Kontron AG: Demand remains weak – annual guidance withdrawn

Augsburg, July 25, 2016 – Kontron AG, a global leader in embedded computing technology, has missed the customary seasonal second quarter revenue recovery and therefore withdrew the guidance for the total year.

Result of the second Quarter is only slightly above first Quarter

Revenues for the second quarter were only slightly higher than in the first quarter of 2016. Compared to the second quarter of 2015, they were down 16.2 % from € 108.5 million to € 90.9 million. Order intake, at € 104.6 million, boosted by our Avionics / Transportation / Defense (ATD) business unit, was, by contrast, 4.5 % higher than in the comparative quarter of 2015 (€ 100.1 million). Order backlog came to € 270.2 million at the end of the second quarter of 2016. This represents a 16.2 % decline on the figure seen as of June 30, 2015 (€ 322.4 million).

Revenue weakness is visible in all three business units: ATD revenues came to € 22.7 million in the second quarter, following € 28.9 million in the comparative period of the prior year, a 21.4 % decrease. Communication closed the quarter with revenues of € 22.3 million, also below the level of the comparable quarter of the prior year. The development of Industrial was also negative, with revenues falling by 14.0 % to
€ 45.9 million.

Our gross margin for the second quarter reflects the general decline in revenues and, at just 18.6 %, was significantly below our long-standing target of 25 %, due also to the impairment losses recorded.
In light of the revised revenues and earnings guidance, an impairment test was performed as of June 30, 2016. This test resulted in a need to recognize impairment losses of € 60.9 million on goodwill and of € 6.0 million on property, plant and equipment.

Our EBIT adjusted by restructuring cost, one time cost and write offs based on the impairment test fell to
€ - 10.0 million in the second quarter of 2016 compared to € - 1.8 million in the second quarter of 2015.

Kontron has identified market related and internal difficulties as reasons for the continued weak performance:

Partially the challenging market situation, that our customers are currently facing and affecting Kontron indirectly. Demand was lower as predicted. This has a direct impact on Kontron’s revenues because the framework agreements in place are being drawn down to a lesser extent than expected, as well as on order intake.

Furthermore over the past couple of months Kontron changed its sales structural setup and parts of its product portfolio, to provide especially  its midsized and small size customers with standard products, also with the support of distribution partners. However, the measures taken to reorganize are not yet showing full effect. On top of this, the implementation of several individual projects has unexpectedly been postponed into the second half of the year or even next year. Here, the development cycles are taking longer than expected.

To steer against the revenue weakness and to adjust costs, Kontron is presently starting a comprehensive program of actions. 

Total Year 2016

Kontron expects for the second half of the year 2016 a slightly higher revenue than in the first six months .  Furthermore we anticapte, that the EBIT-Margin adjusted by restructuring cost, one time cost and write offs based on impairment test as well as the Gross Margin will be at the same level as in the first half of the year.

Key performance indicators for the second quarter of 2016

*In Q2/2015 only corrected by restructuring cost

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About Kontron:

Kontron, a global leader in embedded computing technology and a pioneer in secure IoT platform solutions, provides a combined portfolio of hardware, middleware and services. With its leading-edge standard products and  customized  solutions, Kontron enables new technologies and applications across multiple industries.

As a result, customers benefit from accelerated time-to-market, reduced total cost of ownership, product longevity and the best overall application with the highest reliability in embedded technology.             

Kontron is a listed company. Its shares are traded in the Prime Standard segment of the Frankfurt Stock Exchange and on other exchanges under the symbol “KBC”. For more information, please visit: www.kontron.com

For more information:

Chari Lazaridis
Head of Global Corporate Communications
Kontron AG
Tel: +49 (0) 821 4086 484
Chari.Lazaridis@kontron.com

Alexandra Habekost

Head of Investor Relations

Kontron AG

Tel: +49 (0) 821 4086 114

Alexandra.Habekost@kontron.com