SinterCast Results April-June 2010
* Revenue for period: SEK 8.6 million (SEK 5.3 million). Year-to-date: SEK
16.6 million (SEK 9.3 million)
* Operating result: SEK 0.6 million (SEK -1.0 million). Year-to-date: SEK 1.3
million (SEK -3.7 million)
* Earning/share: SEK 0.5 per share (SEK 0.4 per share). Year-to-date: SEK 0.7
per share (SEK -2.1 per share)
* Cashflow: SEK 2.8 million (SEK -0.3 million). Year-to-date: SEK 0.7 million
(SEK 0.1 million)
* Mini-System 3000 successfully commissioned at First Automobile Works (FAW)
in China
* Land Rover introduces new 4.4 litre V8 diesel engine with SinterCast-CGI
cylinder block
* Ford 6.7 litre V8: CGI engine becomes most powerful diesel ever installed in
a pick-up truck
Annualised Series production grew to 950,000 Engine Equivalents in the second
quarter.
Actual production during the first half of 2010 exceeds full year production for
2009.
Current Production and Outlook
Series production for the second quarter ran at an annualised rate of
approximately 950,000 Engine Equivalents (47,500 tonnes), providing 5% growth
relative to the first quarter of 2010 and a 125% increase compared to the same
quarter in 2009. The increase is primarily due to the continued ramp-up of the
Ford 6.7 litre V8 cylinder block in Brazil and increased production of exhaust
components in China. However, production of some of the passenger vehicle
V-diesel cylinder blocks and commercial vehicle engine components that began
series production before the onset of the economic downturn also contributed to
the increase during the quarter.
Jaguar Land Rover, the first automotive company to introduce a high volume
engine based on a CGI cylinder block, unveiled its fourth CGI engine - a 4.4
litre V8 turbodiesel. Similar to the engine's 3.6 litre predecessor launched
during 2006, the new 4.4 litre upgrade is based on a SinterCast-CGI cylinder
block produced at the Tupy foundry in Brazil. Series production began during
early 2010. The 4.4 litre upgrade delivers 230 kW (308 horsepower) and 700 Nm
(516 lb-ft) of torque, representing 15% and 10% improvements respectively.
Despite the larger displacement and significant power increases, the new engine
provides a 10% reduction in CO(2) emissions compared to the 3.6 litre
predecessor. The Euro 5 engine is expected to be available in Land Rover
vehicles during autumn 2010.
During the period, First Automobile Works (FAW), the largest vehicle
manufacturer in China, commissioned a new Mini-System 3000 installation at the
FAW Foundry Co., Ltd., R&D foundry in Changchun, China. SinterCast-CGI
components were successfully produced to support product development in both the
commercial vehicle and passenger vehicle sectors. Also during the period, the
System 2000 that was initially installed at the Halberg foundry in Brebach,
Germany in 1998 was transferred to the Halberg foundry located in Leipzig,
Germany. The transfer marks the end of niche volume production of the Audi 4.2
litre V8 diesel cylinder block at Brebach and was effected by Halberg to support
ongoing pre-production of a new commercial vehicle engine component which is
scheduled to begin series production during the third quarter of 2010.
On 3 August 2010, Ford Motor Company announced a power upgrade for the 6.7 litre
V8 diesel engine installed in Ford's Super Duty pick-up trucks. A software
upgrade increases the performance to 400 horsepower and 1,085 Nm of torque,
making the CGI engine the most powerful diesel ever installed in a pick-up
truck. The increased power and torque allow drivers to reach higher gears
earlier, and to remain in higher gears over a wider range of driving conditions,
providing lower engine speed, improved fuel economy and reduced noise. The
performance upgrade is expected to improve overall fuel economy by at least 2%.
Based on the current production programmes and the potential market recovery
during SinterCast's five year planning horizon, the five year outlook is
summarised as follows:
Approximate Annual Production Potential and Revenue
30 June 2010 31 March 2010
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series Production(1) 950 22 900 21
Potential Mature Volume(2) 1,300 30 1,200 28
Production Orders Secured(3) 400 9 400 9
Development Pipeline(4) 2,500 58 2,500 57
Near-term Market 4,200 97 4,100 94
Opportunity(5)
Notes: 1. Current annualised production rate
2. Annualised potential mature volume of Current Series Production (Item
1 above) when fully ramped-up
3. Annualised mature volume of programmes for which SinterCast's foundry
customers have received production orders, but have not yet started
series production
4. Annualised mature volume of development programmes that SinterCast is
currently supporting, but have not yet been awarded as series
production orders
5. Total Near-term Market Opportunity (sum of items 2, 3 and 4)
* KEQVS: Thousands of Engine Equivalents
** Assumes SEK 23 per Engine Equivalent, depending on exchange rates
Financial Summary
Revenue
The revenue for the SinterCast Group relates primarily to income from equipment
(sales and leases), series production and engineering service.
Revenue Breakdown April-June January-June
2010 2009 2010 2009
Number of Sampling Cups shipped 25,400 9,300 48,650 20,600
Equipment (1) 0.4 1.7 1.3 2.0
Series Production (2) 7.4 3.1 14.4 6.4
Engineering Service( 3) 0.6 0.4 0.7 0.8
Other( ) 0.2 0.1 0.2 0.1
Total 8.6 5.3 16.6 9.3
(Amounts in SEK million if not otherwise stated)
Notes: 1. Includes revenue from system sales and leases and sales of spare parts
2. Includes revenue from production fees, consumables and software
licence fees
3. Includes revenue from technical support, on-site trials and sales of
test pieces
The April-June 2010 revenue amounted to SEK 8.6 million (SEK 5.3 million). The
revenue increase of 62% is a result of the significant increases in series
production and Sampling Cup shipments. The revenue from series production
increased by 140% to SEK 7.4 million (SEK 3.1 million), due to the record
production at an annualised rate of approximately 950,000 (400,000) Engine
Equivalents and the shipment of 25,400 (9,300) Sampling Cups.
The January-June 2010 revenue amounted to SEK 16.6 million (SEK 9.3 million).
The revenue increase of 78% is as a result of the significant increases in
series production and Sampling Cup shipments and the invoicing of the
Mini-System 3000 to First Automobile Works in China, which was installed during
the period. The revenue from series production increased by 125% to SEK 14.4
million (SEK 6.4 million), due to the record production at an annualised rate of
approximately 900,000 (400,000) Engine Equivalents and the shipment of 48,650
(20,600) Sampling Cups. Actual production during the first half of 2010 was
approximately 450,000 Engine Equivalents, compared to actual production of
approximately 400,000 Engine Equivalents during full-year 2009.
Results
Results Summary April-June January-June
2010 2009 2010 2009
Operating Result 0.6 -1.0 1.3 -3.7
Result for the period 3.4 2.0 4.4 -11.7
Result after tax per share (SEK)* 0.5 0.4 0.7 -2.1
(Amounts in SEK million if not otherwise stated)
*Based on 6,478,383 shares
The April-June 2010 operating result of SEK 0.6 million (SEK -1.0) million was
primarily affected by higher gross result of SEK 2.4 million compared to the
same period 2009. The result after tax for the April-June 2010 period amounted
to SEK 3.4 million (SEK 2.0 million), primarily related to the revaluation of
the deferred tax asset, as described in the section entitled "Deferred Tax
Asset".
The January-June 2010 operating result of SEK 1.3 million (SEK -3.7) million was
primarily affected by higher gross result of SEK 5.8 million compared to the
same period 2009. The result after tax for the January-June 2010 period amounted
to SEK 4.4 million (SEK -11.7 million), primarily related to the revaluation of
the deferred tax asset, as described in the section entitled "Deferred Tax
Asset".
Deferred Tax Asset
SinterCast calculates its estimated future taxable profit from secured
production orders on a quarterly basis, in order to determine the valuation of
its deferred tax asset.
Deferred Tax Asset April-June January-June
2010 2009 2010 2009
Estimated future taxable profit 92.2 39.9 92.2 39.9
Change in carry-forward tax loss taken into 11.9 9.6 11.9 -30.2
consideration
Deferred tax asset 24.3 10.5 24.3 10.5
Tax result 3.1 2.5 3.1 -8.0
(Amounts in SEK million if not otherwise stated),
(FY: Full Year)
SinterCast has reassessed the estimated future taxable profit and deferred tax
asset calculation from secured orders to reflect the current expectation of
programme longevity and the typical lifecycle for engine programmes in the
automotive industry. As of 30 June 2010, SEK 92.2 million (SEK 80.3 million) of
SinterCast's total carried-forward tax losses have been used as the basis of the
updated calculation, resulting in SEK 24.3 million (SEK 21.2 million) being
capitalised as a deferred tax asset.
Employee Stock Option Programme
As of 30 June 2010, the cost of the employee stock option programme 2009-2013
was calculated at a total amount of SEK 3.3 million (SEK 3.2 million), based on
a closing share price of SEK 49.4 (SEK 30.4). Thus far during 2010, SEK 0.7
million (SEK 0.5 million) has been accounted for as costs related to the option
programme.
Cashflow, Liquidity and Investments
The April-June 2010 cashflow result was SEK 2.8 million (SEK -0.3 million),
providing a Group liquidity of SEK 25.5 million (SEK 9.1 million) on 30 June
2010. It is noted that the cashflow result from operating activities was
positive during the period, however, the time delay between invoicing and
payment has resulted in a decrease in working capital required during the
period. Investments during the period amounted to SEK 0.1 million (SEK 0.7
million), relating to the activation of the Pressurised Pouring Furnace
development project.
Cashflow Summary April-June January-June
2010 2009 2010 2009
Cashflow from operating activities 1.1 -1.2 2.4 -2.8
Cashflow from working capital 1.8 1.6 -1.5 0.6
Cashflow from investment activities -0.1 -0.7 -0.2 -0.7
Cashflow from financing activities - - - 3.0
Cashflow total 2.8 -0.3 0.7 0.1
Liquidity 25.5 9.1 25.5 9.1
Investments 0.1 0.7 0.2 0.7
(Amounts in SEK million if not otherwise stated)
Current liquidity is SEK 25.5 million, with the prospect of an additional SEK
11.6 million being raised during September 2010 from the warrants related to the
rights issue conducted during September 2009 and an additional SEK 1.7 million
from the potential exercise of the first 15% of the employee stock options
during November-December 2010.
Risks and Uncertainty Factors
Market Development
Despite the positive increase in series production since mid-2009, the main
uncertainty factor for SinterCast continues to be the overall timing of the CGI
market ramp-up, which primarily depends on the global economy for new vehicle
sales and on the individual sales success of the vehicles equipped with
SinterCast-CGI components. The economic conditions facing the global foundry
and automotive industries have caused automotive OEMs to reduce production and,
in some cases, delay production launches. In parallel, foundries have delayed
plans for new investment in CGI production capacity. The overall decline in the
automotive market has resulted in a reduction of SinterCast's near-term market
opportunity calculation from a peak of 5.7 million Engine Equivalents on 30 June
2008 to the current value of 4.2 million Engine Equivalents. Although the
automotive sector has begun to recover, volumes are still significantly below
pre-downturn levels. While SinterCast continues to support new product
development activities, and anticipates new production launches and new
opportunities for installation revenue, the Board believes that it is still not
possible to determine the ultimate effect of the global economic recession or
the timing and rate of the overall market recovery.
Liquidity
SinterCast regularly monitors its cash position with reference to market
forecasts and internal expense budgets. In consideration of current expense and
revenue forecasts, the Board judges that the Company's financial position is
secure. The Company will continue its prudent approach toward expenses and new
recruitment as the overall market recovery evolves.
Market Penetration and Competition
SinterCast has played a leading role in the development and application of CGI
since the early 1990's. SinterCast enjoys global brand recognition and respect
as the CGI technology leader and is welcomed by the industry as a reliable and
trustworthy partner. However, virtually every company encounters competition,
and SinterCast is no exception. As the CGI market has developed, some foundry
supply companies have proposed alternative CGI technologies. To SinterCast's
knowledge, these have included Hereaus-Electronite, OxyCast, OCC and NovaCast.
It is also possible that some foundries may opt to produce CGI using in-house
control and discipline, but this is generally judged to become less likely as
product complexity and production volumes increase, and as specification
requirements become more rigidly enforced by the end-users. SinterCast judges
that its technology and engineering know-how provides the most reliable and
cost-effective solution for the production of high quality CGI. Based on its
proven technology, production experience and engineering service, SinterCast
will continue to support new CGI development activities to further increase its
share of the world CGI production capacity. With respect to the development of
alternative automotive technologies such as biofuels, hybrids and fuel cells,
SinterCast does not expect these to have a significant effect on the Company's
competitive position for the foreseeable future.
Personnel
As of 30 June 2010, the Group had 13 (13) employees, two (two) of which were
female. The core technical staff has the necessary skills and resources to
support ongoing customer activities and to support the current intensified
market development. Further recruitment will be phased with the development of
field activities, particularly the need to support new installations.
Accounting Principles
The information provided on behalf of the Group in this interim report has been
prepared in accordance with Sweden's Annual Accounts Act and IAS 34 Interim
Financial Reporting. As of 1 January 2009, several amendments to existing
standards, new interpretations and one new standard (IFRS 8) have come into
effect. In accordance with IAS 1, SinterCast has opted to present the Group's
total earnings divided into two statements: a separate income statement and a
statement of comprehensive income. Furthermore, the consolidated statement of
changes in shareholders' equity only includes transactions with the Group's
owners. As of 1 April 2009, development costs that can be directly attributed
to the design and testing of identifiable and unique new products controlled by
the Group are recognised as intangible assets when the criteria of IAS38 are
met. Beginning with the 3Q09 report, SinterCast has reassessed the estimated
future taxable profit and deferred tax asset calculation to reflect the typical
lifecycle of an engine programme in the automotive industry. In compliance with
IFRS 8, beginning with the 4Q09 report, the Geographical Market presentation
summary has been removed from the financial statements, to better correspond
with the internal reporting within the Group. The reporting for the Parent
Company has been prepared in accordance with Sweden's Annual Accounts Act. The
accounting policies that have been applied for the Group and for the Parent
Company are in agreement with the accounting policies used in the preparation of
the Company's latest annual report.
No material transactions have taken place between SinterCast and the Board or
the Management during the period.
Events after the Balance Sheet Date
There have been no significant events since the balance sheet date of 30 June
2010 that could materially change these financial statements.
Parent Company
SinterCast AB (publ) is the Parent Company of the SinterCast Group, with
registered office located in Stockholm, Sweden. The Parent Company has 10 (12)
employees. The majority of the operations are conducted by the Parent Company,
including responsibility for the representative office in China and sales
representatives in Australia, India, Japan and Korea. Operations in the UK and
the USA are managed by the local companies. The information given for the Group
in this report corresponds in all material respects to the Parent Company.
Information
The Interim Report July-September 2010 will be published on 3 November 2010
The Interim Report October-December and Full Year Results 2010 will be published
on 18 February 2011
The Interim Report January-March 2011 will be published on 4 May 2011
The Interim Report April-June 2011 will be published on 24 August 2011
This report has not been reviewed by the company's auditors
The Board of Directors and the CEO certify that the half-yearly financial report
provides a true and fair overview of the operations, outlook, financial position
and results of the Company and the Group, and describes the material risks and
uncertainties that the Company and the companies in the Group face.
Stockholm, 25 August 2010
Ulla-Britt Fräjdin-Hellqvist Aage Figenschou Andrea Fessler
Chairman of the Board Vice Chairman of the Board Member of the Board
Robert Dover Steve Dawson
Member of the Board President & CEO
Member of the Board
For further information please contact:
Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Tel: +46 8 660 7750
Mobile: +44 771 002 6342
e-mail: steve.dawson@sintercast.com
SinterCast is the world's leading supplier of process control technology for the
reliable high volume production of Compacted Graphite Iron (CGI). With at least
75% higher tensile strength, 45% higher stiffness and approximately double the
fatigue strength of conventional grey cast iron and aluminium, CGI allows engine
designers to improve performance, fuel economy and durability while reducing
engine weight, noise and emissions. SinterCast produces a variety of CGI
components ranging from 2 kg to 17 tonnes, all using the same process control
technology. The end-users of SinterCast-CGI components include Aston Martin,
Audi, Caterpillar, Chrysler, DAF Trucks, Ford, Ford-Otosan, General Electric
Transportation Systems, General Motors, Hyundai, Navistar, Jaguar, Kia, Land
Rover, MAN, Porsche, PSA Peugeot-Citroën, Renault, Rolls-Royce Power
Engineering, Toyota, Volkswagen, Volvo and Waukesha Engine. The SinterCast share
is quoted on the Small Cap segment of the Nordic Exchange, Stockholm
(Stockholmsbörsen: SINT).
END
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