BILLINGSTAD, NORWAY – Kitron today reported strong growth and record operating earnings in the second quarter, led by the defense/aerospace and offshore/marine sectors.
The EMS company's revenue for the period was NOK860 million ($100.7 million), up 29% from last year. Organic growth, excluding the acquisition of the EMS division of API Technologies, was 19%. All market sectors reported growth.
Net profit was up 5.2% to NOK36.3 million ($4.25 million).
Order backlogs at quarter's end were up 44% to NOK 1.45 billion. Excluding the API acquisition, backlogs were up 28%. Oil and gas demand was particularly strong, offset in part by lower energy/telecom orders.
The operating profit (EBIT) was NOK56.4 million, compared to 45 million last year. EBITDA was NOK75.1 million, up from 58.6 million. Both figures are all-time highs. EBIT margin was 6.6%, down 20 basis points from a year ago. Operating cash flow was NOK45.7 million, up 7% year-over-year.
In a statement, Cathrin Nylander, CFO and acting CEO, Kitron, said, “The second quarter was characterized by strong growth, leading to record revenues. Meanwhile, we have been preparing to handle further growth through our announced capacity expansions in the US, Poland and China. I am also happy that the challenging component situation in the industry is now improving, and this is expected to gradually reduce working capital over the coming quarters.”
Net working capital increased 55% to NOK933 million, primarily related to deliberate and temporary inventory buildup to avoid supply disruptions in the face of previously reported electronic components shortages.
According to the company, the situation is now improving. The number of components on allocation are reduced by half compared to the peak in the third quarter 2018 and supplier lead times have a similar development but are still above the levels before the allocation situation. Kitron expects that a continued gradual improvement over the year will lead to a reduction of working capital, both in absolute numbers and as a percentage of revenue.
Kitron guided for revenue to grow NOK3.2 billion to 3.4 billion for the year. EBIT margin is expected to be between 5.9 and 6.3%. Stronger growth than expected due to customer ramps will temporarily drive inefficiency in existing facilities. The startup of a new facility in Polish is also expected to affect margins.
"We expect the margin challenges to be resolved as we move into 2020. Growth is primarily driven by the acquisition of the EMS division of API Technologies and growth in the defense/aerospace, industrial and offshore/marine sectors."
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