Kitron

Nordnet nettmte

Peter Nilsson, CEO

October 18th, 2016

Speaker

Peter Nilsson
Chief Executive Officer

Born in 1964. Joined Kitron in 2014. Almost 25 years

of experience in electronics manufacturing and
related services. Several senior and executive
leadership positions for Swedish and US companies.
Mr Nilsson holds a degree in Industrial Management
and is a Swedish citizen.

Kitron Streamlined for customer success

Kitron is an Electronics Manufacturing Services company. Our customers
outsource manufacturing and related services to us to improve flexibility, cost
efficiency, accuracy and innovation power throughout the value chain.
Kitron focus on high reliability products and demanding customers in high
margin sectors
The targeted geographical customer markets are primarily Sweden, Norway and
Germany but we also sell into the local markets where we have production sites,
predominantly following our existing customers into those markets
Kitron is positioned for growth and increased profitability

Operational improvements ongoing

Focused market strategy
Clear plans for organic growth
Potential acquisitions

Kitron Group

Operations in Norway, Lithuania, Sweden, Germany, China and USA

Manufacturing of high complexity products for global markets

About 1250 employees

Revenue 2015: NOK 1.95 Billion

Personnel (FTE)
345 Norway
140 Sweden
535 Lithuania
160 China
25 US
5 Germany

Europe

EBIT 2015: NOK 103 Million

China
China

Listed on Oslo Stock Exchange

Ningbo facility

Arendal facility
Jonkping facility
Kaunas facility

Main shareholders:
Kongsberg Group (NO ~ 19%)
Amber Trust II (Intl ~ 17%)
MP Pension (NO ~ 6%)

Stuttgart office
USA

Johnstown
facility

Operations:

What is it Kitron does?

Kitron is an Electronics
Manufacturing Services
company. Our customers
outsource manufacturing
and related services to
us to improve flexibility,
cost efficiency, accuracy
and innovation power
throughout the value
chain.

Development

Industrialization

Sourcing &
procurement

Manufacturing

Logistics &
Distribution

Redesign
Repair
Maintenance

Markets and customers:

High-value sectors with high-reliability products

Energy/
Telecoms

Defence/
Aerospace

Offshore/
Marine

Medical
devices

Industry

Customer Example:

Cardiovascular imaging Systems

Development

Sourcing &
procurement

Industrialization

Prototyping
Test
development

Manufacturing

Cost reduction
programs
Obsolescence
management
ITO optimization

Production

planning
Quality
assurance
Efficiency
programs
Cable
harnessing
Final assembly

Redesign
Repair
Maintenance

Logistics &
Distribution

Re-cycling
and disposal
management
of packaging
material

Repair and
Overhaul

Customer Example:

ABB HVDC: Efficient alternatives for

transmitting bulk power and connecting
Super Grids

Development

Design
studies

Industrialization

Prototyping
Test
development
Sustainability
reports

Sourcing &
procurement

Supplier
selection and
optimization
Cost reduction
programs
Obsolescence
management
ITO optimization

Manufacturing

Production
planning
Quality
assurance
Efficiency
programs
Electromechanical
assembly

Logistics &
Distribution

Redesign
Repair
Maintenance

Packaging and
labeling
services

Red-Design
and Cost
reduction

Increasingly complex market:

Outsourcing, nearshoring or reshoring?

Outsourcing to Asia due to labor-cost
advantage was major growth driver
Todays picture more complex
Increasing labor costs in Asia
China moving up value chain
Automation changes cost mix
Strong growth in Eastern Europe
Shorter time-to-market favors
nearshoring
Kitron offers a variation of
production sites to match
customers preferences, with clear
strategic reasoning for each location.

Positioning of Kitron:

High-reliability products and demanding customers

Margin/complexity

Local
niche
providers

Volume

Sales strategy:

Achieve 10 per cent annual revenue growth

Service sales:
10% of revenue

Existing customers:
10% annually

New customers:
5% annually

Growth outlook:

Accelerating growth: NOK 3 billion in 2020

Organic growth
3000

New

2500

NOK million

Focus on existing strengths and

segments
Target annual organic growth of 10%
Existing customers
New customers
Grow service to 10% of revenue
Organic target 2020: NOK 3 billion
Explore targeted acquisitions

2000

1500

Renewal
1000

500

0
2015

Attrition

Existing
New
customers customers

2020

Capex:

Major investment cycle nearing end

Capital expenditure

Major investment cycle: modern,

highly competitive facilities

3,8 %

Lithuania 2014: NOK 37.0m (facility) and

NOK 13m (equipment)
Norway 2015: NOK 40.5m (facility) and
NOK 7.0m (equipment)

41

Will be considerably lower in 2016

Despite facility and equipment
investments in Sweden

3,9 %

2,3 %

37
1,8 %

Expected to remain at lower level

29

30

2013

2014

Other

Facilities

35

2015

2016

Capex as % of revenue

Quarterly EBIT:

Profitability level improved

33,6
33,1

26,3
20,8

22,1

20,5

14,3

NOK million

Contributing factors to profitability

improvement
Volume increase ~ 50 %
Cost reduction on direct
materials a result of spend
consolidation and increased
technical service sales ~ 20%
Restructuring of geographical
headcount ~ 20%
Currency translation ~ 10 %

6,9

6,9
379 %

Q1 2016 includes one off MNOK 5

for terminated acquisition.

Margin

Q2 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

1,5 %

3,0 %

4,4 %

4,5 %

5,6 %

6,4 %

4,1 %

5,9 %

14

Operational Excellence Projects

Q2-2016

Q3-2016

Q4-2016

Consignment Stock

STEP 2

Supply Chain Concept

STEP 1

New NPI Process

STEP 1

STEP 2

New Quality Management System

STEP 1

STEP 2

Process Standardization (80-20)

STEP 1

Q1-2017

STEP 3
STEP 3

STEP 2

STEP 3
STEP 2
STEP 1

New Product Structures

Operational Excellence Toolbox rollout

STEP 2

STEP 3

Site Sourcing Plans

STEP 2

STEP 3

Emergency Response Plan

STEP 1

STEP 2
STEP 1

Business Continuity Plan

IFS Manufacturing Enhancement Package

STEP 1

Data Warehouse

STEP 1

Routing Times Storage

STEP 1

Conflict Minerals

STEP 1

Inter Company EDI

STEP 1

STEP 2
STEP 2

STEP 2

STEP 2
STEP 2

Q2-2017

Growth through targeted M&A

Kitron will consider carefully targeted acquisitions in
two areas:
M&A:

Electronic
Manufacturing
services
Competence, customers or
market complementary to
Kitron

Product hardware
company
Competence
complementary to Kitron
Technology of importance
to Kitron customers

Financing of
potential
acquisitions

New
bank
financ
ing

Cash
and
loan
Cash

NOK 100 million

NOK 200-300
million

NOK 300-500
million

2020:

Long-term strategy

Revenue NOK 3 billion

EBIT margin 7%
CCC 50 days
ROOC 25%
Dividend 30-60% of net profit

17

Kitron Streamlined for customer success

Kitron is an Electronics Manufacturing Services company. Our customers
outsource manufacturing and related services to us to improve flexibility, cost
efficiency, accuracy and innovation power throughout the value chain.
Kitron focus on high reliability products and demanding customers in high
margin sectors
The targeted geographical customer markets are primarily Sweden, Norway and
Germany but we also sell into the local markets where we have production sites,
predominantly following our existing customers into those markets
Kitron is positioned for growth and increased profitability

Operational improvements ongoing

Focused market strategy
Clear plans for organic growth
Potential acquisitions

18

Your long-term sustainable partner

19