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Kitron: Weaker demand led to lower profitability
- Lower demand from key customers
- Operational streamlining continues
- Delay in US operations
- Cost reductions initiated
Weaker demand led to lower profitability in the first quarter 2013. Kitron has introduced a wide range of initiatives that aim to increase profitability and stimulate top line growth.
Lower demand from key customers
During Q1 there has been a negative trend in the demand from several key customers. The recessionary trend in the European market is the main explanation for this development. In addition the demand in the US defence segment has been significantly lower than previously expected.
Kitron has a strong focus on driving growth through capturing new customers and entering new markets. In the long term these effects are expected to have a positive impact.
Delay in US break-even
Due to the lower demand from the US defence sector there is a delay in the start-up of the US operation. While it was previously expected to reach break-even in Q2 2013 the outlook is now uncertain.
Operational streamlining continues
Kitron has introduced a wide range of improvement initiatives to increase profitability, reduce capital and stimulate top line growth. These measures span the entire value chain, and include inventory reduction, manufacturing efficiency improvements and supply chain optimization.
As part of the operational streamlining, Kitron launched a new organization in April. All manufacturing and supply chain activities will be organized in a global organization under the Chief Operating Officer (COO) while the customer delivery organization will be organized in three business areas. The purpose is to create a more customer centric organization while driving global standardization in the manufacturing and supply chain processes.
Cost reductions initiated
Cost reduction measures have been initiated in response to a market that is weaker than expected. Management is in process to evaluate further measures to be taken. As a large proportion of the costs is personnel related, headcount reductions can not be ruled out.
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