Kongsberg Automotive ASA (KOA) Earnings Call Transcript & Summary

Good day, and welcome to the investor presentation hosted by Kongsberg Automotive ASA. Today's conference is being recorded. At this time, I would like to turn the conference over to Norbert Loers. Please go ahead, sir.

Thank you, operator. Dear ladies and gentlemen, welcome to the Kongsberg Automotive investor presentation. [Operator Instructions] This webcast is conducted in audio mode only with synchronized slides. The PDF of the presentation will be uploaded to our website after this meeting. As usual, today's discussion will be conducted under a legal disclaimer. And the presenters of today are Robert Pigg, Co-CEO and SVP, Off-Highway; and myself, Co-CEO and CFO of the company. So Page 4. That is where I want you to look at first, and that's a summary of us being a world-class product provider, with a global reach in light and commercial vehicle industries and beyond. So let me start for 7 reasons why Kolberg Automotive is a great investment opportunity. First, we have a great team. High-caliber, experienced people manage our company in all relevant functions. We have very, very good people. We also have proven ourselves in last year when we managed the COVID-19 crisis successfully. That was bringing various different challenges to our people, to our teams, and that was managed successfully. We delivered since 2016 strong profitable growth that was only disrupted by the crisis last year. We steadily improved our free cash flow, as we will demonstrate later, when we look into the cash generation of the company. And very important from an investor perspective, we operate a diversified and resilient business model. We have very good regional diversification. We have diversification across light vehicles, commercial vehicles and about 1/4 of our company is non-serial automotive business with strong business in, for example, powersports. And we are a trusted company, a partner of our customers for many years. And that relation -- we lift that relationship every day. Finally, we are ready for EV, for electronic vehicles with cutting-edge technologies. Pure battery electric vehicles require different components, primarily in powertrain. And we have for any powertrain combination, the right product already as of today. However, many of our products are simply non-powertrain dependent. So apply to any car and any powertrain composition. We give you, first, a company overview, and then we will go into our business model. And I'm handing over here to Robert.

All right. Thanks, Norbert. As we talk about, we'll start with company overview. Our agenda is today is quick, and we'll have time, as Norbert said, to take your questions at the end. The purpose of the presentation is to share with you [indiscernible] in 2020, and how we are positioned in selected markets and products to create a sustainable long-term growth for Kongsberg Automotive. So we'll start with the company perspective. Kongsberg Automotive benefits strongly from an experienced leadership team. Slide 6, please. Thank you. Leadership team has an average of 20-plus years in the industry and 7-plus years at KA at tenure. And through the presentation, the 2020 accomplishments of our leadership team during the COVID-19 crisis in the following slides. If we move to Slide 7. Kongsberg is more than just an automotive supplier. We're a leading partner to the global automotive industry and beyond. Our products can be found in every fifth vehicle globally. We sell through our diversified customer base, serving 5-plus end markets in -- with high resilience, as shown by the COVID-19 shock in 2020. As you can see from the KPIs on the slide, in 2020, our sales totaled EUR 969 million. Debt to EBIT amounted to EUR 11 million, heavily impacted by the market declines caused by COVID-19 pandemic. Despite the COVID-19 impact, we see an improved cash flow of plus EUR 7 million, when we compare it year-over-year to 2019, with the additional potential to become free cash flow positive in the first half of 2021. Our mission and purpose is to be a global partner of choice for our customers, employees and stakeholders by providing advantageous solutions that enhance the driving experience. We move to the next slide. As you know, we operate Kongsberg Automotive in 3 different business segments: Interior, Powertrain & Chassis and Specialty Products. A key highlight to KA is that all of our business units profit from having a leading market position in the products that they supply. With a broad range of products from seat ventilation to off-highway steering systems, as I mentioned before, we serve 5-plus end markets, which makes us very resilient to when we see changes in one market segment versus the other as the -- one or the other market segments really stays on track. As we move to the next slide, and we talk about the historic financials over the last years. Since 2016, we outgrew our addressable markets. We showed continued strong sales -- strong growth in both sales and EBIT. In 2020, we've been hit significantly by COVID-19 market shock, which affected us due to the overall market decline. However, through our active management during the COVID-19 crisis, we were able to stabilize our EBIT, despite a 17% drop sales decline. So all in all, a well job done by the team to make sure we went through the crisis. Next slide. Even through 2020 on the COVID-19 period, we took a true cycle perspective, continue our investments to sustain future growth with a CapEx ratio of approximately 6.2%. Cash generation has been impacted by COVID-19 drop in sales and adjusted EBIT, resulting in a negative free cash flow of EUR 37 million. However, if we compare year-over-year, our cash optimization levers that we implemented in 2020, we improved the free cash flow by a positive EUR 7 million compared to 2019. Looking ahead, we expect our future positive cash flows, after having invested significantly in restructuring and CapEx, as we have the appropriate base and most of the high investments is in the past. Next slide, we talk about new business wins. New business wins in 2020 recovered strongly in Q3 and Q4. And after COVID-19, the Q2 is where we had a low activity in customers. The reduced bookings in Q2 and Q3 was mainly driven by reduced customer sourcing activities due to October 19. However, after a good Q3, we approximately reached pre-COVID-19 levels in Q4, and we expect some of the programs that we didn't win in 2020 will be carried over to 2021, as they were put on hold by the OEMs that was lost to KA. If we go to the next slide. Our book-to-bill ratio supports our projected strong future growth with business volumes exceeding ourselves. This positive business pipeline is bolstered by the growing market segments we operate in and our strong competitive position and are increasingly -- increasing market share. Next slide, please. Looking at our financials, performance on the segment levels. We see that the COVID-19 impacted all segments heavily. However, Specialty Products and more -- proved to be most crisis resistant with a strong operational performance in 2020. On the positive note, we achieved new business wins across all segments despite a challenging market. Next slide. Corporate responsibility. On Slide 15, we see corporate responsibility as a key success factor for Kongsberg Automotive and an integral part of our company's future. As you can see in the slide, we did -- we have defined 6 guiding principles to drive our efforts: leadership and talent; human rights and labor practices; supply chain management; environmental performance; integrity and ethics; community engagement. Likewise, we specifically have 3 key action areas that we're focusing on. And those are: people; the health and safety of our employees, training and development and local communities; the planet, climate change, energy usage and waste, product and supply chains, working practices and supply chains, product materials, compliance and with environmental legislation. We move to the next slide. In particular, sustainability and the contribution to improve the long-term health of the planet is a core strategic goal for Kongsberg. On this page, you will see the current EGS ratings in our mission KPIs. To further improve our carbon footprint, we've initiated a range of green initiatives, including increasing the use of renewable energy, reducing our waste and accelerating our energy reduction programs. For the future, we strive to achieve carbon neutrality and have clearly defined sustainability and emission goals. In essence, we commit ourselves to reduce the overall carbon footprint and become carbon neutral in the future. Currently, we're developing a holistic concept to achieve the carbon neutrality as the goals we have set forth and we show on this particular slide. We'll now talk about the resilience of the KA business, and I'll hand it over to Norbert to cover this topic.

Thank you, Robert. So we continue Page 19. And looking back a little bit into last year, that was truly a challenging year. And it was a stress test for all of us on various different levels, and all of you have experienced that probably in your own environment. From early on, active crisis management became a key priority of management. We had to address 4 principal concerns, safeguarding, health and safety. So safety first, and that is in such a situation -- in a pandemic situation, there a potentially little virus is around, really absolute mandatory and paramount. Also, we had to ensure operational stability and delivery capabilities in our industry, customers come always first, and we never let them down. And we have to maintain customer satisfaction, so not just delivery quantities, but also the quality of our delivery. And finally, we had to secure sufficient liquidity. So looking at the KPIs on that slide, I believe we stayed -- we can say that we managed it well. And that we addressed all these different needs of our customers, of our employees, of our stakeholders. Next page, we try to walk you through the resilience factors at KA. So it can be split into 5 different categories. And first, diversified end customer markets. And we have diversification in all various different categories. We have a global diversification across regions, across all major industry regions. We have diversification over end markets with light vehicles and commercial vehicles. We have strong aftermarket business, and we have nonautomotive business. Our customer base is also very diversified and of global reach. That is a second strong piece in our diversification. When it comes to CapEx, as an automotive supplier, we enter into commitments with our customers to install capacity. And once we have that commitment, we are not longer flexible. We have to provide it. And that is simply our business model. So on CapEx flexibility, there is not much what we can do since we always live up to our commitments. What we can do and where we can improve is CapEx flexibility and leveraging our installed base. When we had our business wins over the last years, we see market outlooks at the time in 2018, '19, we were expecting higher future revenues and installed CapEx accordingly. So we have a significant installed base that can produce more than we currently do. CapEx efficiency means that the CapEx we have to spend on new business will improve. So with the installed base we have, also with the learning curve on some critical new products, we are now in a position to be able to increase our revenues without adding the same amount of CapEx that we had to add in the past. So that's what we call CapEx efficiency. And there, we have a clear improvement target and road to improvement ahead of us. OpEx flexibility is the next one. So you're all familiar with the concept of variable costs and fixed costs in the reality of our 28 factories. Not all costs are clearly variable or fixed. So truly variable cost is basically only material cost. All other cost categories have various different degrees of flexibility from a little flexible to more flexible. And in times of underutilization, what we had in the second and third quarter, it is key to flex the cost. And we did that pretty successfully, and we will walk you through the details on the next pages. So next and final category, cash flow, working capital management. Key working capital for us is receivables, inventories and trade payables. Our receivables are very much driven by revenues and customary terms. So we are happy to have these revenues. And the terms in our industry, we simply have to apply being in that industry, where we improved significantly over the last years for us to reduce the amount of overdues. And that is driven by having better processes that avoid late payments, but also being focused on customer communication in case they pay late. The second area is inventory management, and you'll see that in our balance sheet and cash flow from inventories, we could reduce year-over-year, our overall inventories, and we improved a lot on inventory turns and on avoiding excess inventories. So these are the 5 resilient factors at KA, and let's go next page. Diversified end markets. On the left side, you'll see our top end markets. And the lion piece is a little bit more than half is our light vehicle end markets. And light vehicle is for our interior segment, almost 100% of their end market. And it is within Powertrain & Chassis for our Driveline business, the end market, and as a small piece in our FTS business where we also have passenger car as an end market. Commercial vehicles is about 1/4 of our revenues. We have in our Powertrain & Chassis segment, the On-Highway business. And we have in our Specialty Products, the Couplings business, both are 100% commercial vehicles, but both have also a very significant piece of aftermarket. And aftermarket business is of different nature. It is -- it has different cycles. So in times where production is having a down cycle last year, we see an increased demand for aftermarket. And then we have a few segments that are mainly covered by Off-Highway with powersports, outdoor equipment and some other industries, that is also from the cyclicality, a very different business. And if you look back over the last 10 years, when we had the financial crisis, for example, in 2008, 2009, that business was very strong. When automotive went down, this business went up. If you go to the right side, we show you here our top 5 light vehicle OEM customers. #1 is Geely or Volvo car. Renault Nissan come second, BMW, PSA and Ford, premium customers, but nobody has a really dominant position in our overall revenues. When we look into our top 5 commercial OEM customers, it is Volvo truck. Volvo truck is wired with Renault trucks a while ago. Second comes the Volkswagen Group with the brands of Scania and MAN. Then Dongfeng is our first Chinese customer in that ranking. And the Dongfeng business is increasing strongly over the last years. Paccar, as a European brand of Paccar/DAF, comes forth. And then the Chinese BAIC group is already on #5. You see here that our Chinese business is growing stronger. If you look into the further customer list, you see lots of blue chip customer names where we have very good customer relationships and where we are in some -- for some customers, even single source on critical product. Next page shows you our customer base, and we try here to give you a view into our bill-to customers. So that is the solid bar. So Adient, for example, accounts for 30% of our invoiced revenues. However, there is much -- or all of the Adient business is within OEM, and that is shown in the light bars with the OEM sales. So for example, significant pieces of our Geely business runs through Adient. And typically, this is customer-directed business where the customer is negotiating with us or we are negotiating with the customer, the whole functional specification and the commercial specification of the product. So -- and the OEM customer makes the sourcing decision on the technology provider and on the Tier 1, who is, in that case, assembling the seat. So when we go next, cost flexing. So we give you here some numbers. And what happened in second quarter, our sales dropped by EUR 130 million revenues relative to an average quarter in 2019. And we can could reduce our OpEx. OpEx as defined here basically as all costs without material cost. Material cost is fully variable. OpEx is not fully variable. OpEx, some of OpEx is really very fixed, like leasing costs, like depreciation and others. So we could reduce this cost base by EUR 42 million in the second quarter. Then we had recovery in third quarter. When recovery started, we were still below average sales of the quarter by EUR 35 million, and we still could reduce our operational expense by EUR 18 million. And what is the best quarter here from that perspective is a new baseline quarter in Q4, where we actually exceeded our average revenues of 2019 already and still had our OpEx reduced by EUR 7 million. So we try to demonstrate here how cost flexing, cost containment measures worked during the shock recovery and new baseline quarters of last year. It was achieved by a bundle of various measures. So we had to adjust capacities, we had to adjust shifts. We adjust services. We also managed some leasing agreements to be more favorable and more appropriate to the situation. And wherever we had the possibility, we reduce discretionary spending. If we go next page, free cash flow and how do we want to achieve what we are projecting for next year. And we already talked in our earnings call, finally, about a 2021 cash flow outlook. So minus EUR 37 million free cash flow in 2020, we are looking in 2021 to improve, first and foremost, revenues and EBITDA, so with margins from that revenues. We will have a small impact, a negative impact on increased working capital. It's relatively small since you already had such a strong Q4 in 2020. We will also have an increase in CapEx. And we anticipate that we improve on all the other areas, which is financing and other, FX and so on and so forth, so that we end up next year in our prediction with a positive free cash flow of EUR 10 million, which is an improvement of EUR 47 million versus 2021. The enabler for that are listed on the right side, the key levers for that. And what is really important, that we have a clean sheet on CapEx. So we spent almost EUR 30 million last quarter to have this year only focused spendings that are current and not to catch up with previous quarters where we had a delay. So Robert, I believe the next section is yours.

Yes. Thanks, Norbert. So now, we'll take a look at market trends and how they affect KA. So on to Slide 26, please. So light vehicle market as based upon IHS February 10, 2021. As you can see here, we suspect the production volumes in light vehicle market to grow moderately until 2028. We believe that the internal combustion engine will reach its tipping point around 2021 and are, at the same time, convinced the electrification will start to accelerate strongly. We're all familiar with the overarching train shaping new market, which basically our powertrain electrification, autonomous driving, vehicle connectivity, shared mobility, safer and cleaner regulation and sustainable and ESG. Specific trends around KA for light vehicles is a shift from premium to mass market for vehicle comfort, driving performance and safety features, which is mainly affected by both the driveline, the vision of Powertrain & Chassis and our ICS division in Interior, higher customer expectation regarding convenience and interior comfort features, which is directly affects and relevant to ICS, and the emergence of the new automotive players and shift of regional centers of gravity. If we move to the next slide. And commercial vehicles based upon LMC Q4 2020 similar to light vehicles, we expect moderate growth in the commercial vehicle markets until 2028, in terms of production volumes. It is important to note here that China is a dominant regional market and is expected to continue to be that going forward. In terms of trends, as we know, alternative powertrains, electrification and fuel cells, autonomous driving, safer and cleaner regulation, total cost of ownership, including fuel economy and efficiency and sustainable and ESG. Specifically, trends relevant to KA is the value chain debt, modularization and outsourcing from OEMs to suppliers, which will affect both our On-Highway, Couplings and Fluid Transfers. New chassis and air suspension technology, which has an effect relevant to Couplings and Fluid Transfers. And the last one is more complex compressed air infrastructure, which is a benefit to Couplings and to Fluid Transfers. If we move on to Specialty Products. Our Specialty Products segment are active in numerous markets, including outdoor power equipment, power sports, construction, ag and industrial. However, overall, these markets are affected by similar trends in light and commercial vehicles such as autonomous driving, connectivity, emission regulations, electrification, with mostly highly in the moderate positive outlooks. Overarching trends that we see is electrification, the increased use of electronic controls, motors and lower prices and approved robustness. And then GDP growth, economic recovery with additional spending and recreational activities and investment in commercial equipment. So if we focus on outdoor power equipment, 2 drivers there, commercial segment growth and autonomous, and that is highly positive for our Off-Highway segment. Powersports, you have the reduction in international travel, which has triggered more local holidays, driving sales of powersports equipment. Digitalization, higher demand for technology features such as smart keys and immobilizers and display. This is moderately positive for our Off-Highway division. Construction and ag, continued emission regulations where lower regulation countries are catching up to the EU and North America. Our connectivity demand for seamless integration of machines and connected services in and outside of the vehicle, drive for use of electronic components in a time with faster adoption with autonomous driving due to controlled or bound environment requires fully electronic controls, which all of these are highly positive for our Specialty Products segment. And in industrial, we're seeing the rising competition. PTFE hose products remain the products of choice in various technical markets, including pharmaceutical and clinical conductor manufacturing, and this is not somewhat significant to our Fluid Transfer business. We'll move to the next slide. KA is positioned to benefit from these current market trends. If we break it down into selected -- for selected trends with the impact on KA. If we look at electrification, CO regulation and fuel economy, that affects all 3 business segments. Interior, we're seeing the shift from cables to electronic actuators, acquiring more efficient components. Powertrain & Chassis is a higher demand for shift by wire, fast adoption of automated manual transmission systems. Specialty Products, the benefit there is enhanced performing couplings, more hoses for EV heat management turbos and an uptake in electronic throttle controls. The next trend is autonomous connectivity and digitalization. For interior, that's a shift to focus from powertrain to interior comfort. For Powertrain & Chassis, the impact is migration of technical change away from mechanical systems and development of shift-by-wire products. There, we supply both the shifter and the actuator. In Specialty Products, the adoption of autonomous in equipment is high, and we're seeing integration of machines, connected service and outside the vehicle. Next trend is premium to max, higher interior comfort expectations, which basically that affects interior. Higher take rate, fitment rate for standardized price -- standardization of seat comfort. And then exposure to cost pressures and commoditization with innovation products portfolio, and the clearer U.S. piece. Specialty Products, we see more technical features such as smart keys, immobilizers, more functions and features managed by compressed air and electronic power steering becoming a standard in powersports. The last trend we will talk about is air suspension and compressed air systems. This affects the Powertrain & Chassis and Specialty Products. Powertrain & Chassis get the change from hydraulics to compressed air that we're seeing in Asia. Increased market for air suspensions in passenger car and commercial vehicles. Specialty Products, we see more complex couplings with integrated features such as sensors, increased air suspension fitment rates, providing more opportunities for hose assemblies. So to sum it up, the impact on KA is well prepared due to the improved operations, engineering and innovation-backed pipeline, order pipeline. KA is positioned as a constant technology leader for ICS business by growing market share in the EV market. And lastly, KA has a strong position to capture projected growth with new technologies and at the global scale. We'll now move on to product and innovation highlights, and we'll focus on each of the business units as we go through the next slides. So Couplings. Our Couplings business unit has an attractive market position, growing market demand and further differentiation potential going forward. The market demand, as we spoke about earlier, where we have the KA competitive position, is strong in companies. So we have future differentiation, potential customization, high-quality and high-performing solutions, entering new business field to extend our current product line as the launch of our twist lock coupling. And leverage our key customer acquisitions and global footprint to enhance and exploit local customer relationships. Some of the product highlights that we have in Couplings. Three, basically, we can sum it up. So lightweight, we have an installation cost benefit, and we have a performance benchmarking. If we move on to Fluid Transfer. Fluid Transfer unit is the market leader in PTFE hose and a growing business benefiting from the transition to EV. Comparative positioning is #1 in PTFE -- as PTFE hose [indiscernible]. We maximize our capacity utilization at fully leveraged tail effects, improve our assembly margins by continuing backward integration, gain market share in future EV coolant markets and benefit from extra features on the new engine development. A couple of product highlights here is, as you can see, the first one is electrical vehicle coolant nylon assemblies. As you can see, the entire system for battery coolant lines. And the other one is our high-performing PTFE [ cut in pieces ] in assembly. This is a unique hose design, high-temperature fuel hose used in multiple applications. Move on to Off-Highway. A diverse segment with a strong product portfolio, okay? Compared to your position, we're top 3 in all categories, except what we call HMI, human-to-machine interface. Growing with targeted investments while continuously improving our current operational performance, expanding our customer base in powersports, agriculture and construction markets and defending our current niches and define new applications and base technologies. A couple of product highlights here is our electronic power steering, where we have contact with prox sensor in a rigid shaft, and then the rollout and launch of our new electronic shifters from a contactlessly electronic pedal shifter to an electronic console shifter with customized position to user [ reference ]. On to Driveline. Driveline is a segment operating in a highly dynamic market environment with new emerging customers. KA's competitive position is strong here, especially in our actuation systems. We build upon the 15% market share we have by shift by wire in China with innovative products, both from shift-by-wire shifters and the actuator. Continue winning new battery electronic vehicle-related applications, sustainability and improve customer relationship with existing OEMs and double down our patents in the application products. Couple of products to highlight here is our shift-by-wire shifter. So we have both a toggle and a rotary shifter and our electronic actuators, which is 2 different kinds. We have a dog clutch actuator and a decoupling unit. Off to On-Highway. On-Highway is a high-performing transmission business benefiting from a strong positioning in actuation systems. Strong position in actuation systems, likewise to this Driveline. Key competitive position is to further enhance our system supplier capabilities, leverage our significant transmission knowledge, push high-performance actuators and double down on the system's applicable for medium-duty and heavy-duty commercial vehicles. This unit profits from a strong product portfolio, including this gear and clutch actuation systems. Product highlights are our gear actuation systems, so pneumatic actuation can be used for battery electronic vehicle trucks in addition to ICE-based powertrains like ATM. Clutch actuation system, first, high-performance fully electronic clutch actuation for heavy-duty transmission was launched in 2020, and we expect this product line to continue to grow in the future. Moving on to Light Duty Cables. KA is a leading provider for Light Duty Cables. We have a leading market position. Our competitive position is to further drive cost excellence, industrialization of our new product pipeline and further expand our customer base. Product highlights here is our electronic actuators. So the system is very flexible packaging and convenient for remote actuation. And then the unique solutions we have. So our cable systems from all aspects of the vehicle where movement or release is a function of the system itself. So therefore, we can combine or develop a unique solution based on the customer needs and wants. And then lastly, we'll cover ICS. Finally, Interior Comfort System is continuously growing in its market position, benefiting from favorable market environment and cutting-edge products. Competitive position today, we're top 3 market position in all product categories. We leverage our favorable market trends toward comfort and climate system. We benefit from cross-selling between the products and standardization. We continue the expansion of our customer base, especially with new OEMs and new vehicle segments. Product highlights here is our seat ventilation. So it incorporates a highly modular KA fan and then a massage system. Design offers scalability of the system, so we can go from basic lumbar to adding multiple massage zones built into one system. And now we'll talk about ICS. So in past investor presentations, we typically highlighted one business unit. So today, we'll briefly cover Interior Comfort System in the following slides. The Interior Comfort System is a market-leading supplier of seat climate and support systems with a top 3 market position in all product categories. We supply seat heat, ventilation, lumbar support, massage systems, head rest and mechanisms. Customers are the likes of the BMW, Tesla, Daimler, Audi, Ford, FCA, Tata. Roughly, we have 4,000 -- a little over 4,000 employees. We operate this business in 5 manufacturing sites, and we currently hold 190 patents actively focused on seat comfort systems. Next slide, please. ICS is a technology leader in this segment. For example, our advanced biotechnology from pneumatic comfort systems have a clear value proposition compared to traditional products, including best-in-class package size for optimal application, best-in-class weight per function, scalable products enabling 2 to 24 functions for Valpak and multiple use case can support, bolster lumbar and massage functions. Next slide, please. ICS has a clear path toward cash flow generation. This unique product portfolio translates into a strong expected development in the coming years. As we can see from the chart, how the sales is going versus the bottom chart, cash -- CapEx and cash flow as a percent of sales. But in particular, we're confident that we will benefit from strong sales growth in the coming years with our newly developed products. Become cash positive from 2022 onwards due to better CapEx efficiency, capacity utilization. In 2019 and 2020, still investments in the industrial base and the new technology and made capacity extensions was greatly -- strapped ICS on their cash. But those investments are behind us, and now we can start to say we're fully invested in those industrial technologies. 2022 onwards, we have a reduction in investments only mainly due to maintenance and product adoption to our new customers. So based on the current plan, and as you can see in the charts, ICS has a clear path to cash flow generation in the coming years. Underlying this, all ICS product lines, except [indiscernible] are active in the growing markets. Ventilation, lumbar support, massage system markets are expected to grow with a 3% CAGR. Market growth in ventilation is tampered by the overall declining market prices, not so much as loss in market share. We see solid growth in our lumbar support and massage systems, in which KA ICS is well positioned to generate returns for its investors. So if we break down the product category. Ventilation, we focused on higher usage of existing solutions and potential new fan technology for further value add. Continuing the focus there is on quality and endurance as a differentiator. Lumbar support, we leverage cutting-edge valve technology as we previously mentioned in the slide. We addressed the premium OEMS, expanding customer base and drive a broader technology adoption. And then if we look at massage systems, further build upon the technology advantage to scale with our new products. In summary, ICS is a market-leading supplier in interior comfort products with clear value propositions; technology leading, providing high-end products with excellent quality; well-positioned provider of fully integrated solutions of seat support, seat heat and seat cooling; strong growth as a result of market share gains and market growth; improved operating performance established a solid foundation for further growth. And as you can see in the picture, we see how the seat in the cars have changed over the years. From just AC in 1970 through a full system that we have today that we supply to the Tier 1s. And I'll hand it over to Norbert for a summary and conclusion.

Thank you very much, Robert. So if we come back to our -- to the 7 reasons why we think Kongsberg Automotive is a great investment opportunity. We have seen throughout the presentation that we have a strong management team that managed the business very successfully last year. Our strong growth since 2016 had been negatively impacted by COVID-19, but our market outlook now is pretty favorable in most end markets. Most important, we are improving our cash flows dramatically from consuming cash in the last years, primarily for restructuring and investments, to becoming a cash-positive company in 2021, utilizing much of the installed base and the improved cost structures. Also, our diversified and resilient business model is, in normal times, a good protection against cycles. I consider last year not to be a normal time under these circumstances. Finally, we have a future-proof portfolio we are ready -- sorry, we are ready for EV technologies with cutting-edge technologies and in the area where we have currently a large powertrain dependence, that is our Driveline business, we have all the product already for any powertrain, including pure electrical vehicles. These are our management priorities for 2021. First, we will continue with a strong team, and we are very happy that Joerg Buchheim will join us soon as the new CEO of the company and make Kongsberg even better. We managed the crisis successfully, and we have also shown strong resilience in our whole supply chain. We delivered over the last year strong profitable growth and have all reasons to believe that we continue a profitable growth path going forward. Free cash flow is a management focus, and we have all the opportunities at hand to deliver in each half year with positive free cash flows. We operate a diversified and resilient business model, as you have seen from all the different information we provided on the feature pages, and we will build on our operational improvements and continue that way. We are a trusted partner of our customers, and we will further strengthen our global customer base. And we also developed successfully very solid new customer relationships with new customers in emerging markets, and we are ready for EV. So outlook 2021, it's the same slide we presented earlier in the earnings call, so I'm not going to repeat myself. But we have positive outlook. We are very confident that we can deliver on that, and we are looking forward now to answer all your questions.

So operator, if you please open the question section of -- we already received some questions. Okay. So I'm reading questions. There is still little information to shareholders with this change with this new CEO. That comment came even before we started the presentation. I hope that the presentation provided now the missing information and you also have reasons to look forward to the new CEO. The next question is, you have expanded more into China over the course of 2020, for example, through a new plant opening in October. That is true. Do you still see more challenges regarding collection of receivables from Chinese customers? The background of that question is that payment terms and payment patterns in China are very different from North America and Europe. So first, payment terms are much longer. And second, we have also promissory notes often used as a payment methodology. I don't see any specific challenges. Our Chinese customers pay as good as reliable as all other customers, but we simply have different environments and different terms. But we can live with that. We operate under this business model every automotive supplier has in China, and that is something for us we can well live with. The second question is Asia accounted for EUR 183 million in 2020. How much account of that growth was accounted in China? Can you elaborate on EBIT from China? I don't have the very exact numbers for that question. The lion piece of that growth was in China. Our 2 other Asian business areas are primarily India and Korea. These entities we have there are much smaller. Can you elaborate on EBIT from China? Our growth in China is over average profitable compared to similar business -- of the same business units in other areas. Next question is for Robert. How is Kongsberg Automotive positioning towards electrical car future?

We think we're in a very good and strong position for electric cars in the future, as we spoke about in both presentations. We have current product to date that will drop right in electrical car as it really doesn't matter what the powertrain is, if we look at seat comfort systems from that standpoint. And then we have some new opportunities in powertrain, in our Powertrain & Chassis division to deal with that such as we spoke about our shift-by-wire products, our actuators. We have other opportunities in other business units such as Fluid Transfer, such as battery cooling as we showed the potential system that is required for better cooling that will need connectors and will need hose and tube assemblies. So we're in a very good position from that. As we said, we are ready for EV. We have products in our product portfolio today. And we have products in our innovation and new product development pipeline, working directly with the customers to be ready when the SOP comes about for certain electronic cars and also in other vehicles, whether we're talking about commercial vehicle, construction and agriculture and power source. So all in all, we are in a strong position as the trend goes.

Okay. Thank you, Robert. Next question is, there's an increased conflict between the West and China. Considering KA business in China, how is KA prepared in case something should happen? That is a political question, and we are not in politics. However, we operate in countries that are part of -- let's say, subject to politics. In our day-to-day operations, we have no problems at all on conducting our business in all countries we operate in. We can do business, as you will, with imports, with exports, with product development. We see all our OEM customers investing also, especially in China. And we believe that there is good reason to believe that the business interest of all parties involved are overwhelmingly strong that we continue to cooperate between the regions and between the countries in -- for mutual benefits of all sites. Next question is, what do you think political initiatives will have on KA's business? The example is the increase of scrapping paybacks Germany has given on trucks. That is for us, of course, being an automotive supplier, welcome. We don't believe that this has a major impact on overall demand. We understand that this initiative is especially targeting of getting old trucks with low-emission standards off the road and replacing them by modern trucks. And for us, these initiatives are always welcome. Next question is, in general, will a turn towards electrical cars be of concern for KA? I think that question was already answered by Robert. So I move to the next one. Will you consider to inform investors of new contracts or other important news frequently in coming quarters? We will do so if a new contract is to be considered to win insider information, that is of such magnitude that it has to be disclosed to the markets. But as we have almost every week new business wins of certain magnitudes, I think it would be boring to the market if we report our business wins on a regular basis, on a more frequent basis than quarterly. Yes? If -- unless it is really an outstanding new business win that is of a very different quality, either in size or by other features, we will continue with quarterly updates on business wins. Next question is, you appear to have gained solid traction with Chinese OEMs. Do you anticipate relative stronger regional growth over markets in Asia? That's a question for Robert.