SinterCast Results April-June 2011
* Revenue for period: SEK 12.1 million (SEK 8.6 million). Year-to-date: SEK
21.2 million (SEK 16.6 million)
* Operating result: SEK 3.6 million (SEK 0.6 million). Year-to-date: SEK 4.3
million (SEK 1.3 million)
* Earning/share: SEK 0.9 per share (SEK 0.5 per share). Year-to-date: SEK 1.0
per share (SEK 0.7 per share)
* Cashflow: SEK -1.5 million (SEK 2.8 million). Year-to-date: SEK 0.0 million
(SEK 0.7 million)
* Cashflow year-to-date: SEK 6.5 million before dividend and loan repayment
* Three installations completed during first-half of 2011, further
installations expected before year-end
* New ductile iron technology development introduced at GIFA world foundry
trade fair, field trials secured
* New US fuel economy legislation can provide opportunities for diesel growth
in North America
Series production continues at record levels, with year-on-year volume up by 42%
Current Production and Outlook
Series production remained strong and stable throughout the quarter, with record
annualised production of 1.35 million Engine Equivalents. The current series
production programmes have the potential to grow to an annual volume of
approximately 1.7 million Engine Equivalents when all programmes reach mature
volume. Accordingly, increased production is expected before year-end.
SinterCast is currently supporting product development programmes for passenger
vehicle, commercial vehicle and industrial power applications in Europe, Asia
and the Americas. It is estimated that these programmes, some of which have
already been approved for series production, could provide approximately 2.75
million additional Engine Equivalents per year. The combined potential of the
current production programmes and programmes currently under development
represents a market opportunity of approximately 4.45 million Engine Equivalents
per year within SinterCast's five year planning horizon.
Thus far during 2011, SinterCast has announced new installations at the Daedong
and Daeshin foundries in Korea. A third installation has recently been
completed at an international cylinder block and head foundry. A formal
announcement of this installation, made on a lease basis, will be issued when
approval is received by the foundry and the end-user. The installation outlook
remains positive for the second half of the year, with discussions at advanced
stages in Asia and the Americas. SinterCast maintains the goal, presented in
November 2010, of securing five new installations during 2011.
At the GIFA world foundry trade fair, 28 June - 2 July, SinterCast introduced a
suite of new technology advances to extend the functionality and capability of
its Compacted Graphite Iron (CGI) process control technology. The new
technologies focus on increased automation of the foundry process, improved
efficiency, and improved accuracy and robustness of the CGI production process.
These technologies are now incorporated as standard features of SinterCast's
System 3000 process control systems.
SinterCast also took the opportunity of GIFA 2011 to introduce its technology
development for the control of ductile iron production. The development was
well received and field trials have been secured at a select group of foundries
in Europe, Asia and the Americas. The feedback from the field trials, to be
conducted during the autumn of 2011, will provide additional technical data to
refine and validate the correlations. The trials will also provide feedback as
to how the technology will be used by customers, and how it will be valued,
providing input to the business model that is currently under development. The
objective of the ductile iron technology development is to provide a net cost-
benefit to the foundry by reducing magnesium consumption, improving mould yield,
reducing casting defects and improving machinability. The field trials are an
important step in the potential development of a new ductile iron product.
On 29 July, the US government announced new fuel economy standards for cars and
light trucks that will require significant improvements in fuel economy and
greenhouse gas emissions. The new standards require an increase to 54.5 mpg for
all new cars and trucks sold in the United States in 2025. Administration
officials have indicated that the 54.5 mpg standard would reflect combined fuel
economy of 62 mpg for cars and 45 mpg for pick-up trucks. These proposed
standards can provide an improved opportunity for the increased use of fuel
efficient diesel engines in North America.
Financial Summary
Revenue
The April-June 2011 revenue amounted to SEK 12.1 million (SEK 8.6 million). The
revenue increase of 41% represents the combined effect of a 31% increase in
series production revenue and a 275% increase in equipment sales. The equipment
revenue was derived from the sale of a Mini-System 3000 to the Daeshin foundry
in Korea plus System 3000 spares and ancillary equipment sold in support of a
lease installation at an undisclosed cylinder block and head foundry.
The January-June 2011 revenue amounted to SEK 21.2 million (SEK 16.6 million).
The revenue increase of 28% represents the combined effect of a 24% increase in
series production revenue and an 85% increase in equipment sales. The increased
revenue related to installations is a result of installation support provided at
the Daedong foundry in Korea, the sale of a Mini-System 3000 to the Daeshin
foundry in Korea, and the sale of System 3000 spares and ancillary equipment,
plus on-site engineering service in support of a lease installation, yet to be
announced. 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
2011 2010 2011 2010
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Number of Sampling Cups shipped 36,000 25,400 63,400 48,650
Equipment 1 1.5 0.4 2.4 1.3
Series Production 2 9.7 7.4 17.8 14.4
Engineering Service 3 0.8 0.6 0.9 0.7
Other 0.1 0.2 0.1 0.2
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Total 12.1 8.6 21.2 16.6
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(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
Results
The April-June 2011 operating result was SEK 3.6 million (SEK 0.6 million). The
sales & administration costs increased, mainly because of the successful
SinterCast presence at the GIFA world foundry trade fair, other marketing
activities, and increased AGM costs. However, the operating result increased by
SEK 3.0 million because of the equipment sales and the series production during
the period.
The result after tax for the April-June 2011 period amounted to SEK 6.2 million
(SEK 3.4 million), primarily related to the decreased market value of
outstanding currency hedge contracts and the revaluation of the deferred tax
asset, as described in the section entitled "Deferred Tax Asset".
The January-June 2011 operating result was SEK 4.3 million (SEK 1.3 million).
During the period, the operating costs increased by approximately 8% compare to
the same period last year. The cost increase is mainly within the sales &
marketing function, as a result of SinterCast's efforts to increase market
presence, in line with the budget and the overall growth strategy.
The result after tax for the January-June 2011 period amounted to SEK 7.3
million (SEK 4.4 million), primarily related to the decreased market value of
outstanding currency hedge contracts and the revaluation of the deferred tax
asset, as described in the section entitled "Deferred Tax Asset".
Results Summary April-June January-June
2011 2010 2011 2010
------------------------------------------------------------------------
Operating Result 3.6 0.6 4.3 1.3
Result for the period 6.2 3.4 7.3 4.4
Result after tax per share (SEK) 0.9 0.5 1.0 0.7
------------------------------------------------------------------------
(Amounts in SEK million if not otherwise stated)
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. The estimated future taxable profit as of 30 June 2011
has been calculated to an amount of SEK 128.8 million (SEK 92.2 million),
representing approximately 22% of SinterCast's total carried-forward tax losses,
resulting in SEK 33.9 million (SEK 24.3 million) being capitalised as a deferred
tax asset. Due to the positive result, during the January-June 2011 period, the
deferred tax asset has been reduced by SEK 1.1 million (SEK 0.0 million) to SEK
32.8 million (SEK 24.3 million).
Employee Stock Option Programme
As of 30 June 2011, the cost of the employee stock option programme 2009-2013
was calculated at a total amount of SEK 3.1 million (SEK 3.3 million), based on
a closing share price of SEK 50.5 (SEK 49.4). Thus far during 2011, SEK 0.4
million (SEK 0.7 million) was accounted for as costs related to the option
programme.
Cashflow, Liquidity and Investments
The April-June 2011 cashflow result was SEK -1.5 million (SEK 2.8 million). The
cashflow was decreased by SEK 3.5 million as a result of the dividend of SEK
0.5 per share paid to shareholders on 27 May 2011.
The January-June 2011 cashflow result was SEK 0.0 million (SEK 0.7 million). The
liquidity on 30 June 2011 was SEK 40.3 million, unchanged compared to 31
December 2010. However, the liquidity effectively increased by SEK 6.5 million
as a result of increased series production and installation activities, and was
thereafter decreased by the payment of the dividend amounting to SEK 3.5 million
(SEK 0.0 million) and repayment of the bank loan amounting to SEK 3.0 million
(SEK 0.0 million). The increased cashflow related to installations includes
payment received for the December 2010 activation of the back-up System 2000 at
the Dashiang foundry in China and for the System 3000 installation at the
Daedong foundry in Korea that was shipped in December 2010 and installed in
January 2011.
Investments during the period amounted to SEK 0.7 million (SEK 0.2 million).
Cashflow Summary April-June January-June
2011 2010 2011 2010
-----------------------------------------------------------
Cashflow from operating activities 3.1 1.1 4.6 2.4
Cashflow from working capital -1.0 1.8 2.1 -1.5
Cashflow from investment activities -0.1 -0.1 -0.2 -0.2
Cashflow from financing activities -3.5 - -6.5 -
-----------------------------------------------------------
Cashflow total -1.5 2.8 0.0 0.7
Liquidity 40.3 25.5 40.3 25.5
Investments 0.1 0.1 0.7 0.2
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(Amounts in SEK million if not otherwise stated)
SinterCast has historically been financed by risk capital provided by its
shareholders and has managed its expenses according to market forecasts,
resource requirements, and regular reviews of expenditures in relation to the
annual budget. Following positive cashflow from operations during 2010, the
Board judges that the long-term financing of the Company is secure, allowing the
Company to be more pro-active in its operations.
Risks and Uncertainty Factors
The main uncertainty factor for SinterCast continues to be the overall timing of
the CGI market ramp-up. This primarily depends on OEM decisions for new CGI
engines and other components, the global economy for new vehicle sales and the
individual sales success of vehicles equipped with SinterCast-CGI components.
SinterCast has diversified its product development activities in order to
minimise the risk associated with any one industrial sector. Current series
production is well balanced between V-diesel engines for passenger vehicles,
commercial vehicle engine components, and other applications such as exhaust
components and industrial power engines. SinterCast continues to support
product development in these traditional areas while also exploring other
potential applications. SinterCast's presence in Europe, Asia and the Americas
also reduces the dependence on any one geographical sector. Pending the results
of field trials, the new ductile iron technology development provides the
potential to extend the market activities beyond the core CGI arena.
Market Penetration and Competition
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, OCC, OxyCast and NovaCast. It is also possible
that some foundries may opt to produce CGI using in-house control and
discipline, but it is generally judged that this will 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.
SinterCast's business development is strongly linked to the internal combustion
engine, and particularly to the diesel engine. New powertrain technologies,
such as vehicle electrification (hybrids and plug-in vehicles) and fuel cells
attract significant media attention, however, the development and implementation
of these technologies remains a long-term project. Most industry forecasts
indicate a market penetration for these technologies of approximately 10% in the
2020 to 2025 timeframe, which is below the expected global penetration for
diesel engines. In consideration of the technology leadtime and other practical
concerns such as increased cost and driving range, SinterCast does not expect
these technologies to have a significant effect on the Company's competitive
position for the foreseeable future.
Business Model
SinterCast sells or leases the System 3000 hardware, leases the process control
software, sells the sampling consumables, and charges a running Production Fee
for each tonne of CGI castings produced using the SinterCast technology.
Revenue is also derived from spare parts, engineering service, field trials and
sales of test pieces. The total running fees (sampling consumables plus
Production Fee) depend on the ladle size and the casting yield for each foundry
and each product. For a typical cylinder block, the running fees provide revenue
of approximately EUR 40~50 per tonne of castings, equivalently, EUR 2.00~2.50
for each 50 kg Engine Equivalent. The SinterCast business model is highly
scalable, allowing profitability to rise as the installed base grows and as more
products enter series production.
Personnel
As of 30 June 2011, the Group had 16 (13) employees, three (two) of which were
female. The core technical staff has the necessary skill, experience and
resources to support the ongoing customer activities and the anticipated market
development. Further recruitment will be phased with the development of new
products and field activities, particularly the need to support new
installations and series production activities.
On 14 September 2011, Mr David Gilson will join SinterCast in the capacity of
Global Sales & Marketing Director. Mr Gilson will be responsible for broadening
SinterCast's penetration in the foundry and end-user markets, supporting the
development of new business opportunities and securing new foundry
installations, in line with the overall growth strategy. Mr Gilson joins
SinterCast with a strong background in global foundry sales and marketing,
previously serving as the Global Marketing Manager at Ashland Casting Solutions
with responsibility for sales and marketing of Ashland's binder systems. Mr
Gilson holds a Bachelor of Science degree in Metallurgical Engineering from the
University of Wisconsin - Madison and a Masters of Business Administration
degree from the University of Wisconsin - Milwaukee.
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. The reporting for the Parent Company has been prepared in
accordance with Sweden's Annual Accounts Act and RFR 2. 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
2011 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 14 (10)
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 2011 will be published on 2 November 2011
The Interim Report October- December and Full Year Results 2011 will be
published on 22 February 2012
The Interim Report January-March 2012 will be published on 25 April 2012
The Interim Report April-June 2012 will be published on 22 August 2012
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, 24 August 2011
Ulla-Britt Fräjdin-Hellqvist Aage Figenschou Andrea Fessler
Chairman of the Board Vice Chairman of the Board Member of the Board
Robert Dover Laurence Vine-Chatterton Steve Dawson
Member of the Board Member of the Board President & CEO
Member of the Board
For further information please contact:
Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Office: +46 8 660 7750
Mobile: +44 771 002 6342
e-mail: steve.dawson@sintercast.com
website: www.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. The SinterCast technology is used for the
production of more than 46 CGI components, ranging from 2 kg to 17 tonnes, all
using the same proven 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, Jaguar, Kia, Land Rover, MAN, Navistar, Porsche, PSA Peugeot-Citroën,
Renault, Rolls-Royce Power Engineering, Scania, Toyota, VM Motori, Volkswagen,
Volvo and Waukesha Engine. The SinterCast share is quoted on the Small Cap
segment of the NASDAQ OMX stock exchange (Stockholmsbörsen: SINT).
- END-
