Kitron: profitability under pressure

Kitron's revenues amounted to NOK 435.8 million, compared to NOK 378.3 million in the first quarter of 2013. EBIT was reduced from NOK 4.0 million to NOK 2.0 million. Net profit amounted to a loss of NOK 1.7 million, a reduction from a profit of NOK 1.4 million. Operating cash flow was minus NOK 17.4 million, compared to minus NOK 15.9 million during the first quarter last year. Dag Songedal, interim CEO, comments: "While the increase in revenue was a positive aspect of this quarter, margins are suffering from price pressure and are clearly not satisfactory. Kitron is therefore taking action to improve profitability, as exemplified by the reorganisation of the sourcing operations and the downsizing of the Arendal operations." Important contracts secured Kitron has secured important contracts in the first quarter. For instance, Kitron AS in Arendal has received a new order worth approximately NOK 30 million from Kongsberg Gruppen to supply electronics modules for integration in Kongsberg's weapon guidance system Remote Weapon Station (RWS). In addition Kitron has received a prognosis for orders of a further NOK 20 million. The order backlog was nevertheless reduced by NOK 10.7 million in the quarter and ended at NOK 707.4 million, which is a reduction of NOK 50.0 million compared to last year. The reduction is foremost within the Offshore/Marine and Defence/Aerospace sectors. Revenue continues to grow, profitability under pressure While revenues grew, profitability was under pressure in the quarter. The main drivers affecting profitability are margin pressure on both new and existing customers as well as a negative development in product mix as low-margin products have increased in volume. In addition, payroll expenses are higher. In order to improve profitability, Kitron has reorganised the sourcing operations and will downsize the Arendal operations. Outlook Kitron expects a positive development in the Swedish and German markets. This suggests growth for the factories in Sweden and Lithuania. Growth is also expected in China and the US, whereas a lower volume is expected in the Norwegian operation. ----- 1 EUR = 0.12097 NOK (Oanda - 2014-04-23)