SinterCast Results October-December 2011
Press Release: 22 February 2012
* Revenue for period: SEK 16.0 million (SEK 14.5 million). Year-to-date: SEK
49.0 million (SEK 39.4 million)
* Operating result: SEK 4.1 million (SEK 3.9 million). Year-to-date: SEK 11.6
million (SEK 7.2 million)
* Earnings/share: SEK 0.7 per share (SEK 1.3 per share). Year-to-date: SEK
2.1 per share (SEK 2.5 per share)
* Cashflow from operations: SEK 4.6 million (SEK 1.6 million). Year-to-date:
SEK 14.5 million (SEK 3.0 million)
* Dividend: The Board proposes an ordinary dividend of SEK 1.0 per share (SEK
0.5 per share)
* Extraordinary dividend: The Board proposes an extraordinary dividend of SEK
0.7 per share
* Navistar PurePOWER foundry announces high volume production of commercial
vehicle cylinder blocks
* Mid-City Foundry installs Mini-System 3000 for ongoing production of
industrial power components
SinterCast finishes 2011 with record production, record installations and record
revenue
Current Production and Outlook
Series production increased by 7% during the quarter, finishing the year with
record annualised production of 1.55 million Engine Equivalents. The increased
series production during the fourth quarter extended the continuous trend of
positive growth in every quarter since 2008. It is estimated that the current
series production programmes have the potential to grow to an annual volume of
approximately 1.9 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, including some high volume applications beyond
the current high volume domains of passenger vehicle V-diesel cylinder blocks
and commercial vehicle cylinder blocks and heads. It is estimated that the
current product development programmes, some of which have already been approved
for series production, could provide approximately 2.65 million additional
Engine Equivalents per year. The combined potential of the current series
production programmes and the programmes under development represents a market
opportunity of approximately 4.55 million Engine Equivalents per year within
SinterCast's five year planning horizon.
On 25 January 2012, the Navistar PurePOWER foundry in Indianapolis, Indiana
announced the high volume (>100,000 Engine Equivalents per year) production of
commercial vehicle cylinder blocks using the SinterCast process control
technology. The series production began during mid-2011and ramped up during the
third and fourth quarters. The System 3000 installation at the PurePOWER
Indianapolis casting facility is SinterCast's most technically advanced
installation to date. In addition to the standard measure-and-correct
feedforward control of the casting process, the System 3000 also provides
automatic feedback control of the base treatment operation and data logging from
the melting, moulding and shake-out operations to provide enhanced QS 9000
quality control and traceability. The technology agreement between PurePOWER
and SinterCast encompasses the PurePOWER casting facilities located in
Indianapolis, Indiana and Waukesha, Wisconsin, with PurePOWER reserving the
right to install additional SinterCast control systems on the two casting lines
in Waukesha. Together, the Indianapolis and Waukesha facilities provide high
volume CGI production capability for passenger vehicle and commercial vehicle
cylinder blocks and heads with engine displacements as large as 15 litres.
Following three years of niche volume CGI production with on-site technical
support provided by SinterCast, the Mid-City Foundry Company located in
Milwaukee, Wisconsin installed a Mini-System 3000 during December 2011,
providing Mid-City with fully independent production capability for its ongoing
production of industrial power components. The CGI components produced at Mid-
City Foundry range from 100 to 550 kg and are all used in the demanding
industrial power sector, particularly for the off-shore oil and gas industries.
The castings, which are primarily produced for Cameron Compression, include
cylinder heads and turbocharger components. The Mid-City production increases
the total number of SinterCast-CGI components currently in series production to
52.
With the Mini-System 3000 installation at Mid-City, SinterCast reached six new
installation commitments during 2011, exceeding the 2011 installation outlook
that was first announced during November 2010. The six new installations, made
in China, Japan, Korea (2) and the United States (2) resulted in SinterCast's
best year ever for new installations.
Following the introduction of SinterCast's ductile iron product development at
the GIFA world foundry trade fair in June 2011, the first field trial has been
conducted at a major international foundry in North America. The objective of
the trial was to provide an initial demonstration of the technology and to
collect production data to refine and validate the correlations established
during the initial development. The start of field trials represents an
important step in the product development phase, which is expected to continue
throughout 2012 before a final decision can be made regarding the launch of a
commercial product. 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 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
2011 2010 2011 2010
--------------------------------------------------------------------------------
Number of Sampling Cups shipped 33,100 30,600 138,200 102,650
Equipment (1) 4.6 5.3 7.9 6.8
Series Production (2) 11.0 8.7 39.0 30.9
Engineering Service( 3) 0.4 0.3 2.0 1.3
Other( ) 0.0 0.2 0.1 0.4
--------------------------------------------------------------------------------
Total 16.0 14.5 49.0 39.4
--------------------------------------------------------------------------------
(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 2011 revenue amounted to SEK 16.0 million (SEK 14.5
million). The revenue increase of 10% is a result of the increases in series
production and Sampling Cup shipments. The revenue from series production
increased by 26% to SEK 11.0 million (SEK 8.7 million), due to the record
production at an annualised rate of approximately 1.55 million (1.2 million)
Engine Equivalents and the shipment of 33,100 (30,600) Sampling Cups.
Installation revenue amounting to SEK 4.6 million (SEK 5.3 million) is a result
of Mini-System 3000 deliveries to FAW Wuxi Diesel in China, Mid-City Foundry in
the USA and to Toa Koki in Japan.
The January-December 2011 revenue amounted to SEK 49.0 million (SEK 39.4
million). The revenue increase of 24% represents the combined effect of a 26%
increase in series production revenue and a 16% increase in equipment sales.
During the period, 138,200 (102,650) Sampling Cups were shipped. The increased
revenue related to installations is a result of the fully automated System 3000
installation at the PurePOWER foundry in the USA and to Mini-System 3000
installations at Daeshin in Korea, FAW Wuxi Diesel in China, Mid-City Foundry in
the USA and at Toa Koki in Japan. The System 3000 installation at Daedong in
Korea was commissioned during January 2011, but accounted for as revenue when it
was shipped in December 2010.
Results
The business activities of SinterCast are best reflected by the Operating
Result. In contrast, the 'Result for the period' and the 'Result after tax per
share' are influenced by the financial income and costs and by the revaluation
of tax assets, as described in the section below entitled "Deferred Tax Asset".
Results Summary October-December January-December
2011 2010 2011 2010
--------------------------------------------------------------------------------
Operating Result 4.1 3.9 11.6 7.2
Result for the period 4.8 9.1 14.5 16.5
Result after tax per share (SEK) 0.7 1.3 2.1 2.5
--------------------------------------------------------------------------------
(Amounts in SEK million if not otherwise
stated)
The October-December 2011 operating result of SEK 4.1 million (SEK 3.9 million)
was primarily affected, compared to the same period last year, by higher gross
results of SEK 0.5 million, higher costs of SEK 0.5 million and increased
exchange gains on bank holdings, operating receivables, and liabilities of SEK
0.2 million.
The result after tax for October-December 2011 amounted to SEK 4.8 million (SEK
9.1 million), primarily related to the revaluation of the deferred tax asset,
accounted as tax income, amounting to SEK 0.1 million (SEK 4.9 million). This
change is due to the market recovery following the downturn, as described in the
section below entitled "Deferred Tax Asset".
The January-December 2011 operating result of SEK 11.6 million (SEK 7.2
million), compared to 2010, was primarily affected by higher gross results of
SEK 5.6 million, higher costs of SEK 4.1 million and increased exchange gains
on bank holdings, operating receivables, and liabilities of SEK 2.9 million. The
cost increase is mainly within the sales & marketing function, as a result of
SinterCast's efforts to increase its market presence and to grow the business.
The result after tax for the January-December 2011 period amounted to SEK 14.5
million (SEK 16.5 million), primarily related to the revaluation of the deferred
tax asset, accounted as tax income, amounting to SEK 3.6 million (SEK 8.1
million), as described in the section below entitled "Deferred Tax Asset".
Deferred Tax Asset
The estimated future taxable profit and deferred tax asset calculation is
reassessed every quarter. As of 31 December 2011, SEK 125.1 million (SEK 120.4
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 29.3
million) being capitalised as a deferred tax asset. The change in deferred tax
asset, accounted as tax income, amounted to SEK 3.6 million (SEK 8.1 million),
representing a significant change compared to 2010. The larger increase in 2010
was mainly due to the market recovery following the downturn. The estimated
future taxable profit from secure production programs, which is the basis for
the calculation, recovered during 2010 from low levels in 2008 and 2009. In
contrast, the increase during 2011 was more moderate since the market outlook
was more stable compared to the previous year.
Employee Stock Option Programme
As of 31 December 2011, the cost of the employee stock option programme
2009-2013 was calculated at a total amount of SEK 3.3 million (SEK 3.1 million),
based on a closing share price of SEK 45.0 (SEK 51.3). During 2011, SEK 0.7
million (SEK 1.5 million) was accounted for as costs related to the option
programme.
The Board of Directors used the authorisation given at the 2011 AGM to
compensate the employees in cash instead of exercising the options for 60,000
new shares in the stock market. In consideration of the current market
conditions and the daily turnover, coupled with the dilution effects and
administrative costs, the Board preferred to follow the AGM authorisation and to
compensate the employees in cash for the second tranche of the 2009-2013 option
programme. The cash compensation resulted in a cost of SEK 0.3 million,
including social contributions. The Board transaction was formally agreed with
the employees and concluded on 25 November 2011.
Cashflow, Liquidity and Investments
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
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 and growth
strategy.
Cashflow Summary October-December January-December
2011 2010 2011 2010
---------------------------------------------------------------------
Cashflow from operations 4.6 1.6 14.5 3.0
Cashflow from investment activities -0.1 -0.3 -0.4 -0.5
Cashflow from financing activities -0.3 13.0 -6.8 13.0
---------------------------------------------------------------------
Cashflow total 4.2 14.3 7.3 15.5
Liquidity 47.6 40.3 47.6 40.3
---------------------------------------------------------------------
(Amounts in SEK million if not otherwise stated)
The October-December 2011 cashflow result was SEK 4.2 million (SEK 14.3
million). The higher cashflow during the same period in 2010 is primarily due
to the exercise of the shareholder warrants (SEK 11.3 million) and the exercise
of the first 15% of the employee options (SEK 1.7 million).
The January-December 2011 cashflow result was SEK 7.3 million (SEK 15.5 million)
increasing the liquidity on 31 December 2011 to SEK 47.6 million (SEK 40.3
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 13.8 million.
Investments during the period amounted to SEK 1.0 million (SEK 0.7 million).
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.
Organisation
With successful high volume CGI production in foundries located in Europe, Asia
and the America's, SinterCast has built up a global organisation with employees
and representatives in Sweden, the United Kingdom, the United States, China,
Korea, Japan, India and Australia. During 2011, new recruitments were made to
strengthen the organisation and to improve the future growth prospects,
including a new Sales Director for China, a new Global Sales & Marketing
Director, a Market Communications assistant and a new Metallurgical Research
engineer. As of 31 December 2011, the Group had 17 (13) employees, three (two)
of which were female. Further recruitment will be phased with the development
of field activities, particularly the need to increase sales activities and to
support new installations.
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 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.
Patents
SinterCast currently holds 11 (12) patents. SinterCast currently maintains 53
(59) individual national phase patents granted or pending worldwide. The 11
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.
No material transactions have taken place between SinterCast and the Board or
the Management during the period, except for the second exercise of the employee
stock option programme 2009-2013.
Events after the Balance Sheet Date
The following press release has been issued: 25 January 2012 - PurePOWER
Technologies begins Compacted Graphite Iron Production at Indianapolis Casting
Facility
There have been no other significant events since the balance sheet date of 31
December 2011 that could materially change these financial statements.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2011, consists
of Lars Ahlström, 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 2012 of SinterCast AB (publ) will be held on 24 May
2012.
The Board of Directors intends to propose to the AGM 2012 to decide that the
results for 2011 be carried forward, to propose a dividend for 2012, and, on an
annual basis, to seek shareholder approval to authorise a share buy-back
programme.
Dividend
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.
Based on the improved profitability and increased liquidity of the company, the
Board of Directors propose an ordinary dividend of SEK 1.0 (0.5) per share and
an extraordinary dividend of SEK 0.7 per share, resulting in a total dividend of
SEK 1.7 per share and a total transfer of SEK 11.9 million (SEK 3.5 million) to
the shareholders of SinterCast AB (publ). The Board proposes 18 May, 2012 as the
record date for entitlement to receive dividends.
In deciding the amount of the ordinary and extraordinary dividends to be
proposed to the AGM 2012, the Board considered cashflow from operations and
investment requirements together with other factors, such as market outlook,
growth strategy and the internal financial forecast. The proposed ordinary
dividend represents 48% of the 2011 cashflow from operations and 60% of the
2011 Operating result for the Group. The total amount of the ordinary and
extraordinary dividends represents 82% of the 2011 cashflow from operations and
102% of the 2011 Operating result for the Group.
Information
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
The Interim Report October- December and Full Year Results 2012 will be
published on 20 February 2013
Annual Report 2011
The Annual Report 2011 will be published on 4 April 2012.
This report has not been reviewed by the Company's Auditors.
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
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-
