Good evening. Welcome to the Kitron 2019 full year and fourth quarter webcast. I'm Peter Nilsson, the CEO. With me today, as usual, Cathrin Nylander, our CFO. Let me give you a brief summary over the fourth quarter and somewhat into full year last year. We had a strong revenue growth in the fourth quarter, about 20%, and 26% for the full year. Particularly strong in the defense and aerospace sector, as well as offshore marine, just as we initially talked about very early in the year. The year-to-date EBIT margin was 6.1%, strong improvements in both Norway and Sweden. Overall, we made just over NOK 200 million in profits. The order backlog ending very strong with a strong contribution from defense, aerospace and marine sectors.
Our working capital ratios are trending down after the large buildup earlier in 2019 and really starting in 2018. talking about the coronavirus outbreak and situation in China, Kitron started up on Monday this week at 30% capacity, and we're increasing day by day. We'll talk a little bit more about that later. we'll also talk about later the Kitron U.S., the rebuild of the flooded factory from last year, and what the status is now. Kitron Poland is up and running at projected margins, so break even towards the end of last year, December break-even month, and actually a pretty good result in January, even though we're not here to talk about January. I can't help myself.
I know.
The proposed dividend for last year is NOK 0.50 per share or EUR 0.50 per share. We'll have a smaller capital markets presentation on March 18th, a webcast, and put out a little movie. The highlights for the fourth quarter, revenue close to NOK 890 million, that's up 20%. The EBIT margin NOK 54 million, up 28% from previous year. Order backlog very strong, close to NOK 1.9 billion. The interesting thing about the order backlog, it's not, you know, the next 18 months. You know, it's more dominated about for the first 9 months of 2020.
When we look at individual sites and we look at the order backlog for the first half of this year versus our forecast and budget, I think we're pretty much at 100% of our budget already in forecast and orders for the first half of the year. Looking into the second half of the year, over 80% at least. That's a different situation from what we're used to. It's very strong. Normally, we start out the year with less demand from our customers. We feel pretty secure in our forecast for 2020. The operating cash flow, NOK 97.2 in the quarter. We had a lot of inflow in the fourth quarter.
We're really seeing actions yielding results when it comes to reduction of net working capital, primarily driving down inventory numbers. Net working capital, though, for the full year is up 21%, ending at EUR 942 million. Of course, we've added operations, both, the U.S. operation is an addition, and the Polish operation also started up last year. Looking into the full year 2019, EUR 3.3 billion top line, it's up 26%. EUR 200 million, EUR 201 million profit for the year. Again, order backlog is the same as for the fourth quarter. The operating cash flow is close to EUR 200 million for the year.
Another big highlight, I think, is the EPS, where the earnings per share ended at EUR 0.74 per share versus EUR 0.63 the previous year. Yeah.
A little bit about some of the major orders that came in in the fourth quarter. Two major orders from one of our larger customers, Kongsberg. One for communication equipment for K-TaCS and NASAMS Air Defense Systems. The value is approximately NOK 90 million. Delivery start this year and be completed into the next year. Production will take place in our Arendal site in Norway. We're also awarded about NOK 80 million in orders for remote weapon stations, RWS. Production there will take place in Norway also, and it starts also this year. We were awarded an order for energy products, High-voltage direct current products, to secure, you know, offshore wind power production. The delivery start here also in 2020.
Again, it's our site in Arendal, Norway. Very strong order backlog for Arendal, Norway. I think, you know, from a site perspective, we're close to NOK 1 billion.
Very close.
In order backlog at the end of the year.
Getting back to the coronavirus, a lot of interest right now from a lot of people and how that affects Kitron. Overall, based on the information we have right now, we don't see any material effects for Kitron. Our facility is located in the coastal city of Ningbo. It's about a two-hour, 2.5-hour drive south of Shanghai and about 900 km from inland city of Wuhan. We opened on Monday this week at about 30% capacity. We have employees that are traveling in from other places. They'll gradually be released from quarantine. Depending on where they're coming from, they're either facing one or two weeks quarantine right now.
Of course, these, that information and those decisions tend to change on a daily basis, so I'm describing the situation as of this morning, on February 13th. Suppliers and transport and customs is really where we're focusing. We have about 44 suppliers in China delivering not only to our Chinese facility, but to many other Kitron facilities also. Most of those tier one suppliers are now up and running. It's mainly PCBs and mechanics. What we're doing in our other Kitron sites is rescheduling and resourcing to build other products to limit any effects. When it comes to Kitron China itself, it's about 10% of the group revenue.
Again, these two weeks that, you know, the New Year and the shutdown, extended holiday has been for us, we're not expecting any material effects from it. Yeah.
Good.
I'd like to talk about two of our new sites. We acquired Kitron Technologies as an acquisition we did from API. It's located in Windber, Pennsylvania. It was completed first quarter last year.
Yeah. Then in the second quarter, we had a major flooding, right? There was some very heavy rain, and the site was completely flooded. We were up and running about two weeks later in a new facility, so you know, very strong comeback. We didn't miss any customer orders of significance. Today, the site is more or less renovated. The finishing touches are being put on all which is I would like to classify as a new facility, a new site. It's really beautiful the way it's been renovated. We've also had business interruption and insurance that have, you know, covered any extra costs that we've had during that period. All of those costs and losses and everything was booked in Q4.
We plan to move into the renovated facility in the second quarter of this year.
Yeah, maybe I should say a few words on the effects on the accounts, basically. Everything up to Q4 is booked in the income statement, and it affects the top line of about EUR 30 million, and that is insurance income. The business interruption that we get is at margin value, so if you turn it back into top line. It's a sort of a one-to-one replacement of top line for us. There are some extra costs, basically about EUR 19 million in the year of other expense, which is related to the flooding and booked into other OpEx. Then we have a write-down of equipment that was damaged and installations in the facility are about EUR 6 million.
The EBIT effect for the full year is, I would say on the, on the group level, not visible. It's about EUR 1.8 million, and in the quarter, it's nothing. It evens out quite well, even though it affects certain items.
As it should.
Yeah, as it should.
Jumping on to Kitron Poland. Our new facility is in Grudziądz, Poland. It's about an hour south of Gdansk.
Production started in the fourth quarter, had some preliminary qualifications in September, and really running fully in December. December was a break-even month for us. We now have two fully automated production lines, running basically three shifts at this point. I think a pretty decent result in January.
It's at currently at planned capacity and margins.
Good. Now back a bit on the financial statements.
Thanks, Peter. We had a growth of 8% organically in the quarter and actually 20% for the full group, including the acquisition of API. In general, when we look on the growth on the sectors, it seem, you see that Industry still the largest sector in the quarter. It's EUR 320 million in total, has a slight reduction. We saw a bit of hesitancy for some of the customers breaking up a bit and wondering about what's gonna happen in 2020. We don't see the same hesitation in the order backlog going forward. That is primarily the result of the reduction in Q4.
Very strong Defense, NOK 255 million and up 116%, NOK 135 million increase compared to last year, so very significant. Medical Devices up also 20%, very good results of that. Energy & Telecoms, a slight reduction. We have disengaged a customer where we had medium to high volumes, but relatively low margin, and as you can see, the effect in Energy & Telecoms in the quarter specifically, in this, and you will also see them on one of the sites later. Offshore Marine, also there, good growth, NOK 53 million in total, and a growth of 34% for the quarter compared to last year. I will say in all, pretty strong growth and according to what we expected.
When we look on the sectors for the full year, we had a growth compared to 2018, about EUR 680 million, and it's a 26% growth in total, and 16% of that is organic. Kitron Tech acquisition contributed in about EUR 250 million in total for the total top line. Industry, we had 6.3% growth in total, affected slightly by the growth in the fourth quarter. Defense & Aerospace, 65% growth, ending at EUR 743 million. I have to say also Industry is about EUR 1.3 billion of top line currently. Medical Devices, also there, 15% growth for the year, very good. In Tele-Telecoms in total, also 15% growth. Offshore Marine, of course 340% growth, ending at EUR 240 million compared to EUR 50 million the year before. I would say a pretty good year.
Kitron Tech contributed about EUR 250 million, so around 10% of the growth in total. Organically 16%, which I think is good and according to anticipations. When we look at the sites, how did we do? Of course, Norway, as you have seen, they have most of the large orders. They are strengthening their defense business quite significantly, and they grew in the quarter EUR 57 million compared to last year, and 30%. Sweden being affected by this disengaged customer, which explains for the reduction of 19%, basically between these years. Lithuania, there's a slight reduction, as you can see, and most of that top line is, you can see in the rightmost column of Others, it's been transferred to Poland, and they are transfer some of the volumes continually, and that was the plan all along.
We can fill up Lithuania with new volumes going forward. The U.S., of course, the major part of that growth, of EUR 103 million from EUR 11 to EUR 134 is, of course, Technology, about EUR 91 million, but also Inc. did a significant growth by itself. The Others consisting then of Poland and China grew some 36% in total. For the full year, how did we change? Norway, up 30% and EUR 185 million. It's a significant change from the EUR 670 million they had last year, and now up at EUR 851. Sweden, about same, not so much change, but stable income, which we'll see also coming into next year, stable to slight decline. Lithuania, a growth of EUR 100 million in 2019. U.S., we grew to EUR 293 million, and, you know, how many percents?
Over 800%, 250 of those, again, is the acquisition. In Others, we have a growth of 80 coming up to EUR 481 million, of which the we moved some revenue down from Lithuania into Poland. It's the same amount, of course, for the full year for Poland as in the fourth quarter. All in all, I think it's a rather drastic change in the mix between the countries compared to last year. Profit, we ended up at EUR 54.2 million in the quarter and 6.1% according to expectations and up 28% compared to last year.
EBIT margin, again, 6.1% compared to 5.7%. We did have the startup in the Polish facility in the fourth quarter, where we have taken a loss about EUR 10 million. We have to say that during the year as well, our legacy site in the U.S. has been running at a loss as well, which we will see will have a profit next year. We see good expectations for improved profitability next year. We decided on showing just the year-end figures for the EBIT development. As you can see, Norway improved their margins from 4.2% to 5.7%, a significant increase in the EBIT level as such. Also, Sweden improved their margins from 5.5% to 6.3% in spite of actually having equal volume. They have really improved their profitability.
Lithuania is suffering slightly from, what, the ramp-up effects, but also now that we're transferring some volume, we see a temporary slightly lower margin compared to the 8% they've been to before. The U.S. coming up, so it's actually more positive on the acquired side in Kitron Tech. We have at expected margins and good margins, better than you see in the list here, because it's been slightly reduced by the legacy operations that we have in Kitron U.S., dragging the margin down for us. As for the Others, China's performing well, and the Polish startup costs are included in Others. Next year, we will present Poland by itself, and I think possibly also China. Going over to working capital.
Last year, net working capital and percent of top line was 23%, and it's now 26.3% on a rolling three average. It's been decidedly higher during the year, so we see that it's improving during the year. The cash conversion cycle is higher than last year and it's 102 compared to 84, where actually the DIO and the DSO is basically the same as last year. We have a lower DPO as we are buying less. We will see this normalize a bit more going forward. ROC, 14.8% at the end of the year after that one was 17.5% last year.
If we exclude the IFRS 16 adjustments that we do, in the ROC we include fixed assets and of course we have EUR 135 million approximately of the fixed assets according to IFRS 16, which drags the percentage down about 1.5% from that comparably. The net operating working capital has increased compared to last year about EUR 160 million or an increase of EUR 163 million. EUR 100 million of those are from the acquisition in the U.S. and in Poland to have some sort of explanation. For those that are studying the balance sheet, there are some large movements in certain items. I'd like to comment on a few of them.
For fixed assets, it's actually increasing with EUR 230 million in the year compared to last year then to EUR 523 million. OK. The acquisition increases by EUR 43, which is a split of assets and IFRS adjustments. Then also the start-up in Poland increases with EUR 138 million, also, they're a mix. The rest is basically IFRS movements. For the other sites, the investments and the depreciations end up with a sort of a zero change. We increased our working capital from EUR 779 to EUR 942, and it's been around EUR 930, EUR 940 in spite of us growing organically about 16% and 26% in total, including then Windber.
Cash flow, again, we had a positive cash flow of EUR 97.2 million in the quarter. We're happy about that, ending in total right below EUR 200 million in cash flow. We see good effects of that, and we anticipate a positive or a strong cash flow going forward into 2020. Net interest-bearing debt, EUR 2.8 compared to EUR 1.9 last year, and that's affected mainly by the acquisitions that we made, but also according the IFRS adjustments on Net interest-bearing debt, which should have been EUR 2.4 comparably to last year. There is also a change that you can see it in the balance sheet, it's quite clear.
Whereas we previously have booked some, or booked the IPC or the cash pool, sort of net, we had to gross it up, and that means that we have to increase our Net interest-bearing debt with EUR 125 million on the debt side, and we are increasing our cash with EUR 125 million on the asset side. It's blowing up the balance sheet slightly in the quarter. That is the explanation for that. It's IFRS. Back to you, Peter, markets.
Yes, thank you. Overall, a very strong year for Kitron. Nice increase in top line, EUR 200 million profit, EUR 200 million cash flow, so we're pretty darn happy. We're even happier when we look at the order backlog for going forward. EUR 1.9 billion as we exited last year, and it continues into this year also continuing to grow and looking very strong. Overall, on the order backlog, we almost see a doubling of the defense aerospace. It's close to EUR 900 million on defense aerospace now. Even though we had a disengagement from this low-margin customer, we still see a growth on Energy and Telecom, up 37%.
That's an increase with about EUR 60 million, and it's primarily driven by the High-voltage direct current products that we're supplying to wind farms in the North Sea. Industry growth 7.7%. It's about EUR 35 million up. It's stable around EUR 500 million, the order backlog for Industry. As of when you look at Industry in the full year, what the actual number is on, on invoice sales is about EUR 1.1 billion. That shows you how much order backlog coverage we have. Lead times tend to be shorter in the Industry sector. Medical devices, nice growth on medical. Overall for in the order backlog, it's about EUR 200 million, just over EUR 200 million. About just over EUR 100 million on offshore marine, also continuing to grow into this year. Yeah.
Very strong. Outlook.
Outlook for the full year 2020, we expect to be somewhere between EUR 3.3 million and EUR 3.7 million. We always sort of have our starting point at where we ended the previous year, been a sort of tradition with us. We expect the EBIT margins to be between 6.4% and 7%. Growth is primarily driven by aerospace and defense and Industry, at least according to our plan.
Yes.
You know, the plans are the first thing to change when you, when you really hit the, hit the ground running. Profitability is mainly driven by operational improvements in Poland, where we had the EUR 10 million loss booked in the fourth quarter, and the U.S. where we also had a EUR 10 million loss in our legacy operation for the full year. Those, you know, just by breaking even in those two, that's a significant improvement. Of course, both of them should generate normal profit levels in 2020. On top of that, continued growth, continued improvements in Norway, continued improvements in Sweden. Lithuania sort of back on track after transfers into Poland. 2020 is looking pretty good for us.
Yeah.
I think that's it.
Thank you so much. We'll see you at the Q1, whenever that is.
In April.
Thanks. Bye.
Thank you. Bye.