SinterCast Results July-September 2009
* Turnover for period: SEK 5.2 million (SEK 6.0 million).
Year-to-date: SEK 14.5 million (SEK 17.4 million)
* Operating result: SEK -1.5 million (SEK -0.4 million).
Year-to-date: SEK -5.2 million (SEK -4.5 million)
* Result after tax: SEK 10.1 million (SEK -0.4 million).
Year-to-date: SEK -1.6 million (SEK 18.1 million)
* Earnings/share: SEK 1.8 per share (SEK -0.1 per share).
Year-to-date: SEK -0.3 per share (SEK 3.3 per share)
* Cashflow: SEK 17.6 million (SEK -2.9 million). Year-to-date: SEK
17.7 million (SEK -7.5 million)
* New rights issue provides net cash injection of SEK 18.4 million,
increasing liquidity to SEK 26.7 million
* Ford launches high volume diesel engine for Super Duty® pick-up
trucks in North America
* Dashiang Precision foundry in China begins production of new high
volume exhaust component
* First-ever SinterCast-CGI trial in India successfully concluded
at DCM Engineering foundry
Following annualised production of approximately 400,000 Engine
Equivalents during the
first seven months of 2009, series production climbed rapidly to
500,000 Engine Equivalents
in September, resulting from the start of production of two new
programmes.
Current Production and Outlook
Although the existing series production programmes have not yet begun
to show any significant signs of recovery, the total production
volume has increased as a result of the launch of two new programmes:
the Ford 6.7 litre V8 in North America and another new exhaust
component at the Dashiang Precision foundry in China. The Ford Power
Stroke® diesel engine, based on a SinterCast-CGI cylinder block, was
introduced by Ford on 31 August and officially launched in the new
F-Series Super Duty® trucks on 24 September. The state-of-the-art
engine is the first CGI engine to be launched in the high volume
North American pick-up truck sector. The growth in series production
at the Dashiang Precision foundry in China is based on the launch of
another new high volume exhaust component, produced for the export
market. Dashiang currently produces four different SinterCast-CGI
exhaust components.
Production of the Ford Power Stroke® diesel engine began at the Tupy
foundry in Brazil during mid-2008 and has already grown to become
SinterCast's second largest production programme. The Power Stroke®
diesel is the first engine that SinterCast has participated in as a
replacement programme for an existing engine. As such, the ramp-up
is expected to be faster than previous programmes. Based on
historical sales of F-250, F-350, F-450 and F-550 vehicles, where
more than two-thirds of all vehicles are specified with a diesel
engine, the new V8 provides the potential for more than 400,000
Engine Equivalents per year at full volume. During the introduction
of the new engine, Ford specifically stated that the use of a CGI
cylinder block enabled a weight reduction of 70 kg (160 pounds) in
the total engine weight, despite the displacement increase from 6.4
to 6.7 litres.
Also during the period, SinterCast conducted its first ever CGI
production trial in India. The trial was successfully conducted at
the DCM Engineering foundry, India's largest independent cylinder
block and head foundry. The trial was commissioned by DCM in
response to customer demand for CGI engine components as new road
infrastructure and more stringent emissions increase the demand for
improved engine performance in India. Following the trial,
SinterCast-CGI prototype cylinder blocks, weighing from 40 to 175 kg,
were delivered to passenger vehicle and commercial vehicle OEMs in
the domestic market. DCM is also in dialogue with OEMs regarding the
potential to export high quality Compacted Graphite Iron castings.
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 September 2009 30 June 2009
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series 500 11 400 9
Production[1]
Potential Mature 1,300 30 1,000 23
Volume[2]
Production Orders 200 5 500 11
Secured[3]
Development Pipeline[4] 2,600 60 2,600 60
Near-term Market 4,100 95 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 23 SEK/Engine Equivalent on 30 September 2009 and
23 SEK/Engine Equivalent on 30 June 2009
Financial Summary
Revenue
The revenue for the SinterCast Group relates primarily to income from
equipment (sales and leases), series production and engineering
service.
During July-September 2009, revenue amounted to SEK 5.2 million (SEK
6.0 million). The revenue represents 87% of the 3Q 2008 revenue,
which was the last full quarter before the impact of the global
economic downturn. Series production revenue was SEK 4.5 million (SEK
4.7 million), mainly due to the shipment of 15,400 (16,500) Sampling
Cups.
During January-September, revenue amounted to SEK 14.5 million,
representing 83% of the corresponding period in 2008 (SEK 17.4
million). The decreased revenue for the period results mainly from
the decreased series production among foundry customers. A total of
36,000 (44,000) Sampling Cups were sold during the period. Equipment
revenue for the period was SEK 2.3 million (SEK 2.4 million) and is
primarily related to the Mini-System 2000 installation at the
Luitpoldhütte foundry in Germany and the hardware upgrade/expansion
at the Tupy foundry in Brazil.
Revenue Breakdown July-September January-September
2009 2008 2009 2008
Number of Sampling Cups shipped 15,400 16,500 36,000 44,000
Equipment [1] 0.3 0.7 2.3 2.4
Series Production [2] 4.5 4.7 10.9 13.4
Engineering Service [3] 0.4 0.5 1.3 1.5
Other [4] 0.0 0.1 0.0 0.1
Total 5.2 6.0 14.5 17.4
(Amounts in SEK million if not
otherwise stated)
Notes: 1. includes revenue from System 2000 sales and leases, sales
of the Mini-System 2000 and 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
4. includes revenue from activation of the Pouring Furnace and
System 3000 development projects.
Result
The July-September 2009 operating result of SEK -1.5 million is SEK
1.1 million lower than the same period 2008, primarily affected by
depreciation (selected patents near the end of lifetime allowed to
lapse) and by the reduced costs associated with the employee stock
option programme 2006-2010 during 3Q 2008.
+-------------------------------------------------------------------+
| July-September | 2009 | 2008 | Difference |
|---------------------------------------+------+-------+------------|
| Depreciation | 0.9 | 0.2 | 0.7 |
|---------------------------------------+------+-------+------------|
| Employee Stock Option Programme | 0.2 | -0.6 | 0.8 |
| 2006-2010 | | | |
+-------------------------------------------------------------------+
The result for the July-September 2009 period amounted to SEK 10.1
million (SEK -0.4 million), primarily related to the revaluation of
the deferred tax asset, as described in the section entitled
"Deferred Tax Asset".
The operating result for the year-to-date January-September 2009
period amounted to SEK -5.2 million and is SEK 0.7 million lower than
the same period 2008. The lower result for the year-to-date period
is likewise primarily related to higher depreciation (patent lapses)
and to revaluation differences related to the employee stock option
programme 2006-2010.
+-------------------------------------------------------------------+
| January-September | 2009 | 2008 | Difference |
|---------------------------------------+------+-------+------------|
| Depreciation | 1.3 | 0.9 | 0.4 |
|---------------------------------------+------+-------+------------|
| Employee Stock Option Programme | 0.7 | 0.3 | 0.4 |
| 2006-2010 | | | |
+-------------------------------------------------------------------+
The result for the year-to-date period amounted to SEK -1.6 million
(SEK 18.1 million), primarily related to revaluation differences of
the deferred tax asset, by SEK 19.7 million, as described in the
"Deferred Tax Asset" section.
Result Summary July-September January-September
2009 2008 2009 2008
Operating Result -1.5 -0.4 -5.2 -4.5
Result for the period 10.1 -0.4 -1.6 18.1
Result after tax per share (SEK) 1.8 -0.1 -0.3 3.3
(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.
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. This reassessment
reflects the indication that the underlying automotive demand has
stabilised, as described in SinterCast's 2Q Report. As of 30
September 2009, SEK 80.3 million (13.5%) of SinterCast's total
carried-forward tax losses have been used as the basis of the updated
calculation, resulting in SEK 21.1 million being capitalised as a
deferred tax asset.
Deferred Tax Asset July-September January-September FY
2009 2008 2009 2008 2008
Estimated future taxable profit 80.3 80.0 80.3 80.0 70.0
Change in carry-forward tax loss 40.4 0.0 10.3 80.4 70.0
taken into consideration
Deferred tax asset 21.1 22.4 21.1 22.4 18.5
Tax result 10.7 0.0 2.7 22.4 18.5
(Amounts in SEK million if not
otherwise stated), (FY: Full
Year)
Employee Stock Option Programme
As of 30 September 2009, the cost of the existing employee stock
option programme 2006-2010 was calculated at a total amount of SEK
3.2 million (SEK 3.7 million as of 30 September 2008), based on a
closing share price of SEK 60 on 30 September 2009 (SEK 103). During
2009, SEK 0.7 million (SEK 0.4 million) was accounted for as costs
related to the option programme.
The Extraordinary General Meeting of the shareholders approved a new
2009-2013 employee stock option programme on 20 August 2009, to begin
during 4Q 2009. The maximum number of stock options to be allotted to
the employees will be 285,000. According to the IFRS 2 accounting
standard, the employee stock options should be expensed as a
personnel cost during the period and reported directly against equity
capital. The recorded IFRS 2 cost for employee stock options will
amount to approximately SEK 1.8 million during the period 2009-2013.
Assuming that all options will be realised at the maximum ceiling of
SEK 50, the social security costs are expected to amount to
approximately SEK 3.0 million, expensed continuously during the
period in which they are incurred. Costs for the option programme
2009-2013 will be accounted for in 4Q 2009.
Cashflow, Liquidity and Investments
The new rights issue has provided a net cash injection of SEK 18.4
million, securing the Company's liquidity. Current liquidity is SEK
26.7 million, with the prospect of in additional SEK 11.6 million
being raised during September 2010 from the warrants related to the
new rights issue. The July-September 2009 cashflow result was SEK
17.6 million (SEK -2.9 million), providing a Group liquidity of
SEK 26.7 million on 30 September 2009 (SEK 8.8 million). The
January-September 2009 cashflow result was SEK 17.7 million (SEK -7.5
million). The Sörmland Sparbank loan in the amount of SEK 3.0 million
is due for review during December 2009. According to its terms, the
loan may be called for repayment during December 2009. Investments
during the period amounted to SEK 1.2 million (SEK 0.0 million).
Cashflow Summary July-September January-September
2009 2008 2009 2008
Cashflow from operating activities -1.2 0.2 -4.0 -2.8
Cashflow from working capital 0.0 -3.1 0.6 -4.7
Cashflow from investment activities 0.2 0.0 -0.5 0.0
Cashflow from financing activities 18.6 - 21.6 -
Cashflow total 17.6 -2.9 17.7 -7.5
Liquidity 26.7 8.8 26.7 8.8
Investments 1.2 0.0 1.2 0.0
(Amounts in SEK million if not otherwise stated)
Risks and Uncertainty Factors; Global Economic Crisis
Market Development
The main uncertainty factor for SinterCast is the 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 resulted in
significant reductions in demand in both the passenger vehicle and
commercial vehicle sectors, causing automotive OEMs to reduce
production and, in some cases, delay production launches. 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 4.1 million Engine Equivalents. This reduction of
approximately 25% is better than the overall automotive market
decline of 40~60% during the same period, primarily because the
launch of new SinterCast-CGI components has provided incremental
volumes. It is also noted that SinterCast's production of components
other than automotive cylinder blocks and heads has not decreased as
significantly as the core cylinder block and head sector, thus
providing a compensating effect on the overall series production
volume. While SinterCast continues to support new product
development activities, and anticipates new production launches and
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 expense budgets, and has implemented a
pro-active liquidity protection plan that has included personnel
reductions. While the Company believes that new installation
opportunities can provide cash injections to further reinforce the
liquidity, and that new series production launches can provide a
positive contribution to production volumes and revenues, the timing
of the overall recovery in the automotive and foundry industries
remains uncertain. The current series production volume of
approximately 500,000 Engine Equivalents is insufficient to provide
positive cashflow. In consideration of all factors, the Board of
Directors determined that it was in the best interest of the
shareholders to proceed with a new rights issue, which was approved
by an Extraordinary General Meeting of the Shareholders on 20 August
2009, and has since resulted in a net cash injection of SEK 18.4
million with the prospect of an additional SEK 11.6 million being
raised during September 2010 from the warrants related to the new
rights issue. The rights issue ensures the long-term liquidity of the
Company and enables the Company to be more pro-active in its
operations in advance of the market recovery.
Market Penetration and Competition
Virtually every company encounters competition, and SinterCast is no
exception. However, based on SinterCast's pioneering and 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 in the industry. 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 it's 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 cylinder block and head
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.
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) came 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.
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.
During the period, no material transactions have taken place between
SinterCast and the Board or the Management, with the exception of
their unanimous participation in the new rights issue.
Events after the Balance Sheet Date
There have been no significant events since the balance sheet date of
30 September 2009 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.
Personnel
As of 30 September 2009, the Group had 13 (16) employees, two (three)
of which were female. The core technical staff has the necessary
skills and resources to support ongoing customer activities and the
overall market development. Further recruitment will be phased with
the development of field activities, particularly the need to support
new installations.
Annual General Meeting
The Annual General Meeting 2010 of SinterCast AB (publ) will be held
on 20 May 2010.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2009,
consists of Ulla-Britt Fräjdin-Hellqvist, Lars Ahlström and Torbjörn
Nordberg. The Nomination Committee can be contacted at:
nomination.committee@sintercast.com
Information
The Interim Report October-December and Full Year Results 2009 will
be published on 10 February 2010
The Interim Report January-March 2010 will be published on 28 April
2010
The Interim Report April-June 2010 will be published on 25 August
2010
The Interim Report July-September 2010 will be published on 3
November 2010
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
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. 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, MAN
Diesel, 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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