SinterCast Results January-March 2015

Series production breaks two million Engine Equivalent milestone

Five consecutive quarters with record production

First Quarter 2015

• Revenue for Period: SEK 18.8 million (SEK 14.6 million)
• Operating Result: SEK 5.9 million (SEK 2.9 million)
• Earnings per Share: SEK 0.82 per share (SEK 0.45 per share)
• Cashflow from Operations: SEK 4.5 million (SEK -2.1 million)
• Series production reaches 2.0 million Engine Equivalents; 18% year-on-year increase
• Strong ramp-up of Ford petrol engine as 2015 F-150 sales increase in USA
• Continued growth of European commercial vehicle programmes
• Three new installation commitments secured in Asia during first quarter
• Installed Base: 23 fully automated systems and 19 mini-systems in Europe, Asia and the Americas

Series Production* 

For graph, see Press Release PDF

Annualised series production reached 2.0 million Engine Equivalents in the first quarter, providing an 18% year-on-year increase.

* Annualised average production of Engine Equivalents during the quarter (1 Engine Equivalent = 50 kg)

CEO Comments

Strong growth on all fronts

Following annualised series production of 2.2 million Engine Equivalents in March, the annualised volume for the first quarter reached 2.0 million Engine Equivalents, providing five consecutive quarters of record production and an 18% year-on-year increase.  The recent trend reinforces the sustained long-term growth, with an average compounded annual growth rate of 18% since the first quarter of 2007.  The production demand in the first quarter also led to the shipment of 40,500 Sampling Cups; the second highest quarter in SinterCast's history.  Together with two new installations accounted for in the first quarter, the series production and the Sampling Cup shipments resulted in record revenue of SEK 18.8 million and a 103% increase in the year-on-year operating result.

Series production benefitted from accelerated growth of the Ford 2.7 litre V6 petrol engine as sales of the model year 2015 Ford F-150 ramped-up during the quarter.  It is particularly rewarding that journalists, dealers and consumers have provided consistently positive feedback regarding the performance and refinement of the SinterCast-CGI petrol engine.  Series production also benefitted from increased production of commercial vehicle cylinder blocks and heads in Europe, and by the start of production of industrial power engine components at the newly commissioned installation at the Impro Industries foundry in China.  Based on customer production reporting, the SinterCast process was used for the production of more than 75,000 cylinder blocks during the month of March.  The outlook remains positive in each of the passenger vehicle, commercial vehicle and industrial power sectors, as competitive benchmarks and market awareness continue to grow. 

The first quarter also provided three new installation commitments.  The first commitment, at Dongfeng Trucks, China's largest heavy duty truckmaker, was announced on 7 January.  However, the equipment has been held at the Technical Centre in Sweden in order to allow the Dongfeng engineers to train on their own equipment.  The Dongfeng installation will be shipped, commissioned and accounted for in the second quarter.  The other two installations, at Doosan Infracore in Korea, and at an undisclosed engine component foundry in Japan, were shipped during the first quarter and have been commissioned.  The installations in China, Korea and Japan are the result of our strong commitment to the Asian market over many years; the awareness and acceptance of the SinterCast brand; and, the confidence in our technology and engineering support.  Asia currently accounts for 17 of our 42 installations, but it is even more significant to note that 12 of our last 20 installations have been in China, Japan and Korea.

Ductile Iron technology

Development of the ductile iron technology continued during the quarter with field trials and product development.  The current development is focussing on the optimisation of the ductile iron thermal analysis sampling device and the metallurgical correlations, on the hardware and software user interfaces, and on the preparation for reference case studies.  The SinterCast ductile iron technology is expected to provide additional benefit to customers by reducing magnesium consumption, improving mould yield and reducing casting defects in the foundry, and by improving machinability.   

Financial Summary

Revenue

The revenue for the SinterCast Group relates primarily to income from equipment, series production and engineering service.

The January-March 2015 revenue amounted to SEK 18.8 million (SEK 14.6 million). Revenue from series production increased by 41% to SEK 16.3 million (SEK 11.6 million), due to record annualised production of approximately 2.0 million (1.7 million) Engine Equivalents and the increased shipment of 40,500 (37,100) Sampling Cups.  Equipment revenue amounted to SEK 2.1 million (SEK 2.5 million), following the shipment of Mini-System 3000 installations to Doosan Infracore in Korea and to an undisclosed engine component foundry in Japan. The total equipment revenue for the first quarter of 2014 was higher due to the shipment of a larger System 3000 Plus installation to the Zhongding Power foundry in China.  Engineering Service amounted to SEK 0.3 million (SEK 0.5 million) following support provided to various customers globally and the sale of test pieces.

Results

The business activities of SinterCast are best reflected by the Operating Result. This is because the "Result for the period after tax" and the "Earnings per Share" are influenced by the financial income and costs and by the revaluation of tax assets.

The January-March 2015 operating result of SEK 5.9 million (SEK 2.9 million) increased as a result of higher gross results of SEK 4.0 million primarily derived from higher revenue and margin, combined with higher operational expenses of SEK 0.7 million and increased operating expenses from exchange losses from operating receivables and liabilities of SEK 0.3 million.  The result for the period after tax amounted to SEK 5.8 million (SEK 3.2 million), primarily related to the increased operating result of SEK 3.0 million, the decreased financial net of SEK 0.5 million (primarily unrealised revaluation losses derived from outstanding hedge contracts), and decreased tax expenses amounting to SEK 0.1 million.

Deferred Tax Asset

Tax amounted to SEK 0.0 million (SEK -0.1 million).  The estimated future taxable profit and deferred tax asset calculation is reassessed every quarter. As of 31 March 2015, SEK 133.3 million (SEK 128.5 million) of SinterCast's total carried-forward tax losses have been used as the basis of the updated calculation, resulting in SEK 29.3 million (SEK 28.3 million) being capitalised as a deferred tax asset.

Cashflow, Liquidity and Investments

The January-March 2015 cashflow from operations increased by SEK 6.6 million compared to the same period in 2014, primarily due to an increase in cashflow from working capital (SEK 4.1 million), derived from increased inventory (SEK 0.7 million), increased receivables (SEK 3.3 million) and increased operating liabilities (SEK 2.6 million) since year-end. The total cashflow increased by SEK 6.0 million after increased investments by SEK 0.6 million, primarily related to increased activation of products under development (SEK 0.5 million) and increased patent investments (SEK 0.2 million) since year-end.  The total cashflow amounted to SEK 3.8 million (SEK -2.2 million). Liquidity on 31 March 2015 was SEK 48.7 million (SEK 45.6 million).

Risks and Uncertainty Factors

The main uncertainty factor for SinterCast continues to be the 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.

The economies have developed differently in Europe, Asia and the Americas over the last several years.  The European passenger vehicle, commercial vehicle, and construction equipment markets have begun to show some recovery, but this growth is from a relatively low level and uncertainty remains in the market.  In Asia, the dominant Chinese market is characterised by overcapacity in the commercial vehicle and construction equipment sectors, which represent the primary opportunity for CGI.  This overcapacity, coupled with the current economic uncertainty in China, influences product development cycles and production volumes. In contrast, consumer confidence has increased in North America and SinterCast has benefitted from increased vehicle sales. SinterCast's geographical diversification helps to mitigate changing macroeconomic conditions in the different regions.  However, as manufacturing continues to grow in developing countries, many of the future installation opportunities will be in price sensitive markets and this can present a challenge for the SinterCast fee structure and Business Model.        

For full risk and uncertainty factor information, see Note 26 on pages 46 and 47 in SinterCast's Annual Report 2014

Organisation

With successful high volume CGI production in foundries located in Europe, Asia and the Americas, SinterCast has established a global organisation with employees and offices in Sweden, the United Kingdom, the United States, China and Korea.  As of 31 March 2015, the Group had 19 (17) employees, four (three) of whom are female. The company is well positioned to support global market activities and to drive SinterCast's future growth.

Parent Company

SinterCast AB (publ) is the parent company of the SinterCast Group, with its registered office located in Stockholm, Sweden. On 31 March 2015, the parent company had 14 (12) employees. The majority of the operations are managed by the parent company while local operations in the United Kingdom, United States, Korea and China are managed by the local companies.  The information given for the Group in this report corresponds in all material respects to the parent company. However, the result for the period may differ between the Group and the parent company due to intercompany transactions between the parent company and its subsidiaries.  

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 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 31 March 2015 that could materially change these financial statements. The following press releases have been issued:  
 
13 April 2015 - Notice of the Annual General Meeting of SinterCast (publ)
14 April 2015 - Series production breaks two million Engine Equivalent milestone

Annual Report 2014

The Annual Report 2014 was published on the SinterCast website on 2 April 2015. In consideration of cost efficiency and environmental concern, the Annual Report 2014 was only issued in electronic format, as a PDF file.

Annual General Meeting

The Annual General Meeting 2015 of SinterCast AB (publ) will be held at 15:00 on Wednesday 20 May 2015, at the Royal Swedish Academy of Engineering Sciences (IVA), Grev Turegatan 16, Stockholm. The notice to the Annual General Meeting was published on 13 April 2015 and is available on the SinterCast website.

Proposed Dividend        2015

The Board's intention is to continue to provide an ordinary dividend to the shareholders, based primarily on the cashflow from operations. In the event that the Board considers that the liquidity exceeds the amount needed to support the operational requirements and strategic objectives, the Board has the option to propose an extraordinary dividend or a share buy-back to further adjust the liquidity.         

The Board of Directors propose an ordinary dividend of SEK 1.5 per share (SEK 1.2) plus an extraordinary dividend of SEK 0.7 per share, representing a transfer of SEK 15.6 million (SEK 8.5 million) to the shareholders of SinterCast AB (publ). The Board proposes 22 May 2015 as the record date for entitlement to receive dividends. In deciding the amount of the ordinary dividend to be proposed to the AGM 2015, the Board considered cashflow from operations, the financial position, investment requirements and other factors, such as market outlook, growth strategy and the internal financial forecast for the company and for the Group.

Information

The Interim Report April-June 2015 will be published on 29 July 2015
The Interim Report July-September 2015 will be published on 11 November 2015
The Interim Report October-December and Full Year Results 2015 will be published on 17 February 2016
The Interim Report January-March 2016 will be published on 27 April 2016

This report has not been reviewed by the Company's Auditors.

Stockholm 29 April 2015

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 size, weight, noise and emissions. The SinterCast technology, with 42 installations in 12 countries, is primarily used for the production of petrol and diesel engine cylinder blocks and exhaust components for passenger vehicles, medium-duty and heavy-duty cylinder blocks and heads for commercial vehicles, and industrial power engine components for marine, rail, off-road and stationary engine applications. SinterCast's series production components range from 2 kg to 9 tonnes, all using the same proven process control technology.  The SinterCast share is quoted on the Small Cap segment of the Stockholm NASDAQ OMX stock exchange (Stockholmsbörsen: SINT). For more information: www.sintercast.com

END

Press Release PDF http://hugin.info/1205/R/1915972/684958.pdf