SinterCast Results October-December 2010
SinterCast Results October-December 2010
Full Year Results 2010
* Revenue for period: SEK 14.5 million (SEK 5.5 million). Full Year: SEK
39.4 million (SEK 20.0 million)
* Operating result: SEK 3.9 million (SEK -1.1 million). Full Year: SEK 7.2
million (SEK -6.3 million)
* Earnings/share: SEK 1.3 per share (SEK -0.2 per share). Full Year: SEK 2.5
per share (SEK -0.5 per share)
* Cashflow: SEK 14.3 million (SEK -1.9 million). Full Year: SEK 15.5 million
(SEK 15.8 million)
* Dividend: The Board of Directors proposes an ordinary dividend of SEK 0.5
per share (0.0)
* Daedong Metals foundry in Korea adopts SinterCast technology for commercial
vehicle series production
* Dashiang Precision foundry in China activates second System 2000 for
increased series production
* Grainger & Worrall receives UK Casting of the Year award for SinterCast-CGI
V8 cylinder block
Year-on-year series production increased by 118% as SinterCast supported the
production
of more than two million CGI castings in Europe, Asia and the Americas during
2010
Current Production and Outlook
Series production grew to an annualised rate of 1.2 million Engine Equivalents
during the quarter, providing a 118% year-on-year increase and an increase of
60% relative to the pre-economic downturn high of 750,000 Engine Equivalents
established during September 2008. The increased production demand resulted in
the shipment of 102,650 consumable Sampling Cups and the production of more than
two million SinterCast-CGI components. Combined with new installation revenue
from First Automobile Works during January, and from the Dashiang Precision and
Daedong Metals foundries during December, the increased activities provided full
year revenue of SEK 39.4 million (SEK 20.0 million) and served as the basis of
the positive results.
Following a successful product development period, Daedong Metals, one of South
Korea's leading cast iron foundries, entered into a long-term technology supply
agreement for series production. The SinterCast System 3000 process control
system was delivered before year-end and installed during the first week of
January 2011. Series production of 6, 9 and 11 litre CGI cylinder heads for
Hyundai commercial vehicle engines began during early-January 2011. The CGI
cylinder heads will be used for the high performance versions of existing
engines and are forecast to provide a production volume of approximately 50,000
Engine Equivalents during 2011. The Hyundai production increases the number of
SinterCast-CGI commercial vehicle components to 17, and the total number of
series production components to 46.
In order to accommodate increased series production demand, the Dashiang
Precision foundry in China exercised an option to activate a back-up System
2000 on 3 December 2010, in exchange for a previously agreed fee. The Dashiang
foundry now produces CGI turbocharger housings and exhaust manifolds on two
different moulding lines, for export to the European passenger vehicle market.
During the period, the Grainger & Worrall foundry received the prestigious 'UK
Casting of the Year 2010' award from the British Cast Metals Federation. The
UK's top casting prize was awarded for the development and production of the
General Motors V8 NASCAR cylinder block produced in SinterCast-CGI. The Cast
Metals Federation highlighted several key technical features of the block,
including cored water passages between the cylinder bores of just 2.5mm, and the
use of the SinterCast process technology, which Grainger & Worrall "has
championed since 2004".
Also during the period, the Ford CCP foundry in the USA was closed as part of
Ford's global reorganisation. The closure resulted in the termination of the
agreement with CCP for the use of a Mini-System 2000 that was previously
installed to support CGI product development.
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
31 December 2010 30 September 2010
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series Production[1] 1,200 26 1,100 25
Potential Mature Volume[2] 1,500 33 1,350 31
Production Orders Secured[3] 500 11 450 10
Development Pipeline[4] 2,350 52 2,500 58
Near-term Market 4,350 96 4,300 99
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
** Based on 23 SEK/Engine Equivalent on 30 September and 22 SEK /Engine
Equivalent on 31 December due to changes in 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 October-December January-December
2010 2009 2010 2009
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Number of Sampling Cups shipped 30,600 18,600 102,650 54,600
Equipment[1] 5.3 0.3 6.8 2.6
Series Production[2] 8.7 4.7 30.9 15.6
Engineering Service[3] 0.3 0.4 1.3 1.7
Other( ) 0.2 0.1 0.4 0.1
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Total 14.5 5.5 39.4 20.0
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(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 October-December 2010 revenue amounted to SEK 14.5 million (SEK 5.5
million). The revenue increase of 260% is a result of the SinterCast System
3000 delivery to Daedong Metals in Korea, the activation of the back-up System
2000 at the Dashiang Precision foundry in China, and the significant increases
in series production and Sampling Cup shipments. The revenue from series
production increased by 185% to SEK 8.7 million (SEK 4.7 million), due to the
ongoing production at an annualised rate of approximately 1.2 (0.6) million
Engine Equivalents and the shipment of 30,600 (18,600) Sampling Cups.
Development activities amounted to SEK 0.4 (0.8) million and have been accounted
as investments and credited R&D costs.
The January-December 2010 revenue amounted to SEK 39.4 million (SEK 20.0
million). The revenue increase of 197% is as a result of the significant
increases in series production, including an increase from 54,600 Sampling Cups
in 2009 to 102,650 Sampling Cups in 2010, plus invoicing of installations at the
Daedong Metals foundry in Korea, the Dashiang Precision foundry in China, and at
First Automobile Works foundry in China. The revenue from series production
increased by 198% to SEK 30.9 million (SEK 15.6 million).
Results
Results Summary October-December January-December
2010 2009 2010 2009
------------------------------------------------------------------
Operating Result 3.9 -1.1 7.2 -6.3
Result for the period 9.1 -1.1 16.5 -2.7
Result after tax per share (SEK) 1.3 -0.2 2.5 -0.5
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(Amounts in SEK million if not otherwise stated)
The October-December 2010 operating result of SEK 3.9 million (SEK -1.1) million
was primarily driven by the higher gross result of SEK 7.0 million compared to
the same period 2009. The cost increase of SEK 2.0 million compared to the same
period 2009 is mainly related to higher costs related to increased equipment
sales, travel costs, temporary advisory services and intensified development
efforts. The result after tax for the October-December 2010 period amounted to
SEK 9.1 million (SEK -1.1 million), primarily related to the revaluation of the
deferred tax asset, as described in the section entitled "Deferred Tax Asset".
The January-December 2010 operating result of SEK 7.2 million (SEK -6.3) million
was primarily driven by the higher gross result of SEK 16.2 million compared to
the same period 2009. The cost increase of SEK 2.7 million compared to the same
period 2009 is mainly related to higher costs related to increased equipment
sales, travel costs, advisory services, operational exchange losses and
increased R&D costs. The R&D costs have been credited by SEK 0.4 (0.8) million
due to the activation of development projects. The result after tax for the
January-December 2010 period amounted to SEK 16.5 million (SEK -2.7 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 October-December January-December
2010 2009 2010 2009
--------------------------------------------------------------------------------
Estimated future taxable profit 120.4 80.3 120.4 80.3
Change in carry-forward tax loss taken 23.4 - 40.1 10.3
into consideration
Deferred tax on carry-forward tax losses 31.7 21.2 31.7 21.2
Change in deferred tax due to the result -1.1 - -2.4 -
for the period
Deferred tax asset 29.3 21.2
Change in deferred tax on carry-forward 6.1 - 10.5 2.7
tax losses
Change in deferred tax due to the result -1.1 - -2.4 -
for the period
Deferred tax changes on income tax 5.0 - 8.1 2.7
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(Amounts in SEK million if not otherwise stated)
-
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 31 December 2010, SEK 120.4 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 31.7 million (SEK 21.2
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 2.4 million (SEK
0.0 million) to SEK 29.3 million (SEK 21.2 million).
Employee Stock Option Programme
As of 31 December 2010, the cost of the employee stock option programme
2009-2013 was calculated at a total amount of SEK 3.1 million (SEK 3.3 million),
based on a closing share price of SEK 51.25 (SEK 50.5). Thus far during 2010,
SEK 1.5 million (SEK 0.7 million) has been accounted for as costs related to the
option programme.
Cashflow, Liquidity and Investments
The October-December 2010 cashflow result was SEK 14.3 million (SEK -1.9
million), providing a Group liquidity of SEK 40.3 million on 31 December 2010
(SEK 24.8 million). The cashflow change of SEK 14.3 million compared with the
cash position of SEK 26.0 million at 30 September 2010 is a result of the
warrant exercise programmes for shareholders (SEK 11.3 million) and for the
first 15% of the employee options (SEK 1.7 million), together with the positive
results for the period and an increase of working capital.
The January-December 2010 cashflow result was SEK 15.5 million (SEK 15.8
million). The cashflow change of SEK 15.5 million compared with the cash
position of SEK 24.8 million at 31 December 2009 is a result of the warrant
exercise programmes for shareholders (SEK 11.3 million) and for the first 15% of
the employee options (SEK 1.7 million), together with the positive results for
the period and an increase of working capital. It is noted that accounts
receivables has increased to SEK 11.6 million on 31 December 2010 (SEK 3.0
million on 31 December 2009). During December, the Sörmland Sparbank loan in the
amount of SEK 3.0 million was extended for an additional three months.
Investments during the period amounted to SEK 0.7 million (SEK 1.3 million), of
which SEK 0.4 million relates to the activation of development projects.
Cashflow Summary October-December January-December
2010 2009 2010 2009
---------------------------------------------------------------------
Cashflow from operating activities 5.1 0.8 10.4 -3.2
Cashflow from working capital -3.5 -2.3 -7.4 -1.7
Cashflow from investment activities -0.3 -0.1 -0.5 -0.6
Cashflow from financing activities 13.0 -0.3 13.0 21.3
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Cashflow total 14.3 -1.9 15.5 15.8
Liquidity 40.3 24.8 40.3 24.8
Investments 0.2 1.3 0.7 1.3
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(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, 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
Despite the positive increase in series production, and the renewed
opportunities for installations, 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 on the individual sales success of the
vehicles equipped with SinterCast-CGI components.
Over the past two years, the economic conditions facing the global foundry and
automotive industries have caused some automotive OEMs to delay production
launches and this has directly affected SinterCast. Although the automotive
market is enjoying a recovery, 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.
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, 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.
Organisation
The Group management and sales activities are based at the headquarter office in
London, UK. The Technical Centre based in Katrineholm, Sweden is responsible
for technical and commercial support of ongoing foundry production activities,
product development, production of the control systems and sampling consumables,
ISO 9001:2008 quality certification, and finance and administration. Local
support of customer activities in North and South America is provided by
SinterCast Inc., based in Chicago, USA, while local support for the Chinese
market is provided by the SinterCast AB Shanghai Representative Office.
Technical back-up for the US and Chinese offices is provided by the Technical
Centre in Katrineholm.
In order to expand SinterCast's market reach, representation agreements have
been established with Ashland Casting Solutions on a global basis, ASD
International in Japan, Pantech Engineering in Australia and with the STPC
(Swedish Trade Promotion Center) in Korea. Consultancy agreements have also
been established to support SinterCast's local sales activities in France and
India. Together with the global presence of technology partners such as ABP for
foundry automation, Grainger & Worrall for rapid prototyping and MAG Industrial
Automation Systems for manufacturing, the representation and consultancy
agreements provide a familiar and respected local presence for the SinterCast
technology.
As of 31 December 2010, the Group had 13 (13) employees, two (two) of which were
female. On 3 February 2011, Dr Jincheng Liu, a Chinese citizen and an advisor
to the China Foundry Association, joined the company in the capacity of Sales
Director - China. Following training at the SinterCast Technical Centre in
Sweden, Dr Liu will be posted in China. Together with Dr Xiang Feng Zhang,
General Manager - China, based at SinterCast's representation office in
Shanghai, Dr Liu will increase SinterCast's sales presence in the Chinese
market. Further recruitment will be phased with the development of field
activities, particularly the need to support new installations.
Patents
SinterCast currently holds 12 (13) patents. SinterCast currently maintains
59(63) individual national phase patents granted or pending worldwide. The 12
base patents address SinterCast's metallurgical technology, the Sampling Cup,
product applications and machining.
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. 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
There have been no significant events since the balance sheet date of 31
December 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.
Information
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
The Interim Report October- December and Full Year Results 2011 will be
published on 22 February 2012
Annual Report 2010
The Annual Report 2010 will be published during the week commencing 18 April
2011.
Annual General Meeting
The Annual General Meeting 2011 will be held on 19 May 2011.
The Board of Directors intend to propose to the AGM 2011 to decide that the
results for 2010 be carried forward, to propose dividend for 2011, and, on an
annual basis, to seek shareholder approval to authorise a share buy-back
programme.
Dividend
Based on the improved profitability and increased liquidity, of the company, the
Board of Directors propose an ordinary dividend of SEK 0.5 per share for the
financial year 2010, which corresponds to a total transfer of SEK 3.5 million to
shareholders of SinterCast AB (publ). No dividend was paid for the preceding
year. The Board proposes 24 May, 2011 as the record date for entitlement to
receive dividends.
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
This report has not been reviewed by the Company's Auditors.
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. 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, Kia, Land Rover, MAN, Navistar, Porsche, PSA Peugeot-Citroën,
Renault, Rolls-Royce Power Engineering, 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).
- END -
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