Kitron: Q3 2013 - Strengthened order intake in a challenging quarter

Großbettlingen, (PresseBox) - Kitron ASA (OSE: KIT) today reported that a strong order intake during the quarter has increased the order backlog to last year's level. A decline in revenues led to lower profitability compared to last year. Negative cash flow development is due to build up of inventories.

Kitron's revenues amounted to NOK 346.6 million, compared to NOK 365.8 million in the third quarter 2012. EBIT was reduced from NOK 15.4 million to NOK 7.6 million. Net profit amounted to NOK 3.2 million, a decrease from NOK 5.1 million. Operating cash flow for the third quarter was minus NOK 33.5 million, compared to minus NOK 15.4 million during the third quarter last year.

Dag Songedal, interim CEO, comments:

"This was a mixed quarter for Kitron. Revenue and earnings were lower, but the order intake strengthened, laying the foundation for growth going forward. We remain committed to our strategy of expanding in selected markets while continuing our operational improvement programs."

- Major industrial contract secured
- Weaker demand led to lower profitability
- Kitron invests in Lithuania
- Operational streamlining continues

Major industrial contract secured

The order backlog was strengthened with NOK 101.1 million during the quarter, and ended at NOK 847.1 million, which is at last year's level. It is primarily the offshore/marine and industrial segments that have increased.

Kitron ASA has signed an agreement with a leading industrial supplier. The agreement, which is an extension of a previous contract, covers manufacturing of electronics and related technical services for automation and power technologies. The estimated total contract value is NOK 150 million over a three-year period.

Weaker demand led to lower profitability

In addition to the weaker demand for the quarter, a challenging product mix for production during the second half of the quarter and changes in technical specifications from customers have ended up causing production postponements.

The postponed production has a negative impact on the inventory levels and therefore the primary reason for the negative cash flow of minus NOK 33.5 million, compared to minus NOK 15.4 million the same period last year.

Kitron invests in Lithuania

Kitron invests over 37 million NOK in expansion of the factory in Lithuania. On top of Kitron's investment, the Ministry of Economy of the Republic of Lithuania has granted 7 million NOK of financial support. Construction works start in November 2013 and the project is due to be completed in the second half of 2014.

Operational streamlining continues

The Kitron improvement initiatives, which aim to reduce working capital, increase overall profitability and stimulate top line growth, continue. Several actions have been implemented, but the effects on cost and profitability will not start to be visible before fourth quarter of 2013. The improvement initiatives will have continuous focus throughout this and the next year.

Outlook

Kitron's markets are mainly Norway and Sweden, but most customers of Kitron sell their products on international markets, which are still affected by the turbulence in the US and the European markets, even though Kitron sees some growth from the existing customers. This, together with ramp-up of manufacturing for new customers and an increased backlog, indicates growth going into 2014. For the second half year of 2013 the revenue is expected to be at the same level as same period of 2012.

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