Kontron AG reaffirmed its 2026 revenue and earnings targets despite a supply-chain disruption that held back third-quarter deliveries, as executives pointed to strong defense orders, cost savings and potential purchasing support from Foxconn.
Third-quarter revenue fell 7% from a year earlier on a basis adjusted for divested IT service operations, Chief Financial Officer Clemens Billek said on the earnings call. Adjusted earnings before interest, taxes, depreciation and amortization were €50 million, compared with reported EBITDA of €48 million a year earlier. Reported EBITDA for the latest quarter was €41 million after more than €8 million in restructuring charges.
Supply Shortages Weigh on Deliveries
Chief Executive Officer Hannes Niederhauser said shortages of flash memory, DDR4 RAM, Intel processors and printed circuit boards have delayed shipments. Kontron has sometimes purchased components through brokers at higher prices, although growth in higher-margin defense and transportation has helped offset that pressure, he said.
Niederhauser put delayed orders at roughly €70 million in the third quarter, up from about €30 million in the first quarter and €50 million in the second. Billek said inventories rose to €400 million from €318 million amid the disruptions, and the company expects them to fall toward €350 million by year-end.
Kontron has begun accessing Foxconn’s purchasing systems and preferred supplier list, which Niederhauser said could help it obtain components. He cautioned that the process was new, making it difficult to be completely confident about supply availability.
The company confirmed its forecast for approximately €1.6 billion in 2026 revenue and €225 million in adjusted EBITDA. Niederhauser said reported EBITDA would be about €200 million after restructuring costs. He estimated fourth-quarter revenue at €440 million to €510 million, depending on how much delayed backlog Kontron can ship.
Billek said the company expects approximately €100 million in fourth-quarter operating cash flow and net debt of around or below €100 million at year-end, down from €135 million at the end of the third quarter.
Volkswagen Orders Removed From Backlog
Kontron removed €130 million of Volkswagen orders for home charging equipment from its books. Niederhauser said Volkswagen had stopped ordering and that Kontron no longer expects revenue from the contract, although the companies are discussing potential service and product arrangements for existing customers.
The chief executive said Kontron is negotiating compensation with Volkswagen and preparing a court claim in parallel. He said the company had invoiced roughly €9 million and expected additional compensation exceeding €20 million, though the outcome and timing remain uncertain.
Some invoiced amounts are included in Kontron’s earnings guidance, Niederhauser said, while the remaining expected compensation is not. He also said the company would need to discuss the accounting treatment of the invoiced amounts with its auditor.
Even after the Volkswagen adjustment, firm backlog rose to €2.75 billion from €2.5 billion, Niederhauser said. Billek said the company received almost €500 million in orders during the quarter before the Volkswagen reduction.
Defense Growth and Cost Savings
Kontron expects defense revenue to grow about 30% to approximately €200 million in 2026, potentially slightly more, Billek said. Niederhauser cited demand for drone-related technology and said the company had won a €60 million contract from satellite operator Telesat.
In transportation, Niederhauser said Kontron hopes to receive a train-related order of around €250 million or more in the fourth quarter. He also said deliveries of 5G network access devices to Mercedes began in October, with initial deliveries to Asian customers potentially starting in December.
Kontron has completed its GreenTec restructuring, which cost about €25 million, executives said. Billek said 444 full-time-equivalent positions had been reduced against a target of 500, and the program is expected to generate about €30 million in annual run-rate savings. Niederhauser said the company does not expect further significant restructuring charges from the program in the fourth quarter or in 2027.
GreenTec operations still had a negative EBITDA impact of approximately €10 million during the first nine months, Billek said. Niederhauser added that some operational impact could remain in the fourth quarter, but he did not expect it to be major.
Foxconn Cooperation and Dividend Plans
Ennoconn raised its stake in Kontron from 28% to 48% through a tender offer completed in the third quarter, Billek said. Kontron has initiated a synergy program with Ennoconn and Foxconn that it expects to produce around €40 million in annual savings for Kontron over the coming years.
Niederhauser said the cooperation will focus mainly on traditional internet-of-things products and software, including joint sales channels and purchasing. He said some defense customers had expressed reservations about Ennoconn’s stake, but Kontron had not been excluded from any tenders because of it.
Billek said the company expects to propose a dividend of €0.65 per share for fiscal 2026 and targets €1.50 per share by 2030. Kontron received €126 million in September from its earlier congatec transaction, helping reduce debt and improve liquidity, he said.
About S&T (ETR:SANT)
S&T AG engages in the development, implementation, and marketing of hardware and software solutions, and IT services. It operates through three segments: IT Services, IoT Solutions Europe, and IoT Solutions America. The company offers consulting, integration, and outsourcing services in the areas of workplace, data centers, cloud, and application support and development; and consults and sells third-party hardware and software products. It also develops hardware and software products and solutions for Internet of Things and Industry 4.0 applications, including the associated implementation and operating services for industrial automation, medical technology, rail infrastructure, communications, and smart energy markets.
