Welcome to Kitron's capital markets presentation for 2022. I'm Peter Nilsson, CEO of the Kitron Group, and joining me today is CFO Cathrine Nylander, COO Kristoffer Asklöv, MD Norway and VP Americas, Hans Petter Thomassen. They'll be presenting. Also here today is the CEO of BB Electronics, Carsten is here also, you can meet him, and our CTO, Stian, is also here. The agenda today covers a brief introduction to Kitron before we dive into markets and growth. Hans Petter follows with a look at growth opportunities within the defense sector. Kristoffer will review the future capacity and efficiency efforts. Finally, Cathrine and I will present strategic objectives and long-term financial targets before wrapping up with our thoughts on ESG, sustainability, and EU taxonomy. Let's kick off the review. Let's start with a brief introduction to the Kitron Group. We have our roots in a company founded in 1962 in Arendal, Norway. Today, we're an industrial partner to over 200 companies, many of them leaders in their segments. We're a preferred partner for electronics manufacturing and other services needed throughout the product's life cycle. Our core business is building electronic assemblies. We provide services upstream and downstream. Design and industrialization. These services help customers to launch products into the market, or downstream, like logistics that allow customers' products to quickly reach markets globally. Redesign services that extend the lifetime of the product. Our services and efforts allow many of our customers to focus on product design, market development, and introduction while we take care of the rest. To enable our growth, we continuously invest 2%-3% of sales in capacity and capability upgrades and extensions. Toward the end of last year, 2021, we acquired Danish EMS company, BB Electronics, with about EUR 130 million of sales in 2021, and growing to EUR 220 million in 2022, a growth of close to 70%. This acquisition added over 100 new customers, strengthening our market presence in Germany and Denmark. Growth from this acquisition comes from strong revenues within market sectors, smart home, sustainable residential energy solutions, asset tracking, communications, and critical components for e-mobility solutions. Today, you'll find more than 2,800 Kitron employees spread over 10 locations and 100,000 square meters. Corporate headquarters is in Billingstad, Norway. Let's talk about long-term growth and value creation. Over the past seven years, Kitron has delivered a CAGR of 16.5% for sales and close to 40% for EBIT. The company is listed on the Oslo Stock Exchange since 1997. Our commitments to dividend and year-on-year profit improvements has resulted in more than a 1,500% increase in shareholder value since 2014. The first six months of 2022 have been challenging due to the constrained material situation. In the second half of the year, material constraints started to ease, and we saw improvements in revenue, operating profit, and capital efficiency. The acquisition of BB Electronics also provided a substantial contribution. Last week, we raised our outlook for 2022, and because of record strong demand, we now expect revenues between NOK 6.45 billion and NOK 6.5 billion, with an EBIT between NOK 440 million and NOK 470 million. This is a revenue growth of approximately 75%. High component prices on spot buys affect the top line with about NOK 400 million in 2022. We look at 2023, we see further growth driven by global megatrends, green technology, and sustainability. The European security situation adds to defense spending and grows demand from Kitron customers. The outlook for some parts of Europe currently look challenging, our diverse customer base with end markets in many regions globally continue to secure growth. For 2023, our revenue outlook is between NOK 6.7 billion and NOK 7.3 billion, with an operating profit between NOK 460 million and NOK 540 million. We exclude the spot buy cost in 2022 and look at the midpoint of NOK 7 billion for next year, this is a growth of 13%. Before we look at the future and deeper into our markets, let's take a look at the past, what we've done in the past eight years and what we've learned. We targeted a CAGR of more than 10%. Since 2014, we've delivered an organic growth of close to 12% per year and 17% with acquisitions. We've worked hard on customer development and grown existing accounts with more than 10%. We've grown new customers with more than 7%. To provide the opportunities for this growth, we've gone from four to nine factories globally and from 28,000 square meters to 100,000 square meters. Through world-class operations management, we've reduced OpEx from 35% to 22% and delivered on profitability with a CAGR of EBIT for more than 40%. We've proven economies of scale. When our sites run at high utilization, they deliver 8%-12% margin consistently. Regarding expansion, we've not only extended existing facilities, but also completed two international acquisitions, one OEM carve-out in the U.S. and one EMS competitor in Denmark, adding facilities in the U.S., China, Czech, and Denmark. We've also ramped a greenfield in Poland, reaching profitability in record time. All in all, we've invested about half a billion NOK in new equipment and capabilities. As we now move forward, we take with us this experience and learnings from our past performance. Let's move on to markets and growth, starting with customers and positioning. Who are the Kitron customers? Well, they're defined by long-term repeat business. They're often innovative market leaders providing fast-growing new solutions. Examples include Kongsberg, Husqvarna, ABB, Atlas Copco, Getinge, Saab, Kollmorgen, HMS, Inmotion, and many, many more. We have just over 100 customers with substantial sales, 200 in total. The top 20 account for about 60% of our annual sales, the top 30 about 75% of our sales. No customer exceeds 10% of sales. After the BB acquisition in 2021, the customer base doubled, adding many customers from Denmark, Germany, within industry and connectivity. Many of these customers are growing rapidly by global megatrends like sustainable energy, IoT, and e-mobility. What about our positioning in the market? Well, our tradition is to manage complex products with tough requirements, enabling high margins. Within several market sectors, Kitron is recognized as a strategic and critical supplier. Over the years, we have evolved to become a leader known for delivering agility and flexibility in many market sectors. In the terms of volume, we would say we're in the medium volume business, from a few thousand to 1 million units a year. Let's take a look at our market sectors and what features separate these. First of all, volume. This determines how much automation and how much machine utilization we can get. Usually much more higher volumes towards connectivity and lower volumes on medical and defense aerospace. Cost of failure. Can you afford to make a mistake? Certainly failure is not an option within medical or defense aerospace. Life cycle. It determines how often a product is replaced by a new generation. Within connectivity, new generations can be launched every year and live for 18-24 months. For products in aerospace or medical, product verification and product qualification takes a long time, many, many years, life cycles tend to be at least five to 10 years between upgrades or changes. Life cycle also gives an indication of visibility. The longer a life cycle, the further into the future we can predict sales. Many of our aerospace contracts have the contract length is 25 to 30 years. It's also important to understand how demand is affected by the general business cycle to be able to diversify properly. Using these different layers to describe our market sectors, we can in general say that connectivity, electrification, industry products run in higher volumes from tens to hundreds of thousands. The degree of production automation is high, the life cycle is relatively short, time to market is continuously important. Our co-development, prototyping, supply chain setup, and production setup must work flawlessly in a very short amount of time, and pricing is very competitive in the initial win. Medical devices and defense aerospace share many traits. Volumes tend to be low, automation tends to be low, and products are generally not designed for automation. It's normal with a high degree of vertical integration. This means that we build and supply the product the way you might see it in a hospital or at the medical center. Our quality reputation is critical, and recalls and replacements are difficult and expensive. The life cycle is long. Price pressure from our customers, competitors, and end of life on components forces redesign initiatives to protect product margins and delivery capability. The entry barriers are high and increasing. The business tends to be non-cyclical, which takes us to the concern lately regarding recession in parts of the world. Kitron sees a strong demand over the next year. Let's take a look at how Kitron copes with recession. At Kitron, our strategy rests on four pillars. First, establish an exposure to global markets. Even though one region may be suffering challenges, many of Kitron's customers are successful in multiple markets globally. Second, over the years, we've built a strong base of defense and security customers focused on communications, surveillance, and encryption, as well as avionics equipment. We have a base of volumes under long-term contracts, and these are supplemented by new projects that are won from time to time. Spend is determined by security outlook. Budgets are longer term. Defense and aerospace provides opportunities and stability even over a possible recession. In addition, medical devices, where product demand is driven by recurring public investment, tends to be non-cyclical and resilient even during a downturn. The fourth pillar in our strategy is targeting growth segments driven by global megatrends, trends like connectivity, electrification, and sustainable energy solutions. All of these, by the way, supported by public spend. Furthermore, where there is demand-driven by consumer spend, you have to make sure that the consumer is recession resilient. Finally, looking at customers and competitors, in recession times, new opportunities will arise when companies work to reduce their balance sheet exposure, optimize profitability, and where investments focus on R&D, marketing, and sales, leading to a reevaluation of internal manufacturing operations. Also, competitors that struggle in good times will certainly not perform when times are tough. Customers want stability, security, and predictability. Hey, nice picture. Let's take a look at our growth strategy in the different market sectors. Overall, our ambition is to grow faster than the market. This can be achieved by choosing high-growth customers and targeting high-growth market sectors. As I've said, our repeat business is high, including when customers introduce new generations. We also target new program wins. Much of this is focused on the market sectors connectivity and electrification, as indicated by the 15% CAGR. Let's dive into market sector connectivity. Within this sector, we find machine-to-machine IoT, sensors, wireless communications, networking products, and much, much more. Volumes are high, leading to utilization, economies of scale, and competitive pricing being crucial to success. Next, electrification. Here we find maritime and land-based energy storage and control systems for wind and solar energy production, battery management systems, power grid transmission systems, and charging and fuel cell technology. Customers are often large multinational entities with global sales. We will have to continue investing in capabilities and application know-how. We compete on scale, technology, and reputation. Looking at market sector industry, it remains impressively large. Here we find equipment for automation, robotics and recycling, seismic seabed exploration, sub-sea production control, equipment for construction and infrastructure. We'll continue to grow with the existing customer base. It's important here to capitalize on our capabilities and our wide application knowledge. Finally, two of our traditional areas of growth, defense, aerospace, and medical, both have very high requirements, entry barriers to doing business, and very long product life cycles. The long product life cycle leads to growth in the strategic period, primarily coming from existing customer base. We expect the moderate growth of around 5% in medical sector, for defense aerospace, we see strong growth possibilities in Europe as Europe increases defense spend. We therefore increase our growth expectation from 3%-5% to 10%. As a result of these contrasting growth rates, the share of the total between the market sectors is expected to change by 2027. Next, Mr. Defense, Hans Petter Thomassen, will help us understand growth opportunities within defense aerospace. Hans Petter? Don't forget it's down. Thank you, Peter, for the introduction. In this section of opportunities in the defense industry, I will briefly address what is driving the market, and secondly, how is Kitron positioned in this sector. Starting up in Europe over the past decades, U.S. foreign military presence has shifted towards other regions in the world, and hence leaving European countries with a greater responsibility for Europe's security. The war in Ukraine has changed the security situation dramatically and is driving the urgency for delivering increased defense capacities. Most countries have established long-term acquisition plans now to renew capabilities and to increase capacity. These plans are now funded, and the timeline for delivery is moving to the left, meaning early is appreciated. In the U.S. side, the U.S. government is the world's largest defense exporter through their Foreign Military Sales program, supplying defense capabilities to NATO countries and other allies of NATO. The defense industrial base in the U.S. is the largest provider of defensive capabilities to the NATO alliance and worldwide. Kitron's position in this landscape, well, Kitron is well-established with long-term relations towards prime defense contractors, both in Europe and in the US. Major defense acquisitions often require localized industrial participation. This adds a requirement on the defense OEMs to establish local production. Kitron as a contract manufacturer is really well suited to support this effort. Our factory footprint is well-positioned to support offset obligations in several countries. With that, we're moving on to what does it take to deliver to the defense industry? First and foremost, a long-term strategy and commitment is a must. If you're not there in for the long game, then you have nothing there. Kitron has already delivered to the defense industry for decades. Most opportunities we come across, they take years to develop from the time they emerge as a prospect until they're actually contracted. Secondly, a robust process for the entire value chain from the point of quoting through completion of delivery is essential. A compliant quote is actually the first step. If you don't have one, you're not in the game. Typical long-term initiatives like the one you see in the lower right-hand corner, they're the weapon stations where we just communicated renewal over the next five years. It takes one-two years from we receive the initial RFI until we have a contract in hand. Through that process, we are audited by customer, we are audited by end users. They're focusing on true cost, they're focusing on quality, they're focusing on security aspects. All of these are tough entry barriers that we have to overcome. Kitron has, throughout the years, cooperated with numerous OEMs and both in the U.S. and in Europe, and we have built the competence to meet these requirements. Through the experience, Kitron has already overcome the main entry barriers in the marketplace. Broadening of the defense customer base is also ongoing. New technology providers are coming into the market space, and Kitron is actively searching for new customers. Kitron does believe that the defense market will be strong for years to come. With that, we will hand it over to Kristoffer talking about future capacity. Thank you. Thank you very much. In this section, I will cover how we will improve our competitiveness and our margins, what strategies we have when evaluating acquisitions and the greenfield investments. Finally, what is the current state of capacity and utilization, and our plans for expansion going forward. Starting with how to improve our competitiveness and our margins. Number one is to focus on economy of scale. We need to maximize utilization of all our investments. Our machines should ideally run 24/7. A common base of automated production equipment must serve the whole customer base. We need to plan our production layout, maximizing the opportunity for operators to monitor several processes on multiple steps on multiple lines. Completely customer-unique processes must be priced as such. To enable a high and efficient utilization, we need to... good, reliable, and real-time data to understand where our bottlenecks are now and also in the future. If you're wondering what we actually do and produce within Kitron, this is an example of a PCB or a printed circuit board, which contains. It's from a medical device that we produce here in Norway. Contains of hundreds or even thousands of electric co-components that we are buying, and then assembled through different kind of processes. Contains a lot of different kind of components, even semiconductors, which I think everyone here also learned a lot about since the last couple of years. It can takes up to 30 different process steps to make some of our PCBs. Many of those processes are very advanced and highly automated, but there are still a lot of manual processes in our production. We will also improve and optimize our tied-up capital and material in stock. The whole operations need to understand the chain of constraints and our delivery schedules. Sourcing and procurement need to push and pull depending on the demand and the component availability. Operations and planning need to maximize the production output, and our operators need to know at all times how they are performing versus targets. We also need to continue our process automation journey. Significant steps have been taken during the last five years, and we are ready to roll out our best practice accomplishments across more factories. Some of those examples are automated through hole in certain lines, fully automated high-level assembly lines, and also utilizing of 3D printing machines and the rapidly adapting machines for new end product use. Our customers expect us to deliver more value, and so we are stepping up our continuous improvements efforts that will deliver capacity boosts, cost reductions for our customers, as well as margin expansion for Kitron. Investing clause in attracting new employees, onboarding them, and providing strong growth opportunities within the group is getting very important going forward. One key takeaway is that Kitron has demonstrated a tremendous economy of scale when reaching more than 50% margin improvements when fully utilizing our flexibilities and our capacity. Over the next five years, we will need to increase our capabilities, and we need to double our capacity. Additional capacity can be created within existing entities, through expansion and additions during 2023 and 2024. Existing facilities will continue to expand. Some sites might even double up in size. Looking into 2025, new capacity will be needed, most likely in central Eastern Europe. Most likely this capacity will be created by launching a new greenfield site similar to the launch we did in Poland in 2019. Over the next year, we will evaluate the region and country to go for. The most important factors when do this is the access to competent and competitive labor pool. The growth strategy for a new facility is to introduce existing growing customers and to do a carbon copy footprint of the transferring sites. Acquisitions are interesting to help us grow by adding capabilities, regional presence, new customers, and new capacity. We continuously evaluate different kind of projects to determine how they fit in our overall growth strategy, how profitable they are and if they provide new customers, market sectors, geography that allows us to grow even faster. If we can use them as a bridgehead to launch additional initiatives in new markets. Currently, our priority for potential acquisitions are primarily in Asia, primarily outside China. Looking at our footprint, Kitron is currently present in 10 countries. We have nine manufacturing sites in eight different countries. In these facilities, we find more than 30 fully automated production lines for electronics, multiple line for high-level assembly of end customer products, and more than 2,800 employees. During 2022, we established a automation center in India. This team is dedicated to developing new automation solutions for Kitron Group going forward. Planned investments for 2023 will improve our capabilities and increase our capacity by 15%. Currently, we are investigating full production automation and test line for battery packs and a high-level automated assembly lines for a sensor and connectivity device. These projects are scheduled to deliver volumes beyond 2024 and going forward. Over the next five years, we plan to double our organic capacity. We are looking for additional possibilities in acquisitions. Financial targets, Peter. Thank you, Kristoffer. When we kicked off our last strategy period in 2015, our target was to double revenue to 3 billion NOK by 2020. Back then, this seemed like a faraway dream. When we wrapped up 2020, we had exceeded this target and were close to 4 billion NOK. Now, we raise our ambition for the next five years. We feel confident about the target. We know our customers, and we know our market. Powered by global megatrends, connectivity, electrification, automation, defense, and security, our ambition is raised for organic growth to reach more than 10 billion NOK or more than 1 billion EUR in the next five years. This means an annual growth rate of about 10%. In addition, we see upside possibilities from M&A. Through continued operational excellence, our ambition is to deliver more than 8% operating profit or EBIT. Cathrine Nylander, our CFO, will share with you some of our top targets going forward. Thank you, Peter. We have selected five long-term financial targets. The first one is a 10% CAGR on revenue or a 10% annual growth rate over time. Oops. It's always my problem. This is the organic growth rate that we've had since 2015, and we estimate that this is a fair representation of the growth rate going forward as well. Of course, experience has shown that customer which have strong demand can push this upwards, so we have a stronger growth rate over some years, and specific events like the material allocation can put it downwards, but over time, we think this, as an average, we think 10% is a good representation of what we can grow. The second target is an EBIT above 8%. We have started to deliver on our previous target of 7% EBIT margin. We say, it's a strong belief that an 8% profit margin or above is achievable. We know we will gain on further economies of scale and that we have improved efficiencies that still can be had within the current setup. We say above 8% because we see it's possible to achieve higher, but we expect that the top end will vary and thus would like to communicate a firm ground on 8% going forward in the long term. The third target is to have a return on operating capital above 25%. As the profitability improves, the returns are likely to improve as well. We are coming from a period with capital inefficiencies due to the material allocation. As we work this out, our capital efficiency ratios will improve. When we talk about operating capital, we not only include net working capital, we also include our fixed assets. That is all the machines that we use, all the buildings we use, and also all our rent obligations on our leased facilities. When taking that into consideration when we make decisions, we make sure that we make decisions on expansions on capacity and footprint, and that they will give the return over time that we want. The fourth target, which is a cash flow of 80% over EBITDA. To be able to finance the growth by our own cash flow, a stable and positive cash flow is key. The same growth is also a limiting factor to the cash flow as we grow. Also, since this is a long-term target, we expect as if we can improve the capital efficiencies ratios over years, we can have a higher cash flow than this, but over time, this is what we strive for. To the last target, net interest-bearing debt over EBITDA. Our long-term target is to be below 2.5, and thus to have a more conservative balance sheet. We are currently around 2.8, and we have been above 3 previously. In addition, with the current interest rates, it is becoming increasingly important to reduce debt to protect our net income, not only to improve our debt efficiency ratios. Our aim is to free capital, so we have the freedom to act when we want to, whether or not it's expansion on capacity, dividends or M&A. That was a bit on the financial targets, to something equally important, sustainability. Kitron has a firm base to move forward with our ambitions within ESG. We have since long environmentally certified sites, ISO 14001. Our ethical guidelines are based on the UN conventions and on, what do you say? Relevant governance principles. We support the UN Global Compact and have targets supporting the ambitions. We have signed for the WASH Pledge. In Kitron, we aim for 100% sustainable power supply on all our sites. We're currently at 66%, so we have some way to go, but we're working hard to find alternative and sustainable sources for the other sites. To the second target, the EU taxonomy. As an EMS partner, the taxonomy alignment is based on our customers' end products. Products that qualify are currently mainly in the electrification sector and partly within the connectivity sector. Right now, we're at the 18%, and our long-term target is to be above 20%. At the bottom are qualifiers. We're part of the Oslo Stock Exchange ESG Index. We have a silver medal with the EcoVadis, and we are top-rated on Position Green and Sustainalytics. For further information, please look into our sustainability report. Finally, as a key takeaway, we have strong stakeholder requirements. Whether it is the number of hours that we're able to work a week in China or life cycle analysis on the customer's products, we are as committed to their ambitions as to our own. With that, Peter, I will leave it to you. Thanks. Thanks, Cathrine. Let me summarize today's message. Kitron will continue delivering superior performance to customers and shareholders. Our ambition is to have 10% growth each year, growing with existing customer base and through new program acquisition. Our ambition for 2027 is sales of 10 billion NOK. Acquisitions add an upside. We'll continue to focus on high growth sectors, electrification and connectivity, where we expect the annual growth rate to be more than 15%. To achieve margin, profit margins of more than 8%, we'll maximize the utilization of existing capacity. With that, we are ready for some questions. If we have a timeline, maybe we can have some on the, on the webcast. It's 45 seconds late, maybe there are some questions in the room. Go ahead, Petter. Yeah. Wait, wait. Wait for the microphone. Thank you. The first question goes to if you were to operate at full capacity today, for example, given the existing footprint, what would be kind of the revenue that you could be able to deliver? In several of our sites today, we are near that full utilization capacity. For example, I'd say primarily Lithuania, Czech Republic probably are very near that full capacity as they, as we stand now. That capacity can also be extended. Your question was in regards to what? Margins or? No, just in regards to revenue. What kind of. Right now Our annual run rate right now in Q4, NOK 7.3 billion. Mm-hmm. That's where we're running at now. You don't wanna do that over an extended time. You want to come down to maybe 85%-80% utilization of the site, so that you actually have some free spare time to catch up if something goes wrong. That's really the issue now in December and to the towards the end of quarter four this year. It leaves very little time to catch up if something goes wrong. The second question goes to if you were to deliver on the NOK 10 billion revenue target organically. Yeah is that within the 2%-3% CapEx scope to get there? Correct. Okay. Thanks. Just with regards to the cyclicality that you mentioned, are you able to give some sort of clarification with regards to industry and what type of customers and application that you deliver to? I guess the majority of the questions goes to the cyclicality in industry, the industry vertical. You're talking about the business cycle and. Yeah, implication for the industry vertical. I'm just curious as to why or what type of customers you have and what type of end applications, if you have some sort of examples? Well, I mean, we spoke about, I spoke about electrification, I spoke about energy storage solutions, both land-based and offshore. On the offshore side, you'd have a customer like Corvus Energy working with electrification of maritime battery management systems that we deliver to Corvus Energy. On the land-based side, we have a very big Scandinavian customer who we can't use their name, but they're where we deliver energy storage solutions for them. On e-mobility, we won a new customer that's just starting to ramp up, and they re-released their new generation of products for EV charging that'll start to sell probably in January, February next year. That's another big product coming into next year. Those are a couple of examples on electrification. On the automation side, you have big U.S. customers delivering to warehouses and to, in general, industrial automation, electric motors and such that are used all over in different kinds of automation. Yeah, I think that's it. I have more questions, but I can leave the microphone to others meanwhile, if there's any other questions. Well, let's see if there's any other hands that come up here. Okay. I'll just continue then. Go ahead. You have to wave if you have something else, Are. All right. Great. I'm just curious about the defense growth of 10%, which seems at least outside in, somewhat conservative, given, I guess, one, you have to restore the inventory levels in Europe, and two, the defense spend is increasing as a percentage of GDP, which is kind of a more of a long-term driver. Can you give some comments? I guess it might have something to do with what type of end application that you deliver to. Mm-hmm. I don't know, but, any thoughts around that will be helpful. I think many, many of our contracts are long-term, so we've counted those already as part of our part of our growth. For example, the F-35 program or the Gripen program out of Sweden, and other big projects that are in the long term. We've also known about some of the shorter-term wins that we've had before. When we know the market has been stable, I think, you know, the 10%, Hans Petter, any comment? Well, first of all, there are two distinctly different types of contracts out there. Typically, on the U.S.-based contracts, they have frame agreements that are very scalable in a short period of time. Going over to Europe, the acquisition process is much, much slower, actually the limiting factor for the growth is going to be the procurement process From the government and the long. What I stated in my presentation also, we are looking at a surge of demand lasting for years. I would even go as far as possible decades, just to replace what has been used in the Ukraine, and increasing our capacity beyond that is a pretty big undertaking. Thanks. Is there any major gross margin differences between the sectors that you have or the verticals that you deliver to? In defense? For example, within defense versus industry versus connectivity, et cetera. No, you can speak to. A couple of margin points. Mm. Right. If we go back to the that slide we have where you see the market sectors, and you see the sort of way you can view them through different layers, we'd say probably the most competitive is on connectivity products. Also the margins are probably a tad lower. Going from maybe 6-6.5% margin on the left-hand side of that slide to 9%, 10%, 12% margin on the right-hand side of that scale. It all varies between when you actually then look at specific products inside those market sectors. If you just want a sort of a general way of looking at. Why, how do we justify that? Usually there's more tied up capital on the right-hand side. You're looking at medical or defense aerospace. Tied up capital, return on operating capital, target of 25%, the only way to compensate is with margins. Yeah. Just one final question from me. I'm just curious with regards to the guidance on 2023, because the implied OpEx growth that you assume from 2022 to 2023 is pretty high on your guidance. I'm just wondering, what are the drivers for the OpEx growth? Because I guess you would have some easy comps with regards to maybe electricity, transportation costs, et cetera. Can you just comment on what you have kind of assumed with regards to the OpEx growth for, from 2022 to 2023 within your guidance? We're not guiding on OpEx growth. No, we're not guiding on OpEx. No, we can calculate that on our own. Yeah. I think you need to. Okay. That's what's everything- I think also we have a very strong fourth quarter this year, so, you know, we cannot repeat that every quarter next year, I think. Let's just say we're maybe a tad conservative. Yes. Go ahead, Otto. We have some questions online here, and one is about a topic that's very much in the news. How are you handling the extraordinary electricity prices? Are you able to pass on these cost increases to customers? Are they, are they split, or do you carry them yourself? What is your strategy going forward with respect to this? It's a sort of a multi-phase question. For the most part, on higher costs that are outside the budget that we create every year, right? You budget costs, and that sort of reflects the pricing you implement in the first quarter, and that rolls on to every quarter beyond that. During this year, we've had extraordinary price increases on transportation for one, and of course on energy as another. Those we try to pass along as much as we can to customers, and we usually do it as an additional addon or markup in percentage to customers. Somewhere around between 2% maybe on transportation, 2%-3% on energy as an additional markup on the sales price, just to cover that cost. Also have to know that the energy prices are not growing in all of our countries that we are at. You know, they have not changed significantly in China or nor in the U.S. It's mainly a European issue. We do know that the electricity prices for 2022 compared to 2021 have doubled. That's what we have and have calculated and increased our prices for. We see a slower increase coming into 2023, of course, because we've had the higher prices for the second half already this year. We have a couple of questions on defense. The first one is, would you please expand on the various weapon systems which you provide services to, for instance, RWS, NSM? I can't go into deep details on that, but we are currently having a very broad portfolio, missile systems, remote weapon stations, military communication equipment for different purposes, both, air defense systems and other general military communication gear, plus the well-known F-35. We have a very broad range of products. Most of them are infrastructure types and not so much conflict-driven. These days, everything is basically conflict-driven. I don't know if that answers the question. For the most part, communications and surveillance equipment as a percentage of the total. There's a sort of a more quantifiable question. Could you please quantify your exposure to the defense sector? Is it 20% of sales? That used to be. I'm not actually- Around there. Somewhere between 20 and... It is shrinking compared, because we're growing so much more in other market sectors. There's a more of a financial question. Can you comment a bit on the debt situation? In what way are you affected by rising interest rates? Cathrine, why don't you take this one? Of course, we are affected by interest, exchange rates. We are. We have about NOK 1.6 billion of net interest-bearing debt, so it does affect us. We have a general surcharge on the general interest of about 2% currently, and the more we can reduce our net interest-bearing debt, of course, our interest rate will go down as also as a percentage because we have better terms when we reduce it. That's basically the situation currently. Our net interest-bearing debt ratio, compared to EBITDA is improving, i.e., being lower due to the fact that we are improving our profitability, basically. We have been sort of stable on the net interest-bearing debt the last 3 months, I think. That's it for the online questions so far. Okay. Anyone else? Yeah, go ahead. Yeah. Hang on. Just wait for the mic. Oh, I'm sorry. I was just wondering on energy costs, on the kind of you keeping everything 100% sustainable energy supply? Yeah. You have 66% today. We had much higher prior to the acquisition of BB. Okay. We had 88%. Is there any cost or a margin risk or implications on this? Far we've not seen that it's more expensive. Okay. Prior to the, to the acquisition of BB, the only facility we had that did not have sustainable energy or green energy certificate, not certificate, but certified green energy was the U.S., and primarily because it was at least last year was impossible to get that. You get a mix. Even the Ningbo facility in China has certified green energy. Mm-hmm. Yeah. Now we're working on getting that for the Susch facility, making sure we have documentation for Denmark and Czech also. Mm-hmm. In terms of M&A, which you still say you're open for. Yeah I mean, you're already above your leverage target. Yeah. I'm guessing any near term M&A would be financed with equity and without, if there are large synergies, to me, that would make sense to do. Mm-hmm. Mm-hmm. It needs to be earnings accretive. Mm-hmm. That's in order for us to utilize that option. How accretive compared to BB Electronics, for example? I mean, that was, I think that was a very good deal, especially, you know, in hindsight now looking at this year, but even at what we looked at when we did that. So- Obviously we'll be looking for things like that. Anything other that will be financed by either cash or, sort of without going to the shareholders and asking for money. Mm-hmm ... we would have to reduce our inventory, right? That's the big thing now. That's the big buildup over the past, you know, 18 months during this material constraint situation. Likely, you know, our target is that that's gonna reduce quickly, over the next six months, first half of next year. Before it bleeds off entirely, it's gonna be a longer period of that. That should start, you know, bringing that debt down. The working capital? Pardon? The inventory levels- Yes ... you say? Yeah. You expect the net working capital to come down, short-term now? Well, not short term, but into next year. Okay. It's gonna take six months to before we see a real impact on it. Mm-hmm. Okay. That's all. Yeah. Go ahead, Petter. Looking at your reverse profit warning, it seems, I mean, you're saying two things, strong demand, and then you're saying that improving component situation. Yeah. I would assume that improvement component situation would lead to reduced inventories, that you have inventories on behalf of the customers that are almost finished kind of. Mm-hmm. Lacking components, and then you add the last components and send them to the customers. Shouldn't that mean that we should expect to see lower inventories in the fourth quarter? It's stable. It's stable. We still had an increase in November. Mm-hmm. As a percentage of the total, maybe 7%, 8% increase-. Yeah in November, actually. That's 'cause the inventory continues to flow in, and not all parts are available. I mean, it's an ease of constraints. It's not just going away. Mm-hmm. That's the way it's gonna continue being for some of these products. There's a big difference between what market sector you're in and how new your products are. We see that between, the acquisition we made from BB Electronics and the sort of old original Kitron, where old original Kitron can have much older products on defense aerospace but also on the medical devices. Components that are sort of becoming, going close to end of life, especially in the, in the, in the very hot market that was on components in the past couple of years. Those parts, along with automotive parts, which also sort of resemble that sort of, position in its life cycle, are still difficult for the auto industry to get a hold of also. It continues, but I expect this to continue to become easier and easier. Mm-hmm. Really, we're not talking about constraints so much internally, at all. We're talking more about our internal constraints on production capacity. Anyone else? Go ahead, Otto, again. Yeah, we have some more online here. One of them is about the customer base. On your top 20 customers, are you the sole EMS, or do you compete with other EMSs also having deliveries? Well, I mean, on a product level, we're probably, I'm not gonna swear by it, but we're probably the sole provider of the products that we build. Some of the customers have other EMSs that they work on with, and they have other products that we don't build at all. It could be that they're more specialized on something versus what we're more specialized on. For some customers, we are the complete sole provider. It varies a little bit, but I'd say, you know, we're the majority supplier for many of these customers. There's one, going back to the green energy question. I would like to hear about your plan regarding green energy in Scandinavia, in the Scandinavian area, and especially in Denmark. In Denmark. first of all, in Denmark, we have a high degree of district heating, first of all. We need to find sources to buy the rest as green, basically. That's the comment. We've been working with BB on that. Then there's sort of a big question. Mm. Are there plans to split Kitron into several companies? As of now, no. There's no discussion on that. That's it. Okay. Go ahead. I have two questions. One is about the spot market. Do you see the activity and the spot market changes changing? Also about extreme prices in the spot market, how do you think that is developing? I think, to a large degree, it's going down. I think there's a fatigue amongst customers and us on continuing to spend a lot of money on this, and also with the demand in general going down from PC and iPhones and capacity shifting over to the types of components that we use. Mm. There's becoming less and less need for it. It still, it still exists, but, I mean, there were crazy prices. Just two months ago, we were looking at ramping a new e-mobility product, the standard price for a part was $1, and all of the different spot market suppliers wanted $55 or more for that same part. That part was used multiple times in the product, so, you know, it became impossible. The product wasn't cost competitive anymore. We held off, and then a few weeks later, problem solved. Thank you. I have a question about acquisitions. We saw the BB Electronics turned out to be a very successful acquisition, that was probably executed during a situation where you had component restrictions or restraints. Yeah. Now that the component situation is easing, it's easing basically for all the EMS- Yeah operators. Do you see, in when you have a smaller EMS, factories that may be for sale, do you see that the price expectations are going up, or how do you think, the opportunities for acquisitions are right now? I mean, there's a lot of opportunity for small single plant, EMSs for sale. We tend to shy away a little bit from that. There's a lot of work that goes into an acquisition, and there needs to be a substantial gain for us, right? Not terribly interested on acquisitions there where the top line is 100 million NOK, right? It's gonna have to be, you know, at the very least, a multiple facility combination. It's gonna have to be at least over $30 million, EUR 30 million in sales to be interesting, to spend the money and the time to go through an acquisition, right? Have to weigh these different possible acquisitions against each other. The, on the, on the valuation side, I see both. I see some valuations coming down. I see other valuations remaining high, and the sort of dream that things are valued the same that they were a year ago, which they should not be, especially as some of these companies have a, you know, a tougher exposure than, for example, we do at Kitron. I think you need to take that into account. We're looking at possible acquisitions multiple times a week, sort of cataloging what's out there and learning what's going on. Thank you. Okay, we have another question up there. Thank you. I just wanted to dig a bit into the growth ambitions. You target 10% organic growth. You say the market is expected to grow around 8%. The difference there, is that mainly due to mix between the market sectors, or is there any other factors? Maybe you could also comment a bit about price and volume assumptions in those 10%. That's the first one. There's a difference between how the market grows in general as a total. It may grow 8% as a total, but inside that total, you will have a significant portion which is computer, mobile, even in Europe. Automotive will be also another portion. If you go to the portion that, you know, where we are, that's probably about 40, 35%-40% of that total market. And that slice is growing probably a little bit higher, I would say. Right? The connectivity in general, IoT play is projected to grow about 22% between this year and 2027. That's one growth factor. You look at electrification and e-mobility solutions, things like that, you'll see varying growth rates between 10%, 12%, 15%, 20%, depending on subcategory of the product. Of course, you know, how can we grow faster than our competitors? All those things add up to our target for growth. Basically, what you're saying is that it's mostly about the mix, which type of market sectors are exposed to versus, call it, the overall market. Well, I mean, yes, right? Yeah. You don't, you wouldn't want to go for a market sector with no growth or negative growth in it. Yeah, sure. On the volume versus price, do you have any kind of implicit assumption on that in there or? No, we try to maintain the our strategy, which is, you know, if it's an interesting product that fits long-term with us, right? We have our business model, 25% return on operating capital. We just look at how much operating capital do we need to use. That'll determine the margin, which could be 6%, 6.5%-12%, some cases, 15% even. All right. Thanks. Have we factored in any price growth in our estimations? No. We have not. No. I mean, no. We're not looking at doing general price increases. No, that's not how we grow. Okay. Mm. That's volume, more of a volume. Yeah. Okay. Okay, that's interesting. A bit on the margins. They're going to go from 7%-8% or above 8%. Mm-hmm. You talked a bit about capacity utilization. It seems to me like you're running pretty close to full capacity already, as we discussed a bit earlier. What will drive the margin increase? Is it mostly scale on sales and general administration? Is it increased productivity, meaning lower costs in the facilities, or is it something else? Yes, yes, and yes. Okay. Right? Volume is a big thing. Keeping overheads to where they are today or growing them significantly slower, right? I keep telling my organization that overhead growth cannot be linear with volume. I don't know how many times I've said that this year, but that goes true for the future also. Becoming more efficient that way. Looking at, you know, we have a target next year. We say, for every single process we work in, small, like an operator doing some soldering, to a big process, we want to cut the process time in half everywhere. That's a big project for the whole group working next year, and that'll lead to also the significant improvements for profitability. Mm. Okay. Also, if you calculate backward for this quarter, you will see that we are in that range. It's possible. Yeah, thanks. One last question from me. This, call it, narrative of economies of scale, how does that fit into the contract pricing models with your clients? Basically, what I'm thinking here is that if you are able to cut cost per unit by, let's say, 10% that you produce for a client, how does that, call it, cost reduction, occur between you and the client? Is that totally on you get all of that cost increase on your books, or are you sharing some of that with your clients over time? Sometimes we share. Sometimes we have, you know, agreed-upon annual price reductions. If we have an annual price reduction of 3.5% and we achieve 7%, well, we're gonna give the customer 3.5%. Right? We're gonna keep the other 3.5%-4% for us. That's one way to do this. Also, we quote and offer market price. Right? There's no other price than the market price. We have to stay cost competitive all the time. If we can keep our costs lower than that's more margin for us. We can't go out there and quote 12% and then also be expensive on our cost side. That's gonna be put us way out of out of competitiveness. We know that we're not because we keep growing and we keep winning new business. All right, thanks. Mm-hmm. Yes, hello. A couple of questions here. I just wonder about growth next year. Can you say anything about how much is expected to come from defense? I mean, we read about new orders every day. Also, how much of a, let's say, recession have you penciled in into your outlook for next year? I mean, is there also a risk maybe that some of your customers has maybe overstated demand due to that they have. You know, said that they want to you to deliver all components, et cetera, that you can, driven by the supply chain crisis? What have you penciled in into your guidance? Yes, of course we have some buffers, right? I don't wanna exactly go out and say how much we have in buffers. What I can say is that the first six months of next year, I feel very confident about. Now, Q1 is very strong. I expect the first quarter to continue rolling at the speed we have in the fourth quarter this year, or even higher, where customers are really coming after some very high volumes in the first quarter. Expect that also to go into the second quarter. Beyond that, you know, yes, we have demand for the rest full year, but there's always uncertainty what's going to happen in the market. Yeah, that's clear. Is the question on the maybe margin side, more longer term. You target 8%, you will grow quite significantly. If we look at some other, EMS players here in the Nordics, we have both maybe NOTE in Sweden and Incap in Finland that are doing above or at 10% EBIT margins. Why are you not targeting the same goals? We're much bigger on volume, right? The competition is higher when you go to a higher volume scenario. The requirement for open book and transparency is much higher with large competent customers. Okay. Right? We If you're looking to If we're gonna grow now from NOK 6 billion-NOK 10 billion, adding another NOK 4 billion of business, do we want to add, you know, eight customers of NOK 500 million each, or do we want to add 80 customers of NOK 50 million each, or do we want to add 800 customers of NOK 20 million each, right? There's a difference there on how, you know, how competent and how competitive the marketplace is. On a low volume program, you know, anything below NOK 10 million a year, you can charge, you know, much, much higher margins because the competition really, you know, foremost, really, it's not attractive to us to work with those customers. It's also a discussion on customer concentration. None of us, or our customers are higher than 10%. You will find other numbers with those two competitors. Yeah. Then is the last question on the market growth. You're saying the market is expected to grow by 8%. Is it possible to say how much of or how much more that is than the, let's say, historical figures? I think the EMS market in Europe has been said to grow by around 3%-4% historically. Mm. Do you think that is a fair assumption, maybe? I think, you know, the change in the past five years with connected devices, that in combination with electrification, drives every single market sector growth. It drives defense and aerospace, right? Everything is talking to each other now. Everything is every system has to be standalone also from an energy point of view. You have these technologies coming in and affecting that. Within the medical sector, it's the same thing. Every machine in a hospital, you know, is connected somehow, and that data is communicated across the hospital and stored and sent and. You have those mega trends that is changing every product we have and introducing new technology, that technology into where it has not been before. That's driving this much higher growth. Yeah. Thank you. Then of course, from a volume perspective, it's even, the growth is probably higher because the cost is also coming down. You have historically had quite limited visibility from your customers, but that's changed a lot during the component issue. Yeah. I assume that from what you said about the quarters, that now the visibility is coming down again, right? Since the component issues are less tough now. I mean, your question, I think, goes to our order backlog and. Yeah ... our rolling 12-month demand. We've not seen any change in that, actually the opposite. Okay, you still have good visibility going forward, yeah? I think, yeah. I mean, the order backlog remains at the level that it has been before. The order intake has been, you know, strong, and the rolling 12, you know, continues to grow. Not as fast maybe as it grew a year ago, but still continues to grow. We'll see those numbers, but not until beginning of February when we have, the Q4 report. There is a comment also on the visibility, because we normally have 12 months of visibility due to customer forecast. What we have seen now in this period, when we have asked for firm orders, we have seen a higher degree of firm orders, but many of them not putting orders a lot more than one year regardless. There, there has been customers now having orders over one year. We expect it to go down to the one-year clear visibility that we've always had. It's not sort of, it's not a bad visibility, it's actually quite good visibility that we have. It's just shifting the form. Sorry, what's up? Just to continue on the visibility. If you look into 2024, which is then more than one year into the future, how bad should the world economy be to see declining revenues, pressure on margin, as some of the lead analysts believe in the company, that you could see EBIT margin drop down to 6.5% and declining revenues? How bad should the economy be to see such a scenario, and is that likely how you see the world today? We, for our budget for next year, we have a scenario where we, you know, just for preparation purposes, right? We've asked every one of our 8 production companies to deliver a budget which still provides, you know, around that 6% margin level, but with a 30% cut from where they are today on top line. We have that scenario, but your question is how bad would we have to start to see? We're not seeing it now. I don't know when we, if and when we'll see it. That's the preparation we've done. You know, that would mean that significant parts of our top line goes down. Mm. We're just not seeing that. Mm. Thank you. Okay. Okay. I think that's it. Yep. Hey, thank you so much. Welcome to join us again in February for our Q4 report.