SinterCast Results January-March 2020

Customer shutdowns in March lead to 6.4% decline in year-on-year first quarter series production

First Quarter 2020

• Revenue for Period: SEK 24.6 million (SEK 22.9 million)
• Operating Result: SEK 7.9 million (SEK 8.9 million)
• Earnings per Share: SEK 0.9 per share (SEK 1.2 per share)
• Cashflow from Operations: SEK 9.1 million (SEK 7.2 million)
• Uncertain near-term outlook; continued confidence in long-term growth
• New order received for large industrial power engine components
• Installations at First Automobile Works and Scania planned for mid-year
• Installed Base: 26 (25) fully automated systems, 26 (23) mini-systems and five (four) tracking systems in 14 (14) countries

Series Production*  

Following a 5.4% increase in year-on-year series production in January and February, series production decreased by 29% in March due to customer shutdowns in the second half of the month. Series production for the first quarter finished at 2.9 million Engine Equivalents, resulting in a 6.4% decline compared to the first quarter of 2019.

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

CEO Comments

Corona virus causes near-term uncertainty for foundry and automotive industries
Following a positive start in January and February, with a 5.4% increase in year-on-year series production and an 8% increase in Sampling Cup shipments compared to the full-year 2019 pace, the onset of the COVID-19 corona virus in Europe and the Americas caused shutdowns at several of our foundry customers and automotive end-users in the second half of March.  Annualised series production in March decreased to 2.4 million Engine Equivalents (-29% year-on-year) resulting in annualised production of 2.9 million Engine Equivalents for the first quarter; a decline of 6.4% compared to the first quarter of 2019.  Although it is not yet possible to predict the duration of the shutdowns, most industry analysts suggest that it is prudent to anticipate a weak second quarter with the start of recovery in the second half of year.  While the series production may be temporarily influenced by the COVID-19 virus, SinterCast remains confident in the long-term growth potential of CGI.

In response to the abrupt change in market outlook, SinterCast has implemented a series of pro-active actions.  The first response action was to increase the stock of consumable Sampling Cups and Thermocouple Pairs to ensure the security of supply to our international customers in the event of shutdowns at our local consumable suppliers.  Secondly, while many of our customers are down, we have embraced the slowdown as an opportunity to focus on our internal development activities.  This opportunity follows a particularly busy period over the past 18 months, where intensified customer activities resulted in an accumulation of internal product development projects and continuous improvement concepts.  The third leg of our approach to the market slowdown was to postpone the publication of the 2019 Annual Report from 2 April to 19 May and to postpone the AGM from 19 May to 23 June.  The Board judges that these postponements will improve the market outlook visibility, enabling the Board to take a more informed approach regarding the balance between our liquidity and our dividend proposal.  Further guidance on the dividend proposal will be published on 15 May.

In the meantime, there have also been positive signs and progress in the market.  Benefitting from a 23% increase in year-on-year first quarter Sampling Cup shipments, revenue increased by 7.4% despite the 6.4% decline in series production.  The improved revenue increased the liquidity from SEK 32.9 million at year end to SEK 41.5 million, further strengthening our cash position.  Operationally, Series production in Korea returned to normal levels during March and Hyundai started production of a new bedplate for a 3.0 litre V6 during the quarter.  The bedplate was converted from ductile iron to CGI to improve efficiency and productivity in the foundry and the machining operations.  SinterCast also received a new series production order for large engine components used in industrial power applications.  Series production is expected to begin during the first half of 2020, with the potential to provide more than 100,000 Engine Equivalents per year at mature volume.  The new order provides the opportunity for the industrial power sector to continue to account for 5-10% of the total volume, even as the core cylinder block and head market continues to grow.

Installation outlook remains positive
Building upon orders received in 2019 for System 4000 Plus installations at the new Scania foundry in Sweden and at the First Automobile Works (FAW) foundry in China, the installation outlook for 2020 remains positive.  Both installations are scheduled to be commissioned during mid-year, with the start of series production of heavy-duty commercial vehicle engine components planned to begin at both sites before year-end.  Also during 2019, a full System 4000 process control system was installed at the WHB foundry in Brazil on a trial basis, with a purchase option due during the second quarter of 2020.  The purchase option discussions have been paused during the shutdown and will be resumed during the second quarter.  Overall, we maintain the ambition to set a second consecutive year of record installation revenue during 2020.

Installation discussions are ongoing for CGI process control systems, capacity upgrades, and Tracking Technologies installations in grey iron, CGI and ductile iron foundries.  In addition to these current installation opportunities, SinterCast is also investigating the development of other unique technologies – within and beyond the scope of thermal analysis – to improve quality and production efficiency in the metals industry, and to broaden our product portfolio and our production base.

Stockholm 21 April 2020

For further information please contact:

Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Office:   +46 150 794 40
Mobile:  +44 771 002 6342
e-mail:    steve.dawson@sintercast.com
website:  www.sintercast.com

This press release contains information SinterCast AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication, through the agency of the President & CEO Dr. Steve Dawson, at 12:30 CET on 21 April 2020.

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 is 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 agriculture, marine, rail, off-road and stationary engine applications. SinterCast supports the series production of components ranging from 2.7 kg to 9 tonnes, all using the same proven process control technology.  As a specialist supplier of precision measurement and process control solutions to the metals industry, SinterCast also supplies the SinterCast Ladle Tracker® and SinterCast Cast Tracker® technologies, to improve process control, productivity and traceability in a variety of applications.  With 57 installations in 14 countries, SinterCast is a publicly traded company, quoted on the Small Cap segment of the Nasdaq Stockholm stock exchange (SINT). For more information: www.sintercast.com

                                                                                       END

Tags: