Kitron's revenue increased 11% in Q3

Year on year, revenue grew 18 per cent, to NOK 1,386.4 million. Profit before tax was NO K 8.7 million, which is NOK 1.4 million down compared to third quarter in 2006. Kitron’s revenue in the third quarter was 11.1 per cent higher than in the same period in 2006 and amounted to NOK 390.2 million (NOK 350.4 million). The revenue increase is largely a result of higher activity in the EMS business in Norway and Lithuania. Revenue increased the most within the Data/Telecom and Defence/Marine segments compared to the third quarter of 2006. Revenue in the Industry and the Medical equipment segments in the third quarter were in line with the corresponding period in 2006. Revenue in the Norwegian Electronic Manufacturing Services (EMS) operation, Kitron AS, represented 54.6 per cent of Kitron’s gross revenue during thethird quarter. The Swedish EMS operation, Kitron AB, represented 13.2 per cent of the Group. Kitron’s operation in Lithuania provided for 16.1 per cent. As of 1 September 2007, UAB Kitron Elsis has been consolidated into the Kitron group, and it has been included in UAB Kitron. UAB Kitron continued its growth based on its competitive strength from quality and pricing. Consequently, the subsidiary’s share of Kitron’s value creation increased. The EMS business provided 82.8 per cent of net Group revenue in the third quarter, while during the third quarter of 2006 it generated 80.5 per cent. Kitron Microelectronics, which normally achieves higher operating margins than the EMS area, has reduced its share correspondingly. Kitron’s revenue in the third quarter of 2007 remained well balanced between the four segments: Defence/Marine 24% (21%), Data/Telecom 28% (26%), Medical equipment 24% (26%) Industry 24% (27%). Sales to customers in the Swedish market represented a 44 per cent share of the total revenue during the third quarter (2006: 47 per cent). The Norwegian market also represented 44 per cent of Kitron’s total revenue in the third quarter, against 43 per cent during the same quarter in 2006. The gross margin was 0.9 percentage points lower compared to the third quarter of 2006, and amounted to 38.6 per cent. The decrease is mainly related to variations in relative growth between business areas and changed product mix. Kitron’s operating profit (EBIT) in the third quarter was NOK 13.9 million which is on par with the same period in 2006 (NOK 14.3 million). Following the reorganisation of Kitron’s Norwegian EMS business in 2006, the group’s operations are now steadily profitable. The company’s total payroll expenses were NOK 7.4 million higher in the third quarter of 2007 compared to the corresponding period in 2006. This increase resulted from salary revisions as well as increased manning to achieve the increase in manufacturing output. Due to productivity increase, the payroll costs were reduced from 27.9 per cent of revenue in the first nine months of 2006 to 25.9 per cent of revenue year to date this year. The improvement quarter to quarter is smaller, due to productivity challenges in the third quarter. Other operating costs increased mainly due to increasing cost of the manufacturing facilities. The transfer of manufacturing activities from Kitron Flen to Kitron’s sites in Karlskoga and Jönkoping in Sweden, as well as Kaunas in Lithuania progresses as planned and will be completed before the end of 2007. Some capacity issues in the EMS combined with productivity challenges both in the EMS facilities operation and Microelectronics operations contributed to the reduction in profitability rate in the third quarter 2007 compared to the third quarter last year. During the third quarter net financial costs amounted to NOK 5.2 million. This was NOK 1.0 million more than during the same period the year before. The principal reason was exchange effects during the third quarter of 2006. Kitron’s gross balance sheet as at 30 September 2007 amounted to NOK 886.8 million, versus NOK 718.4 million at the same time in 2006. Equity was NOK 222.5 million (NOK 169.2 million), corresponding to an equity ratio of 25.1 per cent (23.6 per cent). Trade debtors and other receivables amounted to NOK 377.4 million at the end of the third quarter of 2007. The corresponding amount at the same time in 2006 was NOK 188.7 million. Kitron’s acquisition of EDC Elsis UAB in Kaunas, Lithuania from EDC i Munkfors AB in Sweden, was completed in the quarter. The total investment amounted to about NOK 12 million. The unit has been consolidated from 1 September. A preliminary allocation of the share purchase price has added goodwill of NOK 5.7 million to the balance sheet per 30 September 2007.