SinterCast Results July-September 2010
* Revenue for period: SEK 8.3 million (SEK 5.2 million). Year-to-date: SEK
24.9 million (SEK 14.5 million)
* Operating result: SEK 2.0 million (SEK -1.5 million). Year-to-date: SEK 3.3
million (SEK -5.2 million)
* Earning/share: SEK 0.5 per share (SEK 1.8 per share). Year-to-date: SEK 1.1
per share (SEK -0.3 per share)
* Cashflow: SEK 0.5 million (SEK 17.6 million). Year-to-date: SEK 1.2 million
(SEK 17.7 million)
* Series production exceeds annualised rate of one million Engine Equivalents
in August and September
* VM Motori launches 3.0 litre engine with SinterCast-CGI cylinder block and
bedplate
Annualised Series production surpassed the one million Engine Equivalent
milestone
in the third quarter providing year-on-year growth of 120% compared to September
2009
Current Production and Outlook
Annualised series production reached 1,050,000 Engine Equivalents in August and
grew further to 1,100,000 Engine Equivalents (55,000 tonnes/year) in September,
clearly demonstrating stable series production in excess of the one million
milestone during the period. The series production for September 2010
represents a 120% increase relative to the production pace of 500,000 Engine
Equivalents in September 2009, and a 47% increase compared to the pre-economic
downturn high of 750,000 Engine Equivalents established in September 2008. The
significant growth in series production is primarily derived from the continued
ramp-up of the Ford 6.7 litre V8 engine and from increased exhaust component
production in China; however, the launch of the Navistar 6.4 litre V8, the Land
Rover 4.4 litre V8, and VM Motori 3.0 litre V6 diesel engines during 2010 has
also contributed to the growth, providing the basis for a positive cashflow
outlook for 2010.
In conjunction with the Paris Motor Show, VM Motori SpA of Italy introduced a
new 3.0 litre V6 diesel engine with a SinterCast-CGI cylinder block and
bedplate. The cylinder blocks and bedplates began series production at the Tupy
foundry in Brazil during mid-2010 and become the sixteenth and seventeenth CGI
components to be produced by Tupy using the SinterCast process control
technology. Following pre-machining of the cylinder blocks and bedplates at
Tupy, final machining and engine assembly are performed in a purpose-built
manufacturing facility at VM Motori in Cento, Italy. The Euro 5 compliant engine
is capable of 240 horsepower (59 kW/litre) and 550 Nm of torque and will be
available in 2011 model year vehicles in the European market. The VM Motori
engine reconfirms that CGI has effectively become the standard material for
passenger vehicle V-diesel engines, providing the best combination of weight
reduction, compact design, performance, NVH, durability and environmental
efficiency.
As part of SinterCast's ongoing efforts to increase the awareness of CGI in
China, press conferences were held in Shanghai and Beijing for 18 of China's
leading automotive journals. SinterCast also provided a half-day technology
seminar at China's only foundry conference devoted specifically to automotive
foundries. These presentations, together with the ongoing direct contacts that
have been established with the main automotive foundries, are an important part
of the strategy to establish and grow the SinterCast brand in China.
Based on the current production programmes and the potential market development
during SinterCast's five year planning horizon, the five year outlook is
summarised as follows:
Approximate Annual Production Potential and
Revenue
30 September 2010 30 June 2010
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series 1,100 22 950 22
Production(1)
Potential Mature 1,350 30 1,300 30
Volume(2)
Production Orders 450 9 400 9
Secured(3)
Development Pipeline(4) 2,500 58 2,500 58
Near-term Market 4,300 97 4,200 97
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 July-September January-September
2010 2009 2010 2009
--------------------------------------------------------------------------------
Number of Sampling Cups shipped 23,400 15,400 72,050 36,000
Equipment (1) 0.2 0.3 1.5 2.3
Series Production (2) 7.8 4.5 22.2 10.9
Engineering Service( 3) 0.3 0.4 1.0 1.3
Other( ) 0.0 0.0 0.2 0.0
--------------------------------------------------------------------------------
Total 8.3 5.2 24.9 14.5
--------------------------------------------------------------------------------
(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 July-September 2010 revenue amounted to SEK 8.3 million (SEK 5.2 million).
The revenue increase of 60% is a result of the significant increases in series
production and Sampling Cup shipments. The revenue from series production
increased by 73% to SEK 7.8 million (SEK 4.5 million), due to the record
production at an annualised rate of approximately 1,100,000 (500,000) Engine
Equivalents and the shipment of 23,400 (15,400) Sampling Cups. Despite the
increase in series production during the third quarter 2010, the revenue
decreased by SEK 0.3 million compared to the second quarter 2010 mainly due to
lower equipment and engineering service revenue. Additional engineering service
activities during the period were concentrated mainly on the Pressurised Pouring
Furnace development project. Development activities amounted to SEK 0.4 million
and have been accounted as investments and credited R&D costs.
The January-September 2010 revenue amounted to SEK 24.9 million (SEK 14.5
million). The revenue increase of 72% is as a result of the significant
increases in series production, the doubling of the Sampling Cup shipments, and
the invoicing of the Mini-System 3000 to First Automobile Works in China. The
revenue from series production increased by 104% to SEK 22.2 million (SEK 10.9
million).
Results
Results Summary July-September January-September
2010 2009 2010 2009
Operating Result 2.0 -1.5 3.3 -5.2
Result for the period 3.0 10.1 7.4 -1.6
Result after tax per share (SEK)* 0.5 1.8 1.1 -0.3
(Amounts in SEK million if not otherwise
stated)
*Based on 6,478,383 shares
The July-September 2010 operating result of SEK 2.0 million (SEK -1.5million)
was primarily affected by the higher gross result of SEK 3.4 million compared to
the same period 2009. The R&D costs were reduced by SEK 0.4 million due to the
activation of Pressurised Pouring Furnace and development project. The result
after tax for the July-September 2010 period amounted to SEK 3.0 million (SEK
10.1 million), primarily related to the revaluation of the deferred tax asset,
as described in the section entitled "Deferred Tax Asset".
The January-September 2010 operating result of SEK 3.3 million (SEK -5.2)
million was primarily affected by the higher gross result of SEK 9.2 million
compared to the same period 2009. The result after tax for the January-September
2010 period amounted to SEK 7.4 million (SEK -1.6 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 July-September January-September FY
2010 2009 2010 2009 2009
--------------------------------------------------------------------------------
Estimated future taxable profit 97.0 80.3 97.0 80.3 80.3
Change in carry-forward tax loss taken 4.8 40.4 16.7 10.3 10.3
into consideration
Deferred tax on carry-forward tax losses 25.5 21.1 25.5 21.1 21.1
Change in deferred tax due to the result -1.3 - -1.3 - -
for the period
Deferred tax asset 24.2 21.1 24.2 21.1 21.1
Change in deferred tax on carry-forward 1.3 10.7 4.3 2.7 2.7
tax losses
Change in deferred tax due to the result -1.3 - -1.3 - -
for the period
Income tax 0.0 10.7 3.0 2.7 2.7
--------------------------------------------------------------------------------
(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 September 2010, SEK 97.0 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 25.5 million (SEK 21.1
million) being capitalised as a deferred tax asset. Due to the positive result
for the period, the deferred tax asset has been reduced by SEK -1.3 million (SEK
0.0 million) to SEK 24.2 million (SEK 21.1 million).
Employee Stock Option Programme
As of 30 September 2010, the cost of the employee stock option programme
2009-2013 was calculated at a total amount of SEK 3.2 million (SEK 3.3 million),
based on a closing share price of SEK 52.0 (SEK 49.4). Thus far during 2010, SEK
1.1 million (SEK 0.7 million) has been accounted for as costs related to the
option programme.
Cashflow, Liquidity and Investments
The July-September 2010 cashflow result was SEK 0.5 million (SEK 17.6 million),
providing a Group liquidity of SEK 26.0 million (SEK 26.7 million) on 30
September 2010. The successful completion of the warrant programme resulted in
a net cash injection of SEK 11.3 million on 6 October 2010 and will appear in
future liquidity reports. It is noted that the cashflow result from operating
activities was positive during the period. The increase in working capital
required during the period relates to increased receivables and reduced
liabilities.
Investments during the period amounted to SEK 0.5 million (SEK 1.2 million),
mainly relating to the activation of the Pressurised Pouring Furnace development
project.
Cashflow Summary July-September January-September
2010 2009 2010 2009
--------------------------------------------------------------------
Cashflow from operating activities 2.9 -1.2 5.3 -4.0
Cashflow from working capital -2.4 0.0 -3.9 0.6
Cashflow from investment activities 0.0 0.2 -0.2 -0.5
Cashflow from financing activities - 18.6 - 21.6
--------------------------------------------------------------------
Cashflow total 0.5 17.6 1.2 17.7
Liquidity 26.0 26.7 26.0 26.7
Investments 0.5 1.2 0.7 1.2
--------------------------------------------------------------------
(Amounts in SEK million if not otherwise stated)
Current liquidity is SEK 26.0 million, with an additional SEK 11.3 million
received on 6 October 2010 from the warrants related to the rights issue
conducted during September 2009 and the potential for an additional SEK 1.7
million from the 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, 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, in some cases, caused automotive OEMs to 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
4.3 million Engine Equivalents. Although the automotive sector has begun to
recover, volumes in SinterCast's core markets are still significantly below pre-
downturn levels and the SinterCast-CGI programmes that started production before
3Q08 have still not fully recovered. 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.
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 September 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. The reporting for the Parent Company has been prepared in
accordance with Sweden's Annual Accounts Act and RFR 2.3. 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. New accounting principles, which came into effect as of 1
January 2010, have not affected the financial statements.
No material transactions have taken place between SinterCast and the Board or
the Management during the period.
Events after the Balance Sheet Date
The successful completion of the warrant programme resulted in a net cash
injection of SEK 11.3 million on 6 October 2010. Transaction fees related to
the exercise of the warrants were approximately SEK 0.1 million. There have
been no other significant events since the balance sheet date of 30 September
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 (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.
Annual General Meeting
The Annual General Meeting 2011 of SinterCast AB (publ) will be held on 19 May
2011.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2010, 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 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
The Interim Report July-September 2011 will be published on 2 November 2011
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
Review report
We have reviewed this report for the period 1 January 2010 to 30 September 2010
for SinterCast AB (publ). The board of directors and the CEO are responsible for
the preparation and presentation of this interim report in accordance with IAS
34 and the Swedish Annual Accounts Act. Our responsibility is to express a
conclusion on this interim report based on our review.
We conducted our review in accordance with the Swedish Standard on Review
Engagements SÖG 2410, Review of Interim Report Performed by the Independent
Auditor of the Entity. A review consists of making inquiries, primarily of
persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with Standards on Auditing in Sweden, RS,
and other generally accepted auditing standards in Sweden. The procedures
performed in a review do not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe
that the interim report is not prepared, in all material respects, in accordance
with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with
the Swedish Annual Accounts Act, regarding the Parent Company.
Stockholm, 3 November 2010
Öhrlings PricewaterhouseCoopers
Anna-Carin Bjelkeby
Authorised Public Accountant
Auditor in charge
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 40 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, Navistar, Jaguar, Kia, Land Rover, MAN, Porsche, PSA Peugeot-Citroën,
Renault, Rolls-Royce Power Engineering, Toyota, Volkswagen, VM Motori, Volvo and
Waukesha Engine. The SinterCast share is quoted on the Small Cap segment of the
NASDAQ OMX stock exchange (Stockholmsbörsen: SINT).
- END -
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