SinterCast Results July-September 2011
* Revenue for period: SEK 11.8 million (SEK 8.3 million). Year-to-date: SEK
33.0 million (SEK 24.9 million)
* Operating result: SEK 3.2 million (SEK 2.0 million). Year-to-date: SEK 7.5
million (SEK 3.3 million)
* Earning/share: SEK 0.3 per share (SEK 0.5 per share). Year-to-date: SEK 1.4
per share (SEK 1.1 per share)
* Cashflow: SEK 3.1 million (SEK 0.5 million). Year-to-date: SEK 3.1 million
(SEK 1.2 million)
* Year-to-date cashflow before dividend and loan repayment: SEK 9.6 million
* New installation commitments secured at FAW in China and Toa Koki in Japan
* High volume series production of engine components underway at undisclosed
foundry
* Ductile iron field trials set to begin before year-end
Series production at record level of 1.45 million Engine Equivalents - up 32%
year-on-year
Record five installations secured - potential for additional commitments before
year-end
Current Production and Outlook
Series production increased by 7.5% during the quarter, with record annualised
production of 1.45 million Engine Equivalents, representing a 32% year-on-year
increase. The third-quarter production volume was buoyed by the start of high
volume production at the international cylinder block and head foundry that was
announced in the 2Q11 results, the identity of which has not yet been publicly
disclosed. The current series production programmes have the potential to grow
to an annual volume of approximately 1.75 million Engine Equivalents when all
programmes reach mature volume. 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
4.5 million Engine Equivalents per year within SinterCast's five year planning
horizon.
Following the installation of a SinterCast Mini-System 3000 process control
system at the Foundry Research Institute of FAW - First Automobile Works, China
- in early 2010, FAW ordered a second Mini-System 3000 during the quarter. The
order follows the transfer of the first Mini-System 3000 to the FAW Wuxi Diesel
foundry to support ongoing CGI product development for heavy duty diesel engine
components for FAW's Wuxi Diesel daughter company. The new Mini-System 3000
will be installed at FAW's main R&D foundry in Changchun before year-end and
will be used to support CGI product development within the FAW Group, China's
largest automobile manufacturer.
Building on SinterCast's longstanding support of CGI product development in the
industrial power sector, the Toa Koki foundry in Japan, one of the world's
leading foundries for the production of large marine and stationary diesel
engine components, ordered a Mini-System 3000 installation during the quarter.
The Mini-System 3000 will be installed before the end of 2011 to provide Toa
Koki with independent CGI product development capability, leading towards new
series production opportunities, with the potential for more than 100,000 Engine
Equivalents per year in the near term. The installation at Toa Koki provides
the opportunity for SinterCast to increase its production for components other
than automotive cylinder blocks and heads, which currently account for
approximately 15% of the SinterCast's series production volume.
With the installation commitments at FAW and Toa Koki, SinterCast has secured
five new installations during 2011, resulting in SinterCast's best ever year for
new installations. Additional installation discussions are ongoing, with the
prospect for further commitments before year-end.
Following the introduction of SinterCast's ductile iron product development at
the GIFA world foundry trade fair in June, discussions regarding field trials
have progressed and at least one trial has been scheduled to commence before
year-end. The objective of the trials is to provide additional technical data
to refine and validate the correlations established during the initial
development phase and to provide feedback as to how the technology will be used
by customers. The ductile iron technology is intended to provide a net cost-
benefit to the foundry by reducing magnesium consumption, improving mould yield,
reducing casting defects and improving machinability.
Financial Summary
Revenue
The July-September 2011 revenue amounted to SEK 11.8 million (SEK 8.3 million).
The revenue increase of 42% is a result of the increases in series production
and Sampling Cup shipments. The revenue from series production increased by 31%
to SEK 10.2 million (SEK 7.8 million), due to the record production at an
annualised rate of approximately 1,450,000 (1,100,000) Engine Equivalents and
the shipment of 41,700 (23,400) Sampling Cups.
The January-September 2011 revenue amounted to SEK 33.0 million (SEK 24.9
million). The revenue increase of 33% represents the combined effect of a 26%
increase in series production revenue and a 120% 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,
ancillary equipment and on-site engineering service in support of a lease
installation at the international cylinder block and head foundry that was
announced in the 2Q11 results, the identity of which has not yet been publicly
disclosed. 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
2011 2010 2011 2010
--------------------------------------------------------------------------------
Number of Sampling Cups shipped 41,700 23,400 105,100 72,050
Equipment (1) 0.9 0.2 3.3 1.5
Series Production (2) 10.2 7.8 28.0 22.2
Engineering Service( 3) 0.7 0.3 1.6 1.0
Other( ) 0.0 0.0 0.1 0.2
--------------------------------------------------------------------------------
Total 11.8 8.3 33.0 24.9
--------------------------------------------------------------------------------
(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 July-September 2011 operating result of SEK 3.2 million (SEK 2.0 million)
was primarily affected, compared to the same period last year, by higher gross
results of SEK 1.3 million, higher costs of SEK 1.7 million and increased
exchange gains on bank holdings and operating receivables and liabilities of
SEK 1.6 million.
The result after tax for the July-September 2011 period amounted to SEK 2.4
million (SEK 3.0 million), after accounting for the decreased market value of
the outstanding currency hedging contracts amounting to SEK -0.8 million
compared to the same period last year.
The January-September 2011 operating result of SEK 7.5 million (SEK 3.3
million), compared to the same period last year, was primarily affected by
higher gross results of SEK 5.1 million, higher costs of SEK 3.6 million and
increased exchange gains on bank holdings and operating receivables and
liabilities of SEK 2.7 million. The cost increase is mainly within the sales &
marketing function, as a result of SinterCast's efforts to increase market
presence. The increases are in line with the budget and the overall growth
strategy.
The result after tax for the January-September 2011 period amounted to SEK 9.7
million (SEK 7.4 million), after accounting for the decreased market value of
the outstanding currency hedging contracts amounting to SEK -1.3 million
compared to the same period last year.
Results Summary July-September January-September
2011 2010 2011 2010
--------------------------------------------------------------------------------
Operating Result 3.2 2.0 7.5 3.3
Result for the period 2.4 3.0 9.7 7.4
Result after tax per share (SEK) 0.3 0.5 1.4 1.1
--------------------------------------------------------------------------------
(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 has been reassessed
as of 30 September 2011 and is unchanged compared to the calculation made on 30
June 2011. The deferred tax asset is SEK 32.8 million (SEK 24.2 million),
resulting in a tax income amounting to SEK 3.3 million (SEK 3.1million) year to
date.
Employee Stock Option Programme
As of 30 September 2011, the cost of the employee stock option programme
2009-2013 was calculated at a total amount of SEK 3.0 million (SEK 3.2 million),
based on a closing share price of SEK 41.7 (SEK 41.7). Thus far during 2011, SEK
0.5 million (SEK 1.1 million) has been accounted for as costs related to the
option programme.
Cashflow, Liquidity and Investments
The July-September 2011 cashflow result was SEK 3.1 million (SEK 0.5 million).
The January-September 2011 cashflow result was SEK 3.1 million (SEK 1.2 million)
increasing the liquidity on 30 September 2011 to SEK 43.4 million. The increased
liquidity includes the payment of the dividend amounting to SEK 3.5 million (SEK
0.0 million) and repayment of the loan to Sörmlands Sparbank amounting to SEK
3.0 million (SEK 0.0 million). The cashflow result excluding the dividend and
the loan repayment would have been SEK 9.6 million.
Investments during the period amounted to SEK 0.8 million (SEK 0.7 million).
Cashflow Summary July-September January-September
2011 2010 2011 2010
--------------------------------------------------------------------
Cashflow from operating activities 3.1 2.9 7.7 5.3
Cashflow from working capital 0.1 -2.4 2.2 -3.9
Cashflow from investment activities -0.1 0.0 -0.3 -0.2
Cashflow from financing activities - - -6.5 -
--------------------------------------------------------------------
Cashflow total 3.1 0.5 3.1 1.2
Liquidity 43.4 26.0 43.4 26.0
Investments 0.1 0.5 0.8 0.7
--------------------------------------------------------------------
(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 and thus
far during 2011, 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 could provide 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 remain a long-term prospect. 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 September 2011, the Group had 17 (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.
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
The following press releases have been issued:
20 October 2011 - First Automobile Works (FAW) China Orders Second SinterCast
Process Control System
25 October 2011 - Toa Koki becomes first Japanese foundry to install the
SinterCast Process Control Technology
There have been no significant events since the balance sheet date of 30
September 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.
Annual General Meeting
The Annual General Meeting 2012 of SinterCast AB (publ) will be held on 24 May
2012.
Dividend Policy
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.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2011, 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 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
The Interim Report July-September 2012 will be published on 7 November 2012
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
Report of Review of Interim Financial Information
Introduction
We have reviewed this report for the 1(st) of January 2011 to 30(th) of
September 2011 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.
Scope of 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 International Standards on Auditing,
ISA, 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.
Conclusion
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, 1st of November 2011
Öhrlings PricewaterhouseCoopers
Anna-Carin Bjelkeby
Authorised Public Accountant
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, Jeep, Kia, Lancia, 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).
For more information: www.sintercast.com
- END-
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