SinterCast Results July-September 2012
New installations in Asia and Mexico deliver the goal of three new
installations before year-end, as series production fluctuates in
response to growing market uncertainty
Third Quarter 2012
* Revenue for Period: SEK 8.5 million (SEK 11.8 million)
* Operating Result: SEK -2.3 million (SEK 3.2 million)
* Earnings per Share: SEK -0.3 per share (SEK 0.3 per share)
* Cashflow from Operations: SEK -0.5 million (SEK 3.2 million)
* Average Annualised Production during the Period*: 1.30 million Engine
Equivalents (1.40 million)
* Two new installations in Asia provide further growth opportunities in the
industrial power sector
* Most comprehensive ever installation secured for order of more than 300,000
passenger car engines
Year-to-Date 2012
* Revenue: SEK 31.5 million (SEK 33.0 million)
* Operating Result: SEK -1.0 million (SEK 7.5 million)
* Earnings per Share: SEK 0.0 per share (SEK 1.4 per share)
* Cashflow from Operations: SEK -0.5 million (SEK 9.9 million)
* Installed Base: 18 fully automated systems and 13 Mini-Systems in Europe,
Asia and the Americas
Series Production*
For graph, see Press Release PDF
Series production has fluctuated more than normal in recent months. Beginning
with this report, SinterCast has adopted the reporting of annualised quarterly
averages rather than annualising the volume in the last month of each quarter.
This provides a better reflection of the production activities, without
significantly altering the historical trend.
* Annualised average production of Engine Equivalents during the quarter (1
Engine Equivalent = 50 Kg)
CEO Comments
Series production fluctuates while installation activities increase
Following more than three years of consistent growth, monthly series production
volumes have begun to fluctuate. In response to these fluctuations, the Company
has changed its annualised series production reporting from the previous
approach of simply multiplying the production in the last month of each quarter
by 12, to reporting the annualised average production volume for the quarter.
This new presentation provides a better reflection of the production activities.
The change, introduced in this report, does not significantly change the
historical development of the Company's series production.
Annualised series production during the quarter was 1.30 million Engine
Equivalents, which represents a decline of approximately 7% relative to the
second quarter of 2012. Much of the decline continues to be attributed to the
interrupted shipment of the Navistar Big Bore commercial vehicle cylinder block
in North America, following an EPA ruling that the engine does not fully comply
with 2010 emissions requirements. The interrupted production at both the Tupy
foundry in Brazil and the Pure Power foundry in the USA continued throughout the
third quarter. Navistar has indicated that production will resume during
November 2012. Series production has also begun to show the influence of the
changing global economy, as OEMs began to adjust stock levels and volumes in
response to the overall uncertainty in the market. These actions indicate that
further fluctuations in series production can be expected.
Despite the market uncertainty, new CGI series production commitments were
secured during the period and new product development programmes have been
initiated in Europe, Asia and the Americas. The near-term market development
will depend on the combined result of the resumption of the Navistar Big Bore
production; the start date and ramp-up of the new CGI programmes; and, the
overall development of the global economy.
The increased activity in new CGI product development continues to motivate the
foundry industry to install CGI capability. SinterCast has been actively
engaged in installation discussions throughout the year and these discussions
have now resulted in three new installation commitments, meeting the goal
announced at the 2012 AGM. The first of these installations, with YTO Group
Corporation, also known as China First Tractor Works, was announced on 2 July
and has been successfully commissioned. As the leading supplier of tractors and
harvesters in China with more than 75% share of the Chinese market for large
tractors, the YTO installation reinforces SinterCast's brand and presence in
China and provides an important benchmark in the agricultural industry. The
second installation, also destined for the Asian industrial power industry, was
announced on 18 October and marked SinterCast's tenth installation in Asia,
although the OEM and its captive foundry have requested to remain anonymous for
competitive reasons.
SinterCast's third installation of the year came in October, when the Tupy
foundry in Saltillo, Mexico, ordered a System 3000 Plus after receiving the
largest ever CGI series production order with a mature volume of more than
300,000 passenger vehicle cylinder blocks per year, with series production
starting in 2013. The System 3000 Plus, which will be SinterCast's most
comprehensive ever installation, is planned to be shipped before year-end. In
parallel with the installation of the new System 3000, the existing SinterCast
equipment on the passenger vehicle production line at the Saltillo foundry will
be moved to the commercial vehicle production line to support ongoing product
development for heavy duty engine applications.
Also during the period, an automated wirefeeder was sold to a European
commercial vehicle OEM to increase the efficiency of ongoing product development
activities for heavy duty engines in the OEM's captive foundry. Further
installation activities are under discussion in Europe, Asia and the America's
and installation opportunities are at an all-time high, providing a positive
installation outlook for 2013.
SinterCast continues to support product development programmes for passenger
vehicle, commercial vehicle and industrial power applications in Europe, Asia
and the Americas. This development includes SinterCast's first high volume CGI
petrol engine, which remains on schedule for the start of series production
during 2013. It is estimated that the combined potential of the current series
production programmes and the programmes under development represents a market
opportunity of approximately 4.6 million Engine Equivalents per year within
SinterCast's five year planning horizon.
Continued progress in new product development
As a result of increased technical resources, SinterCast has accelerated
development of new functionality in the core CGI technology and for the ongoing
development of the thermal analysis process control technology for ductile iron.
The ductile iron product development has continued throughout the period, both
with in-house development and external trials, to further define the technical
correlations and potential benefits, and customer discussions have continued in
anticipation of the potential market launch. The proposed ductile iron thermal
analysis control technology is intended to provide a net cost-benefit in ductile
iron production 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.
Revenue Breakdown July-September January-September
(Amounts in SEK million if not 2012 2011 2012 2011
otherwise stated)
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Number of Sampling Cups 12,100 41,700 80,900 105,100
shipped
Equipment (1) 1.6 0.9 2.0 3.3
Series Production (2) 6.5 10.2 28.6 28.0
Engineering Service( 3) 0.4 0.7 0.8 1.6
Other 0.0 0.0 0.1 0.1
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Total 8.5 11.8 31.5 33.0
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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 2012 revenue amounted to SEK 8.5 million (SEK 11.8 million).
The revenue decrease of 28% is due to lower Series Production during the quarter
compared to last year. Equipment revenue amounted to SEK 1.6 million (SEK 0.9
million) and refers to the Mini-System 3000 process control system installation
at the YTO Group foundry located in China. The revenue from the second Asian
installation and the Tupy Mexico installation will be accounted in the fourth
quarter. The revenue from series production decreased by 36% to SEK 6.5 million
(SEK 10.2 million), primarily due to lower Sampling Cup shipments and the 7%
decrease in series production compared to the third quarter of 2011.
The January-September 2012 revenue amounted to SEK 31.5 million (SEK 33.0
million). The revenue decrease of 5% is a result of decreases in series
production and the anticipated reduction in Sampling Cup shipments, as outlined
at the 2012 AGM.
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.
Results Summary July-September January-September
(Amounts in SEK million if not otherwise 2012 2011 2012 2011
stated)
-------------------------------------------------------------------------------
Operating Result -2.3 3.2 -1.0 7.5
Result for the period after tax -1.9 2.4 -0.1 9.7
Earnings per Share (SEK) -0.3 0.3 -0.0 1.4
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The July-September 2012 Operating Result of SEK -2.3 million (SEK 3.2 million),
decreased as a result of lower gross results of SEK 2.4 million and higher
operational expenses of SEK 3.1 million, related to the strategic increase in
technical and commercial manning.
The Result for the period after tax amounted to SEK -1.9 million (SEK 2.4
million million), decreased as a result of lower Operating Results of SEK 5.5
million and improved Financial Result of SEK 1.2 million.
The January-September 2012 Operating Result of SEK -1.0 million (SEK 7.5
million), decreased as a result of lower gross results of SEK 1.0 million,
higher operational expenses of SEK 5.4 million, and reduced operational exchange
gains in the amount of SEK 2.1 million, reported as other operating income. The
higher operational expenses are related to recruiting and salary expenses
incurred in order to position the Company for further growth, as outlined at the
2012 AGM.
The Result after tax for January-September 2012 amounted to SEK -0.1 million
(SEK 9.7 million), decreased as a result of lower Operating Results of SEK 8.5
million and the improved Financial Result of SEK 2.3 million. The remaining
difference of SEK 3.6 million is primarily related to last year's revaluation of
the deferred tax asset, as described in the section entitled "Deferred Tax
Asset". The tax expenses refer mainly to business and income tax paid in China.
Deferred Tax Asset
The estimated future taxable profit and deferred tax asset calculation is
reassessed every quarter. As of 30 September 2012, SEK 125.1 million (SEK 128.8
million) of SinterCast's total carried-forward tax losses have been used as the
basis of the updated calculation, resulting in SEK 32.9 million (SEK 32.8
million) being capitalised as a deferred tax asset, unchanged since 31 December
2011.
It has been announced that the Swedish corporate tax rate is proposed to be
reduced from 26.3% to 22% as of 1 January 2013. This change, if implemented,
will affect SinterCast's deferred tax asset calculation, reducing the
capitalised deferred tax asset by SEK -5.4 million, assuming no other changes
relative to the current calculation. The decreased value is expected to affect
the profit and loss statement during the fourth quarter of 2012. The deferred
tax asset is included in the financial assets in the balance sheet.
Employee Stock Option Program
As of 30 September 2012, the total cost of the employee stock option program
2009-2013 was calculated to be SEK 2.9 million (SEK 3.0 million), based on a
closing share price of SEK 46.0 (SEK 41.7). Thus far during 2012, SEK 0.3
million (SEK 0.5 million) has been accounted for as costs related to the option
program.
Cashflow, Liquidity and Investments
Cashflow Summary July-September January-September
(Amounts in SEK million if not otherwise 2012 2011 2012 2011
stated)
-------------------------------------------------------------------------------
Cashflow from operations -0.5 3.2 -0.5 9.9
Cashflow from investment activities 0.0 -0.1 -0.2 -0.3
Cashflow from financing activities - - -11.9 -6.5
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Cashflow total -0.5 3.1 -12.6 3.1
Liquidity 35.0 43.4 35.0 43.4
-------------------------------------------------------------------------------
The July-September 2012 cashflow from operations was SEK -0.5 million (SEK 3.2
million). The decreased cashflow from operations during the period is mainly due
to the decreased revenue, installation timing, and increased personnel expenses.
The January-September 2012 cashflow from operations was SEK -0.5 million (SEK
9.9 million). The lower cashflow result during the period, compared to 2011, is
primarily explained by the reduced Operating Result, higher installation
payments received during the first half of 2011 and increased working capital
during 2012, including paid out accrued expenses of a one-time character.
Following the payment of the dividend to shareholders in the amount of SEK 11.9
million (SEK 3.5 million), the total cashflow result for the period is SEK -12.6
million (SEK 3.1 million), resulting in SEK 35.0 million (SEK 43.4 million) in
liquidity on 30 September 2012.
Investments amounted to SEK 0.2 million (SEK 0.8 million) during the period.
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.
The global economy has recently become more uncertain and this has begun to
influence consumer confidence and automotive sales. SinterCast's
diversification between V-diesel engines for passenger vehicles, commercial
vehicle engine components, and other applications such as exhaust components and
industrial power engines, combined with its presence in Europe, Asia and the
Americas, reduces the dependence on individual product applications and
geographical regions.
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. SinterCast judges that its technology and engineering know-how
provides the most reliable and cost-effective solution for series production of
high quality CGI.
New powertrain technologies, such as vehicle electrification (hybrid and plug-in
vehicles) and fuel cells attract significant media attention; however, the
development and implementation of these technologies remain a long-term prospect
and SinterCast does not expect these technologies to have a significant effect
on the Company's competitive position for the foreseeable future.
For full risk and uncertainty factor information, please see note 26 on p.39 in
SinterCast's Annual Report 2011
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 representatives in Sweden, the United Kingdom, the United States,
China, Korea, Japan, India and Australia. During the second quarter, a new
subsidiary was established in Korea. The establishment of the Chinese subsidiary
is expected to be completed during the fourth quarter of 2012. As of 30
September 2012, the Group had 20 (17) employees, three (three) of whom were
female. Following the planned recruitment over the past 18 months, the Company
is now well positioned to support global market activities and to drive the next
phase of SinterCast's growth. No further recruitments are currently planned.
Parent Company
SinterCast AB (publ) is the Parent Company of the SinterCast Group, with its
registered office located in Stockholm, Sweden. The Parent Company has 16 (14)
employees. The majority of the operations are managed by the Parent Company,
including responsibility for the representative office in China and sales
representatives in Australia, India and Japan. Operations in the UK, USA and
Korea are managed by the local companies. The information given for the Group in
this report corresponds in all material respects to the Parent Company.
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:
18 October 2012 - SinterCast secures new order for product development and
series production
29 October 2012 - Tupy orders SinterCast process control system for high volume
CGI production in Mexico
There have been no other significant events since the balance sheet date of 30
September 2012 that could materially change these financial statements.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2012, consists
of Karl-Arne Henriksson, Chairman, Ulla-Britt Fräjdin-Hellqvist and Torbjörn
Nordberg. The Nomination Committee can be contacted at:
nomination.committee@sintercast.com
Annual General Meeting
The Annual General Meeting 2013 of SinterCast AB (publ) will be held on
Wednesday 15 May 2013.
Shareholders wishing to have a matter considered at the Annual General Meeting
should submit their proposals in writing to agm.registration@sintercast.com or
to the Company: SinterCast AB (publ), P.O. Box 10203, SE-100 55 Stockholm,
Sweden, at least seven weeks prior to the Annual General Meeting for the
proposal to be included in the notice to the meeting. Further details on how and
when to register will be published in advance of the Annual General Meeting.
Information
The Interim Report October-December and Full Year Results 2012 will be published
on 20 February 2013
The Interim Report January-March 2013 will be published on 24 April 2013
The Interim Report April-June 2013 will be published on 21 August 2013
The Interim Report July-September 2013 will be published on 6 November 2013
Stockholm 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 2012 to 30(th) of
September 2012 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, 7th of November 2012
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 50 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, Cameron Compression, 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
