Kontron releases Q2 results below expectations but maintains guidance

• Order intake EUR 100.1 million, minus 16.9 % yoy
• Order backlog EUR 322.5 million, up 10.9 % yoy
• Revenue EUR 108.5 million, minus 6.5 % yoy
• Gross margin at 24.9 %, adjusted EBIT margin minus 1.7 %
• FY guidance maintained

Augsburg, Germany, July 30, 2015 – Kontron, a leading global provider of Embedded Computer Technology (ECT), has published its results for the second quarter of 2015. While performance during the quarter, and therefore for the first six months of 2015, again fell short of expectations, management continues to strive for the achievement of its operating and financial objectives for fiscal year 2015. The second half of the year is expected to be strong.

Group results

Group order intake came in at € 100.1 million, 16.9 % below the comparative figures for the same quarter of last year, and revenues at € 108.5 million, 6.5 % lower than last year. As a result, profitability was down during the second quarter: the company’s gross profit margin came to 24.9 %, albeit only slightly below our target of 25 %, but EBIT adjusted for restructuring costs fell by € 5.5 million to a loss of € 1.8 million. This corresponds to an EBIT margin of minus 1.7 % compared to 3.2 % during the same period last year.

Weakness due to strategic shifts in Communications business and delays in ATD

The business unit Communications, having been significantly below expectations during the first quarter of 2015, recovered during the second quarter, generating revenues of € 26.2 million. They were, however, still below the same period of the previous year (Q2/2014: € 28.4 million) and order intake was disappointing. This is due primarily to the current strategic shift away from functionalities previously represented by hardware towards software-defined networks. Although Kontron started to respond to this change early in 2013, adjusting its product portfolio accordingly, tangible effects are not expected to be reflected in revenues until the end of 2015.

In the business unit Avionics/Transportation/Defense (ATD) revenues came in below expectations too, at € 28.9 million compared to € 35.8 million during the same period last year. This is due mainly to the fact that revenues generated last year in the Transportation segment from the Polish project business could not be compensated by other income sources as planned. However, many of the planned revenues have merely been delayed and will be realized during the second half of the year. The weaker order intake in the business unit was caused primarily by fluctuating demand in the Defense segment, where Kontron also expects an uplift during the second half of the year.

Key figures for the second quarter 2015

Backlog high, Industrial and Asia show positive trend

Order backlog developed positively: at the end of the second quarter it stood at € 322.5 million, which represents an increase of 10.9 % on the same quarter last year. The rise is due to the high order intake during the second half of 2014 and foreign exchange effects arising from changes in the EUR/USD exchange rate.

The Industrial business unit also developed positively during the second quarter: Revenues rose by 2.9 % in comparison to the same period of last year, to € 53.4 million, on account of stronger demand in Medical and Industrial Automation. As with revenues, Kontron recorded a very pleasing rise in order intake of 11.5 % to € 51.5 million.

“The first half of 2015 was below our expectations, which poses a challenge to us in the coming months. But we are working hard to catch up during the second half, and to achieve our annual guidance”, said Rolf Schwirz, CEO of Kontron AG. “We derive confidence, among other things, from the high level of orders on our books and the encouraging trend in Industrial. On top of that, we expect to generate incremental revenues from calls on framework orders, some promising new projects and a Channel boost initiative. All of this will be implemented and billed this year.”

In Asia, business continued to develop well during the second quarter of 2015: revenues in the APAC region rose by a total of 12 %. In addition to the build-out in China and Japan, which has already been completed, Kontron is now better positioned for the strategically critical market of India: In July 2015 it acquired another 45 % of the shares in Kontron Technology India Pvt. Ltd., Mumbai/India, which now makes the entity a wholly-owned subsidiary of Kontron AG.

Kontron intends to transform itself into a hardware/software provider in order to fully exploit the growth potential of the Internet of Things. The global trend of connecting devices, which currently operate autonomously, to the internet, offers enormous growth and profit potential, which the company aims to exploit thanks to its excellent positioning in the ECT market.

For further information:
Alexandra Habekost
Kontron AG
Tel: +49 (0) 821 4086 114
Alexandra.Habekost@kontron.com