Welcome to Kitron's third. Ms. Cathrine Nylande r, CFO, joining me here today. Backlog 27% on a comparable level, reaching almost NOK 1,280 million for the full year on a comparable level.
Orders they received in the month were particularly strong at NOK 669 million. That's up 25% from last year. We have a slightly lower margin than we had last year, and slightly lower actually than we expected to have. Some of this is due to some program postponements primarily, and a slight. Of course, the expected downturn in the Defense.
We had some programs that came in in mid-quarter and started to slide over into the Q4, and will be delivered in the Q4.
EPS, however, is much better than last year. Over 30% increase with just over NOK 0.12 per share in EPS. Capital, you can see our Net Working Capital is up almost 35%, and the cash flow in the quarter was down NOK 41 million.
This is really due to inventory build-up to secure our future deliveries and future growth. The challenges we've had on the electronics component market with limitations in capacity has forced us to make decisions to really get the inventory inside our factories as next year. Some of this inventory, as we see, is being financed by ourselves, but large portions out of it is also being financed by our customers.
Looking at the first three quarters, so far the 1% growth excluding Defense and Aerospace, and looking isolated actually at the Q3, the growth was 18% excluding the decline this year in Defense and Aerospace. EBIT margins so far is 0.47. I'd say significantly better than last year. Again, reiterating, when we look at the order backlog, strong Q3.
We signed a new agreement with a new customer within the industrial sector. We expect it to generate about NOK 150 million over the next 3 years. Production will be taking place in Kaunas in Lithuania, we expect revenues from this contract starting even in the Q4 now.
We also announced in July our plans to expand our Eastern Europe to northern Poland. The production square footage will be about 8,000 square meters. Production is actually an output from this new site is scheduled to begin in the Q4 of next year. We see about a staff of 100-200 in the first three years of the operation, climbing to about 500 employees.
So it'll be a comparable site to the site we have in Lithuania. Our target for our sites is generally to be around EUR 100 million of revenue, and we expect to reach that with our Poland.
Moving over to our financial statements in a little bit more detail, get some meat on the bone. Cathrine's here to take us through that.
Thanks, Peter. Important decision about Poland.
The financial statements for the first three quarters and Q3 2008, some comments on the effects on Q3. In Q3, we have an income effect about NOK 25 million and a EBIT effect of NOK 1.7 million, compared to the year-to-date figures of about NOK 36 million and NOK 2.5 million. This really implies just then taking to income. Part of this is actually to even out some of the production levels we're having, so about NOK 15 million of that.
The rest is actually keeping more WIP, basically. If we look on the revenue growth for the quarter, we have an 18% revenue growth if we exclude the Defense and Aerospace sector.
In total, we show a growth of 5.1% and up NOK 28 million compared to last year, landing at frequent variations, compared to last year. Industry grew 26% and NOK 50 million compared to last year. Defense Aerospace is down 34% and NOK 45 million, quite substantial changes. Medical is down 8.9% and some NOK 9 million. Offshore Marine is up NOK 6 million and a whopping 150%. A substantial change.
Ability of our facilities to be able to shift like this within a quarter, especially when even when you look at the industry sector, you said it was up NOK 50 million, and we had some postponements, some really large postponements within industry.
Yes. Actually higher on industry coming into the quarter than we ended with. If you look on the total year, landing at NOK 1,881 and net up NOK 6 space sector. Again, if we talk about real figures, the growth in the industry sector is about NOK 200 million compared to last year and 31%. Defense aerospace is down NOK 150 million compared to last year in the same area and time.
Medical Devices is up NOK 60 million, which is a good figure, and around 20%. Energy and Telecoms about even, same level as last year, although we see improving higher figures this year coming later. Offshore Marine is up 40% and some NOK 9 million compared to last year.
Again, we see shifts between the sectors, and, it's a testament to stability, in total because of the different sectors we have.
As impressively enough, the NOK 150 million down this, so far this year is primarily in our Nordic facilities, Sweden and Norway.
Mm.
Even so, we see margin improvements out of those facilities.
Mm.
We expect Defense Aerospace to come back strong.
True, talking about that, looking into the shifts that we have in the quarter from the sites then, as Peter said, Norway and Sweden are affected by the reduction in the Defense and Aerospace sector. You see they're both reducing about 6% and about the same figures, about NOK 10 million compared to last year. Lithuania, in spite of the postponements, are growing 15% compared to last year.
The others is a mix here. It's a U.S. facility, and it's also our operations in China. Our operations in China, they're growing about 30% compared to last year, a very strong quarter.
Also, in that sense, we have to say that the operations in the U.S. are suffering from the postponement of one program coming into Q4 instead of starting in Q3, which we can also see on the profitability a bit later, effective.
Again, on the first three quarters, loan, growth above 20%. As you can see on the others, again, China is growing strongly, whereas the U.S. has declined due to Defense projects.
During the year, you know, we started the U.S. or ended the U.S. last year with basically one customer being invoiced.
Mm. Mm.
As per the end of Q3 this year, we had 10 customers being invoiced, albeit that's still at a low level.
Mm.
Really setting the scene for next year.
We're seeing good expectations from the U.S. going. A lot of hard work has gone into it to attract all these customers. Seasonal variations in profitability. What we can see now, it's quite clear that Kitron is having three good quarters and one that's slightly lower on top line and on our profit quarter, because basically the vacation period in Europe reduces our top line in that sense.
What we also see now is that the component allocation creates less flexibility for short-term changes in demand. Previously, we could pull in, which also affects our profitability in this quarter, this year specifically.
I mean, on the component side, yeah, push out the demand...
Mm.
We used to resolve because we will be needing them.
Mm.
You don't wanna take a chance on not getting them later.
We have two areas where postponed programs have affected the profitability. It's partly in Lithuania and partly in the US specifically, I would say. When we look on the EBIT by country, I have am present revenue reduction compared to last year, and Norway's increasing their profit margin from 1.3% to 3.7%, and Sweden is going up from 4.4% to 5.5%. Quite some good work to reach those figures, looking at the adversity in the top line, if you put it that way. As I said, Lithuania has late demand pushouts into Q4 part affected by one program postponement into starting into Q4 than starting in Q3.
They're actually running at a loss in Q3 and a higher loss than we expected. Substantial changes between the site. Here for the first three quarters, Lithuania continues to drive the profits.
They're, at about NOK 59 million in total for the year so far and up from NOK 47.4 million last year on a profit margin of about 8.2% compared to 7.9% last year. Sweden and Norway, about the same level, I would say, but an improvement, 4.4% compared to 4.0% for 4.8%. In spite of that revenue pushout of NOK 150 million so far, they are managing to create profitability out of it in Sweden and Norway, whereas the U.S. has less things to work on and showing us a larger loss.
Inventory build-up to secure deliveries and future growth. The cash flow was a minus NOK 40 million in the quarter compared to a positive reason for it. It's, as Peter said, it's partly allocated material that we have purchased to keep in our stock for our customers. As also said that we're on some programs where we already have the goods in hand, in-house, which also is affecting it.
There is some effects for growth into Q4, there is some effects on product. We expect a slightly better cash flow into Q4, but it's not gonna be as strong as last year.
Do you dare to forecast?
I'm giving it a try, Peter. I'm giving it a try. I need to do something. Financial gearing. Net Interest-Bearing Debt or EBITDA is 1.5 compared to 0.9. Most Net Working Capital, this is the higher financing needed. Part of it is also, if you compare to last year, an effect of the higher dividend we had last. Unfortunately, most of our key figures on the capital efficiency are then not.
The new is 25% compared to 21.9% last year. Cash Conversion Cycle is... Our ROC is 14.4% compared to 16.3%. We assume most of these will improve during Q4. Not as strong improvement as we have had the last few years.
Again, looking at the working capital...
Mm.
The inventory to secure future growth.
Yeah.
Not happening.
No.
We knew this was coming. We prepared for it.
It has, as you can see, it has leveled out at about. Peter, market development.
Yes. Okay. Well, let's take a first peek at our order backlog. There we go. 1,279 versus just over NOK 1 billion last year. That's the 27% come in and an improvement of 22% so far. I expect further growth on Defense and Aerospace from primarily two larger programs in under a NOK 80 million industry. Big, strong, another big strong push on growth there, just over 35%. Energy of infrastructure on some big e-energy programs over both the Q4 but then also ramping even further into next year. Offshore, you see a big increase of 160% on our order backlog.
This does not include the order and contract signed with the Norwegian seismic customer. I think we released that just. That's not in those numbers. It'll come in in the Q4. We'll see somewhat of that. Again, we say that we expect some fluctuations on Defense going forward. Primarily, the outlook right now is, I think, favorable on Defense and Aerospace.
Yeah. It's only going to be the order backlog, yeah.
Yeah.
The order backlog on the Offshore now is higher than the three quarter revenue, actually.
Sort of in summary here.
Mm-hmm
The strong order intake of 669, that generated close to 27% growth in order backlog. Although margins are slightly improved 33% to NOK 0.12 per share. The new quote pipeline grew 15% in the Q3 compared to last year, indicating that future prospects continue to be strong. In component availability continues to be an issue. Several mitigating actions have been implemented to alleviate the stress in the supply chain, and the resulting driven an increase of our inventory levels during the quarter.
This will improve delivery capability over the next few quarters. Oil and gas market continues to recover. After the end of the quarter, we signed a major contract spanning three years with MagSeis. We, as said, expect a continued significant improvement in 2018.
The trade and tariff sanctions are starting to affect supply chains, with increasing movements of production to and from China, U.S. and Europe. Kitron is well-positioned to serve these customer requests. I'd say we've seen about NOK 50 million-NOK 60 million or so starting to move around or request to move it around between our sites.
The top line, we can continue to serve our customers. I think it's a very competitive advantage for us. Looking at 20 oil and gas-related sales increased our confidence in our strategic ambitions of NOK 3 billion revenue and an EBIT margin of 7% in 2020.
Mm-hmm.
The outlook then for 2018. We reiterate for 2018, we expect to grow to about between 2.5 billion and 2.7 billion NOK. EBIT margin is expected to be between 6.1% and 6.5%. Growth is primarily driven by Defense sector and the Energy part of Energy Telecoms.
Yep.
First three quarters.
Mm-hmm.
The profitability has continued to be driven by cost reduction activities and improved efficiency.
Mm-hmm.
I think that's it.
That's it.
Thank you very much.