SinterCast Interim Report January-March 2000

SinterCast Interim Report January-March 2000 SinterCast - the market leader of process control systems for the production of engine components in Compacted Graphite Iron (CGI) * Compacted graphite iron now accepted by the automotive industry as a new engine material suitable for volume production. * SinterCast process technology now recognised by foundries as the leading technology for volume production. * The Diesel engine market offers the most promising market potential. * Some major companies move towards volume production 2004 or earlier. Present and future Compacted Graphite Iron (CGI) opportunities SinterCast has, during the past ten years, put considerable efforts behind having its process control technology developed and industrially fit. SinterCast has participated in tests and studies of the CGI material, its unique process control system and the overall casting process as well as more recently the machining of the cast CGI components, necessary to manufacture engines in CGI while achieving good economy and reliability in the industrial manufacturing process. During this time it has been firmly established that CGI has superior properties as a material for engine applications to the automotive industry. It has especially been confirmed that there is a substantial growth potential for CGI within the Diesel engine market segment - where the properties of the CGI are highly competitive. The CGI market potential in this segment is estimated by SinterCast for the year 2004 to contain approximately 4.1 million high performance passenger car Diesel engines or 160,000 tonnes of CGI production, approximately 600,000 heavy truck Diesel engines or 200,000 tonnes of CGI production and approximately 550,000 light truck Diesel engines or 85,000 tonnes of CGI production. In summary, a total market potential for the year 2004 has been estimated by SinterCast to be 5,2 million Diesel engines composed of 445,000 tonnes of CGI production. These estimates are based on external studies in combination with SinterCast estimates. Whilst it is still uncertain how much of this potential will actually be developed in CGI by 2004, SinterCast has confidence that the combination of market competition and the fixed legislative dates of EURO IV and EURO V mean that the estimates have a real substance and certainly should now be achievable during the period 2004-2006. SinterCast anticipates securing a major part of this business. The first moves towards volume production Leading European engine manufacturers have requested quotes from foundries for possible serial production starting 2003-2004 in large volumes of engines cast in CGI. These end-users are deemed to be leading the development by being pioneers for the new material in volume production. The major reason for new designs in CGI is to be market competitive in the rapidly growing passenger car diesel market whilst complying with EURO IV and the subsequent even tougher EURO V requirements. Major truck companies are also planning high volume CGI production in 2001/2002 to achieve their targets of improving overall truck operational efficiencies. CGI is providing the opportunity to achieve higher power-to- weight ratio engines, with improved fuel consumption and a longer overall engine life. In the shorter term we are also hopeful of CGI production through material substitution on existing designs given the recently acknowledged improvements in machining. Customers productions During the period, commercial CGI production has taken place at VDP and Sakana for Allen Power Engineering, part of the Rolls-Royce Group, United Kingdom. Caterpillar is in production of CGI engine components. Production of Audi's new V8 CGI Diesel engine cylinder block at Halberg has started. Although the above production activities have as yet resulted in limited volume only, they represent important references for SinterCast vis-à-vis the automotive and heavy Diesel engine industries. Tupy of Brazil, the latest installation After the successful installation of a SinterCast System 2000 at Tupy Fundições in Joinville, Brazil during March 2000, Tupy is now production ready and is aggressively pursuing business throughout the world, especially in the Americas, where work is ongoing with several engine manufacturers. Delivery of probes During the period, approximately 1,300 units of the new SinterCast sampling probe, released last year, have been delivered to customers. These probes are being used for prototype castings and our current production. Patents SinterCast owns 24 patents and patent applications. Operating Result and Investments The Group's turnover for the period January - March 2000 amounted to SEK 1.0 million (SEK 0.7 million for the previous year). The turnover mainly relates to income from production, demonstrations and installations. The result for the Group, after calculated tax, amounted to SEK -9.6 million, SEK -2.3 per share (SEK -10.0 million, SEK -2.4 per share). Investments by the Group during the period amounted to SEK 0.2 million (1.1 million). Liquidity and financing The Group's liquidity on 31 March 2000 amounted to SEK 74.7 million (SEK 113.8 million). Without any income the liquidity should see us through until the end of the year 2001. Although we anticipate some initial income as from 2001, it is today not likely that SinterCast will generate positive cash flow by 2001. However, SinterCast expects some decisions to be made this year by automotive manufacturers for volume production start 2004 or earlier. The Board is convinced that the Company will be able to find an appropriate financial solution in the form of new equity, debt or a combination of both, and the Board will revert to this issue by the end of this year. High Risk The commercial risk remains high until large-scale production commences. Interim Reports The Interim Report January-June 2000 will be published 23 August 2000. The Interim Report January-September 2000 will be published 14 November 2000. The Preliminary Financial Report for 2000 will be published 22 February 2001. Stockholm, 8 May 2000 On behalf of the Board of Directors Bertil Hagman President and CEO SinterCast AB (publ) Tel: +46 8 660 7750 Box 10203 Fax: +46 8 661 7979 SE-100 55 Stockholm e-post: info@sintercast.com Sweden web site: http://www.sintercast.com ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/05/08/20000508BIT00480/bit0001.doc http://www.bit.se/bitonline/2000/05/08/20000508BIT00480/bit0002.pdf http://www.bit.se/bitonline/2000/05/08/20000508BIT00480/bit0003.xls Tables