Kitron Reports Improved Profitability, Strong Cash Flow in Q4 2015

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Kitron ASA today reported the seventh consecutive quarter of improved profits, accompanied by revenue growth, very strong operational cash flow and a proposed dividend increase.

Kitron's revenues in the fourth quarter amounted to NOK 525 million, an increase from 476 million in the fourth quarter of 2014. Operating profit (EBIT) was NOK 33.6 million, compared to 14.3 million last year.

Net profit amounted to NOK 22.6 million, an improvement from 17.3 million. Operating cash flow was NOK 87.8 million, compared to 12.9 million in the fourth quarter of 2014.

The order backlog was NOK 976 million, an increase of 12 per cent compared to the same time last year.

Kitron will host a Capital Markets Day later today, at which the underlying business improvements will be described in more detail. See separate stock exchange notice for highlights. The event will be webcast, and the presentation material will be made available at Newsweb.no and Kitron's web site.

The Board of Directors of Kitron ASA has decided to propose a dividend of NOK 0.21 per share for 2015 to be resolved at the Annual General Meeting. Last year the dividend was NOK 0.05.

The board has also modified the dividend policy. Kitron will pay an annual dividend of 30 to 60 per cent of the company's ordinary net profit after tax. The range is increased from 30 to 50 per cent. The adjustment is based on a fundamental strengthening of Kitron's business, with improved profitability and successful programs to improve the working capital.

Peter Nilsson, Kitron's CEO, comments:

"In the fourth quarter we continued to strengthen revenue, profit and orders. Also, the actions we have taken to improve operating cash flow have paid off, and I am very pleased that Kitron is now able to pay our shareholders a very competitive dividend."

Continued profitability improvement

Profitability expressed as EBIT as a percentage of revenue was 6.4 per cent for the quarter, up from 3.0 per cent in the fourth quarter of 2014. The substantially improved results are a consequence of increased revenue, improved product mix and increased service sales, both from development and engineering. In general, there is a stronger demand for technical services than last year.

Strong overall revenue growth

Revenue in the market sector Defence/Aerospace increased by 16.2 per cent in the fourth quarter, driven by rollout of military communications equipment orders announced in the previous quarter. Medical equipment increased by 9.5 per cent driven by announced contracts and increased demand from existing customers. Energy/Telecoms was ere up 28.3 per cent, driven by growth in North America for existing customers. Offshore/Marine was down 27.3 per cent compared to the fourth quarter of 2014 due to a very weak market, as previously noted.

Strengthened order backlog

The increased order backlog came despite a marked reduction within the Offshore/Marine sector.
Of particular strategic importance, Kitron in the fourth quarter signed an agreement with a global energy company. The company is headquartered in the US, and Kitron will deliver prototypes and serial manufacturing for a specific product family of power controllers. The agreement is valid for three years with an option of a one-year extension. The agreement is estimated to be worth NOK 100 million for Kitron.

Significantly improved operational cash flow

The strong improvement in operational cash flow is caused by a combination of improved profitability and reduced working capital. In the quarter, net working capital was reduced by NOK 33.7 million.

Full year improvement

Full year revenue of NOK 1 952 million gave an overall revenue growth of 11 per cent for the year. Operating profit for the year ended at NOK 102.7 million, compared to 30.0 million in 2014, resulting in an EBIT margin of 5.3 per cent for the year, up from 1.7 per cent in 2014.

Facility upgrades and relocations in Sweden and Norway

Kitron has decided to relocate the Swedish operations to a facility that will be built for Kitron in Torsvik, not far from the current facility in Jönköping. Kitron will lease the new facility, and the move is expected to take place in late 2016. The relocation of the Norwegian facility in Arendal, from Hisøy to Kilsund is performed according to plan and budget. The first production in Kilsund started up in the beginning of January.

Outlook

For 2016, Kitron expects revenue of NOK 2,050 to 2,250 million and an EBIT margin of 5.3 to 6.3 per cent. The growth is driven by increased demand in the Industry and Defence/Aerospace sectors. The profitability increase is driven by cost reduction activities and improved efficiency.

About Kitron

Kitron is one of Scandinavia's leading electronics manufacturing services companies for the Defence/Aerospace, 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 1.95 billion in 2015 and has about 1 200 employees.