Kitron Overview

Norne Securities & Xtrainvestor.com Vilnius 23-24 September 2016

Peter Nilsson, CEO

September 23th, 2016

Speaker

Peter Nilsson

Chief Executive Officer

2

Born in 1964. Joined Kitron in 2014. Almost 25 years

of experience in electronics manufacturing and

related services. Several senior and executive

leadership positions for Swedish and US companies.

Mr Nilsson holds a degree in Industrial Management

and is a Swedish citizen.

Kitron Group

Operations in Norway, Lithuania, Sweden, Germany, China and USA

Manufacturing of high complexity products for global markets

About 1200 employees

Revenue 2015: NOK 1.95 Billion

EBIT 2015: NOK 103 Million

Listed on Oslo Stock Exchange

Main shareholders:

Sievi Capital Plc. (FI ~ 33%)

Kongsberg Group (NO ~ 19%)

Amber Trust II (Int’l ~ 17%)

3

China

Europe

Johnstown

facility

USA

China

Ningbo facility

Kaunas facility

Arendal facility

Jonköping facility

Stuttgart office

Operations:

What is it Kitron does?

Industrialization Sourcing &

procurement Manufacturing

Logistics &

Distribution

Redesign

Repair

Maintenance Development

“Kitron is an Electronics

Manufacturing Services

company. Our customers

outsource manufacturing

and related services to

us to improve flexibility,

cost efficiency, accuracy

and innovation power

throughout the value

chain.”

Markets and customers:

High-value sectors with high-reliability products

Defence/

Aerospace

Energy/

Telecoms

Medical

equipment Industry

Offshore/

Marine

Customer Example:

Industrialization Sourcing &

procurement Manufacturing

Logistics &

Distribution

Redesign

Repair

Maintenance

Development

Prototyping

Test

development

Cost reduction

programs

Obsolescence

management

ITO optimization

Production

planning

Quality

assurance

Efficiency

programs

Cable

harnessing

Final assembly

Re-cycling

and disposal

management

of packaging

material

Repair and

Overhaul

Cardiovascular imaging Systems

Customer Example:

Industrialization Sourcing &

procurement Manufacturing

Logistics &

Distribution

Redesign

Repair

Maintenance Development

Design

studies

Prototyping

Test

development

Sustainability

reports

Supplier

selection and

optimization

Cost reduction

programs

Obsolescence

management

ITO optimization

Production

planning

Quality

assurance

Efficiency

programs

Electro-

mechanical

assembly

Packaging and

labeling

services

Red-Design

and Cost

reduction

ABB HVDC: Efficient alternatives for

transmitting bulk power and connecting

Super Grids

Increasingly complex market:

Outsourcing, nearshoring or reshoring?

Outsourcing to Asia due to labor-cost

advantage was major growth driver

Today’s picture more complex

Increasing labor costs in Asia

China moving up value chain

Automation changes cost mix

Strong growth in Eastern Europe

Shorter time-to-market favors

nearshoring

Kitron offers a variation of

production sites to match

customers’ preferences, with clear

strategic reasoning for each location.

Positioning of Kitron:

High-reliability products and demanding customers

Margin/complexity

Volume

Local

niche

providers

Financials

10

11

Financial highlights full year 2015:

Significantly improved profitability and cash flow

Double-digit revenue and

order growth

Ongoing margin expansion

Strong cash flow

Reduced working capital

Solid dividend capacity

“Actions are yielding results.”

NOK mill.

Revenue

1951,8

EBIT

102,7

Order backlog

975,6

Operating cash flow

204,1

Net working capital

507,6

12,3 %

4384,1 %

-10,2 %

2015 vs 2014

11,4 %

242,0 %

Financial highlights first half year:

Solid growth

12

Solid growth in revenue and

strong growth in order backlog

Underlying growth 5%

Improved profitability

5.1% (4.5%)

Profitability adjusted for

one-offs in Q1 at 5.5%

Improved capital efficiency

NOK mill.

Revenue

1060,1

EBIT

53,6

Order backlog

989,4

Operating cash flow

35,7

Net working capital

521,5

2016 vs 2015

10,5 %

25,1 %

19,2 %

57,3 %

-6,7 %

Q2 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

1,5 % 3,0 % 4,4 % 4,5 % 5,6 % 6,4 % 4,1 % 5,9 %

6,9 6,9

14,3

20,8 22,1

26,3

33,6

20,5

33,1

NO

K m

illi

on

379 %M

arg

in

Contributing factors to profitability

improvement

Volume increase ~ 50 %

Cost reduction on direct

materials a result of spend

consolidation and increased

technical service sales ~ 20%

Restructuring of geographical

headcount ~ 20%

Currency translation ~ 10 %

Q1 2016 includes one off MNOK 5

for terminated acquisition.

Quarterly EBIT:

Profitability level improved

13

Balance sheet:

Solid foundation for growth

Equity ratio 44% (43%)

Target range 38% to 48%

Net interest-bearing debt NOK 226,9

million

NIBD/EBITDA 1,6 (5.0)

Target below 2.5

Capacity to combine growth and

dividend payments

Stronger profitability and reduction of

working capital improves ratios

* Net interest-bearing debt divided by earnings before

interest, taxes, depreciation and amortization.

3,5

2,4

4,4

5,0

1,6

2011 2012 2013 2014 2015

NIBD/EBITDA*

Capex:

Major investment cycle nearing end

Major investment cycle: modern,

highly competitive facilities

Lithuania 2014: NOK 37.0m (facility) and

NOK 13m (equipment)

Norway 2015: NOK 40.5m (facility) and

NOK 7.0m (equipment)

Will be considerably lower in 2016

Despite facility and equipment

investments in Sweden

Expected to remain at lower level

29 30 35

37

41

1,8 %

3,8 % 3,9 %

2,3 %

2013 2014 2015 2016

Capital expenditure

Other Facilities Capex as % of revenue

Historical financials:

Increasing effect of actions taken

1656 1695 1632 1751 1952

2011 2012 2013 2014 2015 2016

Revenue

39

71

25 30

103

2011 2012 2013 2014 2015 2016

EBIT

17 42 32

-5

204

2011 2012 2013 2014 2015 2016

Operational cash flow

72 107

60 65

144

2011 2012 2013 2014 2015 2016

EBITDA

16

Strategic Overview

17

Financial targets

Revenue BNOK 2.05 – 2.25

EBIT margin 5.3-6.3%

CCC 80 days

ROOC 20%

Dividend 30-60% of net

profit

Target 2016:

Revenue BNOK 3

EBIT margin 7%

CCC 50 days

ROOC 25%

Dividend 30-60% of net

profit

Strategy 2020:

1. Accelerated organic growth

2. Continued operational improvements

3. Growth through targeted M&A

Kitron in the future:

Strategic Agenda

19

Accelerate organic growth

Existing customers:

10% annually

New customers:

5% annually

Service sales:

10% of revenue

- 10% growth annually

- 10% of revenues to stem from service sales which typically enjoys higher margins

- For existing customers, Kitron anticipates to grow through winning replacement

contracts, up- and cross-selling

- For new customers, Kitron seeks to leverage its competence within core sectors and

utilize Eastern European base to penetrate selected markets

Continued Operational Improvements

Combining increased revenue and

tight cost control

Payroll expenses limited by leveraging

investments in lower-cost countries

Key cost-oriented initiatives ongoing:

Continue to utilize resources in

lower-cost countries

Operational improvement

program

Consolidate sourcing

Increased service sales will influence

cost structure going forward

Strategic target 25%

26,1% 25,5% 27,2%

25,3% 22,7%

7,6% 7,1%

7,7%

7,3%

6,3%

33,7% 32,6% 34,9%

32,6%

29,1%

25,0%

2011 2012 2013 2014 2015 2020

Cost control taking hold

Other opex as % or revenue

Operational Improvement Projects

Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017

Consignment Stock

Supply Chain Concept

New NPI Process

New Quality Management System

Process Standardization (80-20)

New Product Structures

Operational Excellence Toolbox rollout

Site Sourcing Plans

Emergency Response Plan

Business Continuity Plan

IFS Manufacturing Enhancement Package

Data Warehouse

Routing Times Storage

Conflict Minerals

Inter Company EDI

STEP 2

STEP 1 STEP 2

STEP 1 STEP 2 STEP 3

STEP 1 STEP 2

STEP 2 STEP 3

STEP 2 STEP 3

STEP 1 STEP 2

STEP 1 STEP 2

STEP 1

STEP 3

STEP 1 STEP 2

STEP 1 STEP 2

STEP 1 STEP 2

STEP 1 STEP 2

STEP 1 STEP 2 STEP 3

STEP 1

2015 increase in return on operating

capital primarily due to higher profit

Improvement expected to continue:

Higher profit

Lower net working capital

Lower capex

Long-term target 25%

Cash conversion cycle* is a key metric

Today: 90 days. Long-term target: 50 days

Long-term target based on thorough

internal analysis and peer comparisons

ROOC and CCC:

Improving use of capital

* Days inventory outstanding + days sales outstanding - days payable outstanding.

3,7 % 4,0 %

13,8 %

25,0 %

2013 2014 2015 2020

Return on operating capital

Margins:

EBIT target 7% in 2020

Operational improvements have

taken hold in 2015

Expect approximately 5–6% margin

in 2016

Expect ongoing margin increases in

coming years

Key elements:

Growth

Improved operational efficiency

Growth of service sales

2,3 %

4,2 %

1,5 % 1,7 %

5,3 %

7,0 %

2011 2012 2013 2014 2015 2016 2020

EBIT margin

Kitron will consider carefully targeted acquisitions in

two areas:

Growth through targeted M&A

Electronic

Manufacturing

services Competence, customers or

market complementary to

Kitron

Product hardware

company Competence

complementary to Kitron

Technology of importance

to Kitron customers

NOK 100 million NOK 200-300

million

NOK 300-500

million

New

bank

financ

ing

Cash

and

loan

Cash

M&A:

Financing of

potential

acquisitions

26

Shareholder value Share price evolution

0

1

2

3

4

5

6

7

0

100

200

300

400

500

600

700

OSEBX

Oct 2010 2011 2012 2013 2014 2015 Sept. 2016

NOK

5.5

NOK

2.35

Q2 Market CAP = 950 million ( from 300 million average 2013/2014)

Financial targets

Revenue BNOK 2.05 – 2.25

EBIT margin 5.3-6.3%

CCC 80 days

ROOC 20%

Dividend 30-60% of net

profit

Target 2016:

Revenue BNOK 3

EBIT margin 7%

CCC 50 days

ROOC 25%

Dividend 30-60% of net

profit

Strategy 2020: