Kitron Reports Very Strong Demand, Record Order Backlog in Q1 2022

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Kitron reported first-quarter results showing very strong demand and record order backlog, but also revenue constraints due to a challenging component supply situation.

Kitron’s revenue for the first quarter was NOK 1 429 million, compared to NOK 938 million last year. The revenue growth reflects the acquisition of the Danish EMS provider BB Electronics AS, which was consolidated effective 1 January. Adjusted for this, organic revenue growth was 4 per cent. Demand is very strong, but revenue growth was limited by ongoing component shortages. Nevertheless, there was strong growth within the Connectivity market sector, which partly reflects BB Electronics’ strong position within this sector.

Profitability expressed as EBIT margin was 5.5 per cent in the first quarter, compared to 7.0 per cent in the same quarter last year. The EBIT margin in the quarter is mainly affected by revenue delays and inefficiencies caused by the component situation, but increased energy costs also have a negative effect.

The order backlog ended at NOK 4 222 million, an increase of 105 per cent compared to last year. This is a record and is impacted by the acquisition of BB Electronics. However, even excluding BB Electronics, the organic order backlog growth was 53 per cent. This reflects a strong total demand situation but also includes revenue delays due to the component shortages.

Peter Nilsson, Kitron’s CEO, comments: “Very strong demand and the acquisition of BB Electronics led to record revenue and order backlog in the first quarter, by a substantial margin. However, the material supply situation continues to limit revenue growth and cause operational inefficiencies. Given these challenges, I am pleased that Kitron delivered a solid first quarter, and I remain optimistic about the rest of 2022.”

First-quarter operating profit (EBIT) was NOK 78.1 million, compared to 65.4 million last year. EBITDA was NOK 116.2 million, compared to 90.2 million last year.

Profit after tax amounted to NOK 44.4 million, compared to 44.7 million in the same quarter the previous year. This corresponds to earnings per share of NOK 0.23, down from 0.25 last year.

Ratios affected by constraints in supply chain

Operating cash flow was negative NOK 106.9 million, compared to positive NOK 78.3 million in the first quarter of 2021.

Net working capital was NOK 1 709 million, an increase of 65 per cent compared to the same quarter last year, partly reflecting the acquisition of BB Electronics. Net working capital as a percentage of revenue was 29.2 per cent compared to 27.9 per cent last year. Capital efficiency ratios are heavily affected by the supply situation, with material decommitments and new delivery dates. The material constraints continue to be difficult. Our focus going forward is on balancing demand with the constraints in supply, executing demand into deliveries and improving cash flow.

Outlook

For 2022, Kitron expects revenue between NOK 5 200 and 5 800 million, including BB Electronics. Operating profit (EBIT) is expected to be between NOK 330 and 430 million. Growth is driven by the Electrification, Connectivity and Industry market sectors. Currently, the growth is constrained by the material supply situation.