Kitron's 3Q - Strong demand and material shortages
“Demand continues to be very strong for both 2021 and 2022 with significant growth opportunities in most market sectors. However, the general material supply situation deteriorated rapidly in the third quarter and continues to be a challenge to lead times and deliveries,” says Kitron CEO Peter Nilsson in the quarter report.
The Norwegian EMS provider reports third quarter revenue of NOK 831 million (EUR 85.49 million), compared to NOK 1.05 billion (EUR 108 million) last year. The decrease is explained by last year’s Corona-related and exceptional volumes within Medical devices, which have now been normalized. The company says that the other market sectors continue to see a very strong demand, but revenue growth was limited by ongoing component shortages. More than NOK 200 million (EUR 20.58 million) of demand has been delayed into later quarters. Profitability expressed as EBIT margin was 6.0% in the third quarter, compared to 8.6% in the same quarter last year. The EBIT margin in the quarter is also affected by inefficiencies caused by the component shortage and the fact that the third quarter is seasonally softer. Third quarter operating profit (EBIT) was NOK 50.1 million (EUR 5.15 million), compared to 90.5 million (EUR 9.31 million) last year. EBITDA was NOK 75.7 million (EUR 7.79 million), compared to 115.7 million (EUR 11.91 million) last year. Profit after tax amounted to NOK 19.5 million (EUR 2.0 million), compared to 60.9 million (EUR 6.2 million) in the same quarter the previous year. The order backlog ended at NOK 2.56 billion (EUR 263.57 million), an increase of 38% compared to last year; something that the company means reflects a strong total demand situation but also includes revenue delays due to the component shortage. The company says in the quarter report that the material constraints seem to have leveled out. Management’s focus in the quarter and going forward is on balancing demand with the constraints in supply, executing demand into deliveries and improving cash flow. “We currently believe that we are at the worst of these constraints, and we expect the situation to start showing some improvements as we progress into 2022. After last year’s high deliveries of medical devices driven by the Corona pandemic, 2021 has returned to more normal levels with normal seasonality in the third quarter. Given the constraints in the supply chain, I’m satisfied with the results we deliver in the quarter,” says Peter Nilsson. “Currently the raw materials and component supply chain will not support higher output, even though Kitron stands ready to deliver more. Given this year’s increase of inventory and working capital, we now turn our focus to executing demand into deliveries, improving our cash flow, and protecting competitiveness and profitability,” the CEO concludes.