Kitron ASA Presentation Second Quarter 2003

Kitron ASAPresentation

Second Quarter 2003

Kitron ASAPresentation

Second Quarter 2003

Main Features – 2nd Quarter 2003

Lower costs strengthen expectations of higher profitability in second half of 2003

• Sales in second quarter: NOK 475m (551m)

• Gross margin: 38.8% (37.3%)

• EBT: NOK - 2.7m (-10.6m)

• Positive cash flow of NOK 42m (6m) from operations

• Reduction of 253 full-time positions in first half-year

• Total assets of NOK 816m (910m)

• Order backlog: NOK 900m (820m)

Performance trend Q2 2002 – Q2 2003

Gross profit Q2 2002 - Q2 2003

205 551

184 132

170 000175 000180 000185 000190 000

195 000200 000205 000210 000

Q2 2002 Q2 2003

Operating costs Q2 2002 - Q2 2003

200 292

177 541

165 000170 000175 000180 000185 000190 000195 000200 000205 000

Q2 2002 Q2 2003

Change: NOK –21.4mCause: Sales down NOK 76.5m

Change: NOK –22.8mCause: 1) Payroll costs down NOK 14.1m 2) Other operating costs down NOK 7.2m 3) Depreciation down NOK 1.5m

Development of payroll costs

Development of payroll costs

147 147

108

144139

133

100

110

120

130

140

150

Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003

NO

K m

ill.

Full-time positions - Kitron Group at 31.12.02 31.12 Added from Tandberg Data 65 Added from Alcatel Norkrets 24 Increase in workforce Kitron Lithuania 29 Laid off/left in first half 2003 (253) Kitron Group total at 30.06.03 1 377

Net financial costs Q2 2002 - Q2 2003

15 898

9 282

-

5 000

10 000

15 000

20 000

Q2 2002 Q2 2003

Loss before tax Q2 -2002 - Q2 2003

(10 639)

(2 691)

(12 000)

(10 000)

(8 000)

(6 000)

(4 000)

(2 000)

-

Q2 2002 Q2 2003

Change: NOK – 6.6mCause: Less tied-up capital, no write-down of shares

Change: NOK 8m

Performance trend Q2 2002 – Q2 2003

Income Statement 2nd Quarter 2003Income Statement 2nd Quarter 2003

(Figures in NOK 1.000) Income Statement Q2 2003 Q2 2002 Per 30jun03 Per 30jun02 2002 (audited)

Operating income 474 827 551 345 931 761 1 074 401 1 984 279 Cost of materials 290 695 345 794 563 329 673 430 1 238 385 Gross margin 38,8 % 37,3 % 39,5 % 37,3 % 37,6 %Payroll expenses 132 963 147 018 272 303 293 879 569 883 Other operating expenses 31 250 38 492 65 842 72 125 157 014 EBITDA 19 919 20 041 30 287 34 966 18 997 Ordinary depreciation 12 596 13 932 24 996 27 344 55 738 Goodwill amortisation 732 850 1 463 1 700 3 400

Operating profit (EBIT) 6 591 5 259 3 827 5 922 -40 141 Net financial costs 9 282 15 898 18 605 25 891 47 943

Profit (loss) before tax -2 691 -10 639 -14 777 -19 968 -88 084

Taxes -282 -3 013 -3 549 -5 625 -23 835

Profit (loss) after tax

Profit (loss) per chare

-2 409 -7 626 -11 229 -14 343 -64 249

(0,02) (0,13) (0,13) (0,24) (1,07)

Balance sheet per 30 June 2003Balance sheet per 30 June 2003

Development total balance sheet Q2 2002 - Q2 2003

909 605

815 573

760 000780 000800 000820 000840 000860 000880 000900 000920 000

2nd Q 2002 2nd Q 2003

Development inventory Q2 2002 - Q2 2003

379 115

322 444

280 000

300 000

320 000

340 000

360 000

380 000

400 000

2nd Q 2002 2nd Q 2003

Change: NOK -94,0 mill.





Development accounts receivable Q2 2002 - Q2 2003

211 183

112 247

-

50 000

100 000

150 000

200 000

250 000

2nd Q 2002 2nd Q 2003

Development interest-bearing liabilities Q2 2002 - Q2 2003

194 005

53 467

196 800

242 547

-

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

2nd Q 2002 2nd Q 2003

Factoring liabilities

Capitalised liabilities

(Figures in NOK 1.000)Balance 30June2003 30June2002 31Dec2002Deffered tax assets 109 428 85 138 102 206 Intangible assets 19 693 18 170 16 470 Tangible assets 147 905 158 239 156 606 Financial assets 24 123 19 763 25 095

Total fixed assets 301 149 281 310 300 377

Inventory 322 444 379 115 340 459 Accounts receivable 112 247 211 183 118 310 Other receivables 45 924 36 457 29 995 Cash and bank deposits 33 809 1 540 26 036 Total current assets 514 424 628 295 514 800

Total assets 815 573 909 605 815 177


Balance per 30 June 2003Balance per 30 June 2003

Liabilities & shareholders equities 30June2003 30June2002 31Dec2002Share capital 286 010 288 786 223 018 Accured equity -11 227 -16 937 -Other reserves 4 189 - -Minority reserves 5 311 - 4 182 Total shareholders’ equity 284 283 271 849 227 200

Pension commitments 9 175 10 117 9 132 Amounts owed to credit institutions 53 467 146 140 63 194 Other long-term liabilities 48 445 17 638 41 400 Total long-term liabilities 111 087 173 895 113 726

Interest-bearing short-term liabilities - 47 865 30 333 Provisions for liabilities & charges 22 279 - 42 301 Other short-term liabilities 397 924 415 996 401 617

Total short-term liabilities 420 203 463 861 474 251

Total liabilities & shareholders’ equity 815 573 909 605 815 177

242 547 196 800 246 000 Financing ofaccountsreceivables:

Cash flow statement & shareholders’ equity per 30 June 2003Cash flow statement & shareholders’ equity per 30 June 2003

Cash flow statement (NOK 1 000) Q2 2003 Q2 2002 30Jun03 30Jun02 2002 (audited)Net cash flow from operating activites 42 310 6 044 (10 652) 55 784 200 536 Net cash flow from investing activities (7 724) (1 390) (11 126) (3 626) (23 404)

Net cash flow from financing activities (24 092) (8 993) 29 551 (53 989) (154 467)

Net changes in cash 10 494 (4 339) 7 773 (1 831) 22 665 Cash balance per 31Dec.02/opening date 23 315 5 879 26 036 3 371 3 371 Cash balance as of closing date 33 809 1 540 33 809 1 540 26 036

Shareholders’ equity (NOK 1 000) 30Jun03 30Jun02 2002 (audited)Shareholders’ equity opening blance 227 200 288 786 288 786 Profit/loss for the year (11 229) (14 343) (64 249) Conversion difference 5 319 (2 594) (1 519) Share issue after issue costs 62 993 - - Change in minority interests - - 4 182 Shareholders’ equity closing balance 284 283 271 849 227 200

Top 20 shareholders per 26 August 2003

RankShareholders Per 26 Aug 2003 % share

1 Whitecliff ASA 36 037 485 28,71 %2 KongsbergGruppen ASA 33 914 292 27,01 %3 SEB klientkonto 10 058 033 8,01 %4 Tine Pensjonskasse 7 987 000 6,36 %5 Aksjefondet Gambak 3 000 000 2,39 %6 Sparebankens Sikringsfond 2 500 000 1,99 %7 Statoil pensjonskasse 1 958 479 1,56 %8 Statoil forsikring 1 637 307 1,30 %9 Hatteland Holding AS 1 500 000 1,19 %10 Jurs Consulting 1 100 000 0,88 %11 Telespar 1 080 011 0,86 %12 Verdipapirfondet Avanse 1 059 123 0,84 %13 Gambak kapital 700 000 0,56 %14 Norske Shell pensjon 679 629 0,54 %15 Gullskogen Cellulose 613 000 0,49 %16 Bergen komm. Pensjonskasse 600 000 0,48 %17 Verdipapirfor. Avanse 500 000 0,40 %18 Verdipapirfondet Fondsfinans 500 000 0,40 %19 Sundal Collier Aktiv 499 300 0,40 %20 Storebrand Norge AS 450 000 0,36 %

Total top 20 106 373 659 85 %

Total amount of shares 125 543 325 100 %

Development market sectors

Turnover development of market sectors 2nd Q 2002 – 2nd Q 2003

178165

95113

145 142

76

113

-

50

100

150

200

Defence Data/telecom Medical Industry

2Q 2002

2Q 2003

Turnover development of market sectors 1st Q 2003 – 2nd Q 2003

138 140

72

107

145 142

76

113

-

50

100

150

200

Defence Data/telecom Medical Industry

1st Q 2003

2nd Q2003

Defence/MarineDefence/Marine

30%

• Although slightly down on last year’s second quarter, this was the company’s largest segment during the period• The decline was due to one client in

the marine segment

• A better market for oil/gas exploration services is expected to boost the level of activity in 2004

• Prospects in the defence segment remain good• Major development projects are being

carried out in 2003• Existing project plans indicate that

production activities will grow by around 10% from 2003 to 2004

• Although slightly down on last year’s second quarter, this was the company’s largest segment during the period• The decline was due to one client in

the marine segment

• A better market for oil/gas exploration services is expected to boost the level of activity in 2004

• Prospects in the defence segment remain good• Major development projects are being

carried out in 2003• Existing project plans indicate that

production activities will grow by around 10% from 2003 to 2004

Data/TelecomData/Telecom

30%

• The market remained depressed in the second quarter and this has continued into the second half-year• Some clients point to signs of recovery• Indications that negative market

trends are being replaced by stability and the possibility of positive prospects

• Kitron EMS depends on an inflow of new projects in order to participate in the market growth that is expected in 2004

• Present contracts based on expertise in wireless applications (high-frequency microwave technology) will generate growth for Kitron Microelectronics in 2004

• The market remained depressed in the second quarter and this has continued into the second half-year• Some clients point to signs of recovery• Indications that negative market

trends are being replaced by stability and the possibility of positive prospects

• Kitron EMS depends on an inflow of new projects in order to participate in the market growth that is expected in 2004

• Present contracts based on expertise in wireless applications (high-frequency microwave technology) will generate growth for Kitron Microelectronics in 2004

MedicalMedical

16%

• The slight decline in turnover in the second quarter compared with the same period last year was due to client-specific circumstances

• Ongoing development projects are expected to generate production contracts for new products

• Breakthrough with limited module deliveries to major players in the segment offer the prospect of new production contracts• Qualifying Kitron Litauen to produce

medical equipment

• 5-8% market growth expected

• The slight decline in turnover in the second quarter compared with the same period last year was due to client-specific circumstances

• Ongoing development projects are expected to generate production contracts for new products

• Breakthrough with limited module deliveries to major players in the segment offer the prospect of new production contracts• Qualifying Kitron Litauen to produce

medical equipment

• 5-8% market growth expected

Industry / OtherIndustry / Other

24%

• Turnover in line with previous year

• Very positive trend among some clients engaged in industrial applications• Total volume in 2003 affected by

reduction in stocks held by one major client in this segment

• Kitron is highly dependent on the market situation for individual clients within the sector• Considerable growth potential for certain

clients• Prospect of increasing Kitron’s market

share among some clients by providing competence and services that strengthen the client’s competitive position

• Turnover in line with previous year

• Very positive trend among some clients engaged in industrial applications• Total volume in 2003 affected by

reduction in stocks held by one major client in this segment

• Kitron is highly dependent on the market situation for individual clients within the sector• Considerable growth potential for certain

clients• Prospect of increasing Kitron’s market

share among some clients by providing competence and services that strengthen the client’s competitive position

Looking ahead

• Order backlog NOK 900m (820m)

• Estimated turnover for second half-year:• Third quarter – roughly 5% down on last

year (NOK 396 mill)• Fourth quarter – marginally down on last

year (NOK 514m)• Estimates based on order reserve and

forecasts

• Taken separately, the second half-year is expected to be in profit

• Continued focus on measures aimed at improving efficiency and further development of services providing added value

• Order backlog NOK 900m (820m)

• Estimated turnover for second half-year:• Third quarter – roughly 5% down on last

year (NOK 396 mill)• Fourth quarter – marginally down on last

year (NOK 514m)• Estimates based on order reserve and

forecasts

• Taken separately, the second half-year is expected to be in profit

• Continued focus on measures aimed at improving efficiency and further development of services providing added value

Focuson

efficiency

Focuson

efficiency

Focused factories – higher productivity

No value creationNo value creation (Queues-waiting-set-upchecks-transfers etc.

Value creationValue creation (when tools are productive)

Total through-put timeTotal through-put time

Manualassembly

Soldering

Packing

Delivery

Stock managementKitting

Non-value-creative through-put time

Value-creative through-put timeValue-creative through-put time

5%

85> %8%

Surfaceassembly

Post-saleassembly

Finishing

A single integrated and scaleable production system

EMSHisøy KilsundOsloKongsberg KarlskogaLitauen

Microelectronics:RørosJønkøping

EMSHisøy KilsundOsloKongsberg KarlskogaLitauen

Microelectronics:RørosJønkøping

A single integrated and scaleable production system

Focuson the

development of value-added services

Focuson the

development of value-added services

Product Roadmap – promoting profitability

Concept PrototypeSpecification Introduction. MatureDesign

EMS Market Profitability

Decline Obsolescence

Product Roadmap – promoting profitability




Kitron’s strategy

Ideal division of projects




Status Defence&Marine clients/projects




Status Data&Telecom clients/projects




Industry&Other clients/projects




Status Medical clients /projects




Focus on high-value clientsFocus on high-value clients

Proximity to the market

Competence

Development services

Service

Proximity to the market

Competence

Development services

Service

Kitron ASA Presentation Second Quarter 2003

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