosis for orders of a further NOK 20 million.

The order backlog was nevertheless reduced by NOK 10.7 million in the quarter and ended at NOK 707.4 million, which is a reduction of NOK 50.0 million compared to last year. The reduction is foremost within the Offshore/Marine and Defence/Aerospace sectors.

Revenue continues to grow, profitability under pressure
While revenues grew, profitability was under pressure in the quarter.  The main drivers affecting profitability are margin pressure on both new and existing customers as well as a negative development in product mix as low-margin products have increased in volume. In addition, payroll expenses are higher.

Downsizing of Arendal operations
The Arendal operations in Norway will be downsized by 60-100 employees during 2014, compared to the level at year-end 2013. The reduction is a consequence of lower activity due to transfer of products and customers to other parts of Kitron as well as an expected decline in revenue in the offshore sector during the second half of 2014. In addition, the general cost base in Norway will be addressed.

Reorganisation of sourcing operations
The sourcing operations has been reorganised to accommodate cost savings in the organisation. The changes involve a reduction of the global sourcing staff and closer cooperation between the global and local sourcing activities.

Outlook
Kitron expects a positive development in the Swedish and German markets. This suggests growth for the factories in Sweden and Lithuania. Growth is also expected in China and the US, whereas a lower volume is expected in the Norwegian operation.

Overall, Kitron expects growth in revenue in 2014, partly explained by development in foreign exchange. As a result of the reorganisation and other actions taken, Kitron expects the profitability to improve during the year.

Enclosed in pdf are the quarterly report and the presentation.

For further information, please contact:
Dag Songedal, interim CEO, Tel: +47 913 86 468 or e-mail: dag.songedal@kitron.com

Cathrin Nylander, CFO, Tel: +47 900 43 284 or e-mail: cathrin.nylander@kitron.com

Kitron is one of Scandinavia's leading electronics manufacturing services companies for the Defence, Energy/Telecoms, Industry, Medical equipment and Offshore/Marine sectors. The company is located in Norway, Sweden, Lithuania, Germany, China and the United States. Kitron had revenues of about NOK 1.6 billion in 2013 and has about 1,200 employees. www.kitron.com

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