SinterCast Results July-September 2009
(Thomson Reuters ONE) - * Turnover for period: SEK 5.2 million (SEK 6.0 million). Year-to-date: SEK 14.5 million (SEK 17.4 million) * Operating result: SEK -1.5 million (SEK -0.4 million). Year-to-date: SEK -5.2 million (SEK -4.5 million) * Result after tax: SEK 10.1 million (SEK -0.4 million). Year-to-date: SEK -1.6 million (SEK 18.1 million) * Earnings/share: SEK 1.8 per share (SEK -0.1 per share). Year-to-date: SEK -0.3 per share (SEK 3.3 per share) * Cashflow: SEK 17.6 million (SEK -2.9 million). Year-to-date: SEK 17.7 million (SEK -7.5 million) * New rights issue provides net cash injection of SEK 18.4 million, increasing liquidity to SEK 26.7 million * Ford launches high volume diesel engine for Super Duty® pick-up trucks in North America * Dashiang Precision foundry in China begins production of new high volume exhaust component * First-ever SinterCast-CGI trial in India successfully concluded at DCM Engineering foundry Following annualised production of approximately 400,000 Engine Equivalents during the first seven months of 2009, series production climbed rapidly to 500,000 Engine Equivalents in September, resulting from the start of production of two new programmes.Current Production and OutlookAlthough the existing series production programmes have not yet begunto show any significant signs of recovery, the total productionvolume has increased as a result of the launch of two new programmes:the Ford 6.7 litre V8 in North America and another new exhaustcomponent at the Dashiang Precision foundry in China. The Ford PowerStroke® diesel engine, based on a SinterCast-CGI cylinder block, wasintroduced by Ford on 31 August and officially launched in the newF-Series Super Duty® trucks on 24 September. The state-of-the-artengine is the first CGI engine to be launched in the high volumeNorth American pick-up truck sector. The growth in series productionat the Dashiang Precision foundry in China is based on the launch ofanother new high volume exhaust component, produced for the exportmarket. Dashiang currently produces four different SinterCast-CGIexhaust components.Production of the Ford Power Stroke® diesel engine began at the Tupyfoundry in Brazil during mid-2008 and has already grown to becomeSinterCast's second largest production programme. The Power Stroke®diesel is the first engine that SinterCast has participated in as areplacement programme for an existing engine. As such, the ramp-upis expected to be faster than previous programmes. Based onhistorical sales of F-250, F-350, F-450 and F-550 vehicles, wheremore than two-thirds of all vehicles are specified with a dieselengine, the new V8 provides the potential for more than 400,000Engine Equivalents per year at full volume. During the introductionof the new engine, Ford specifically stated that the use of a CGIcylinder block enabled a weight reduction of 70 kg (160 pounds) inthe total engine weight, despite the displacement increase from 6.4to 6.7 litres.Also during the period, SinterCast conducted its first ever CGIproduction trial in India. The trial was successfully conducted atthe DCM Engineering foundry, India's largest independent cylinderblock and head foundry. The trial was commissioned by DCM inresponse to customer demand for CGI engine components as new roadinfrastructure and more stringent emissions increase the demand forimproved engine performance in India. Following the trial,SinterCast-CGI prototype cylinder blocks, weighing from 40 to 175 kg,were delivered to passenger vehicle and commercial vehicle OEMs inthe domestic market. DCM is also in dialogue with OEMs regarding thepotential to export high quality Compacted Graphite Iron castings.Based on the current production programmes and the potential marketrecovery during SinterCast's five year planning horizon, the fiveyear outlook is summarised as follows: Approximate Annual Production Potential and Revenue 30 September 2009 30 June 2009Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**Current Series 500 11 400 9Production[1]Potential Mature 1,300 30 1,000 23Volume[2]Production Orders 200 5 500 11Secured[3]Development Pipeline[4] 2,600 60 2,600 60Near-term Market 4,100 95 4,100 94Opportunity[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 23 SEK/Engine Equivalent on 30 September 2009 and 23 SEK/Engine Equivalent on 30 June 2009Financial SummaryRevenueThe revenue for the SinterCast Group relates primarily to income fromequipment (sales and leases), series production and engineeringservice.During July-September 2009, revenue amounted to SEK 5.2 million (SEK6.0 million). The revenue represents 87% of the 3Q 2008 revenue,which was the last full quarter before the impact of the globaleconomic downturn. Series production revenue was SEK 4.5 million (SEK4.7 million), mainly due to the shipment of 15,400 (16,500) SamplingCups.During January-September, revenue amounted to SEK 14.5 million,representing 83% of the corresponding period in 2008 (SEK 17.4million). The decreased revenue for the period results mainly fromthe decreased series production among foundry customers. A total of36,000 (44,000) Sampling Cups were sold during the period. Equipmentrevenue for the period was SEK 2.3 million (SEK 2.4 million) and isprimarily related to the Mini-System 2000 installation at theLuitpoldhütte foundry in Germany and the hardware upgrade/expansionat the Tupy foundry in Brazil.Revenue Breakdown July-September January-September 2009 2008 2009 2008Number of Sampling Cups shipped 15,400 16,500 36,000 44,000Equipment [1] 0.3 0.7 2.3 2.4Series Production [2] 4.5 4.7 10.9 13.4Engineering Service [3] 0.4 0.5 1.3 1.5Other [4] 0.0 0.1 0.0 0.1Total 5.2 6.0 14.5 17.4(Amounts in SEK million if nototherwise stated)Notes: 1. includes revenue from System 2000 sales and leases, sales of the Mini-System 2000 and 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 4. includes revenue from activation of the Pouring Furnace and System 3000 development projects.ResultThe July-September 2009 operating result of SEK -1.5 million is SEK1.1 million lower than the same period 2008, primarily affected bydepreciation (selected patents near the end of lifetime allowed tolapse) and by the reduced costs associated with the employee stockoption programme 2006-2010 during 3Q 2008.+-------------------------------------------------------------------+| July-September | 2009 | 2008 | Difference ||---------------------------------------+------+-------+------------|| Depreciation | 0.9 | 0.2 | 0.7 ||---------------------------------------+------+-------+------------|| Employee Stock Option Programme | 0.2 | -0.6 | 0.8 || 2006-2010 | | | |+-------------------------------------------------------------------+The result for the July-September 2009 period amounted to SEK 10.1million (SEK -0.4 million), primarily related to the revaluation ofthe deferred tax asset, as described in the section entitled"Deferred Tax Asset".The operating result for the year-to-date January-September 2009period amounted to SEK -5.2 million and is SEK 0.7 million lower thanthe same period 2008. The lower result for the year-to-date periodis likewise primarily related to higher depreciation (patent lapses)and to revaluation differences related to the employee stock optionprogramme 2006-2010.+-------------------------------------------------------------------+| January-September | 2009 | 2008 | Difference ||---------------------------------------+------+-------+------------|| Depreciation | 1.3 | 0.9 | 0.4 ||---------------------------------------+------+-------+------------|| Employee Stock Option Programme | 0.7 | 0.3 | 0.4 || 2006-2010 | | | |+-------------------------------------------------------------------+The result for the year-to-date period amounted to SEK -1.6 million(SEK 18.1 million), primarily related to revaluation differences ofthe deferred tax asset, by SEK 19.7 million, as described in the"Deferred Tax Asset" section.Result Summary July-September January-September 2009 2008 2009 2008Operating Result -1.5 -0.4 -5.2 -4.5Result for the period 10.1 -0.4 -1.6 18.1Result after tax per share (SEK) 1.8 -0.1 -0.3 3.3(Amounts in SEK million if nototherwise stated)Deferred Tax AssetSinterCast calculates its estimated future taxable profit fromsecured production orders on a quarterly basis, in order to determinethe valuation of its deferred tax asset.SinterCast has reassessed the estimated future taxable profit anddeferred tax asset calculation from secured orders to reflect thecurrent expectation of programme longevity and the typical lifecyclefor engine programmes in the automotive industry. This reassessmentreflects the indication that the underlying automotive demand hasstabilised, as described in SinterCast's 2Q Report. As of 30September 2009, SEK 80.3 million (13.5%) of SinterCast's totalcarried-forward tax losses have been used as the basis of the updatedcalculation, resulting in SEK 21.1 million being capitalised as adeferred tax asset.Deferred Tax Asset July-September January-September FY 2009 2008 2009 2008 2008Estimated future taxable profit 80.3 80.0 80.3 80.0 70.0Change in carry-forward tax loss 40.4 0.0 10.3 80.4 70.0taken into considerationDeferred tax asset 21.1 22.4 21.1 22.4 18.5Tax result 10.7 0.0 2.7 22.4 18.5(Amounts in SEK million if nototherwise stated), (FY: FullYear)Employee Stock Option ProgrammeAs of 30 September 2009, the cost of the existing employee stockoption programme 2006-2010 was calculated at a total amount of SEK3.2 million (SEK 3.7 million as of 30 September 2008), based on aclosing share price of SEK 60 on 30 September 2009 (SEK 103). During2009, SEK 0.7 million (SEK 0.4 million) was accounted for as costsrelated to the option programme.The Extraordinary General Meeting of the shareholders approved a new2009-2013 employee stock option programme on 20 August 2009, to beginduring 4Q 2009. The maximum number of stock options to be allotted tothe employees will be 285,000. According to the IFRS 2 accountingstandard, the employee stock options should be expensed as apersonnel cost during the period and reported directly against equitycapital. The recorded IFRS 2 cost for employee stock options willamount to approximately SEK 1.8 million during the period 2009-2013.Assuming that all options will be realised at the maximum ceiling ofSEK 50, the social security costs are expected to amount toapproximately SEK 3.0 million, expensed continuously during theperiod in which they are incurred. Costs for the option programme2009-2013 will be accounted for in 4Q 2009.Cashflow, Liquidity and InvestmentsThe new rights issue has provided a net cash injection of SEK 18.4million, securing the Company's liquidity. Current liquidity is SEK26.7 million, with the prospect of in additional SEK 11.6 millionbeing raised during September 2010 from the warrants related to thenew rights issue. The July-September 2009 cashflow result was SEK17.6 million (SEK -2.9 million), providing a Group liquidity ofSEK 26.7 million on 30 September 2009 (SEK 8.8 million). TheJanuary-September 2009 cashflow result was SEK 17.7 million (SEK -7.5million). The Sörmland Sparbank loan in the amount of SEK 3.0 millionis due for review during December 2009. According to its terms, theloan may be called for repayment during December 2009. Investmentsduring the period amounted to SEK 1.2 million (SEK 0.0 million).Cashflow Summary July-September January-September 2009 2008 2009 2008Cashflow from operating activities -1.2 0.2 -4.0 -2.8Cashflow from working capital 0.0 -3.1 0.6 -4.7Cashflow from investment activities 0.2 0.0 -0.5 0.0Cashflow from financing activities 18.6 - 21.6 -Cashflow total 17.6 -2.9 17.7 -7.5Liquidity 26.7 8.8 26.7 8.8Investments 1.2 0.0 1.2 0.0(Amounts in SEK million if not otherwise stated)Risks and Uncertainty Factors; Global Economic CrisisMarket DevelopmentThe main uncertainty factor for SinterCast is the timing of the CGImarket ramp-up, which primarily depends on the global economy for newvehicle sales and on the individual sales success of the vehiclesequipped with SinterCast-CGI components. The economic conditionsfacing the global foundry and automotive industries have resulted insignificant reductions in demand in both the passenger vehicle andcommercial vehicle sectors, causing automotive OEMs to reduceproduction and, in some cases, delay production launches. Theoverall decline in the automotive market has resulted in a reductionof SinterCast's near-term market opportunity calculation from a peakof 5.7 million Engine Equivalents on 30 June 2008 to the currentvalue of 4.1 million Engine Equivalents. This reduction ofapproximately 25% is better than the overall automotive marketdecline of 40~60% during the same period, primarily because thelaunch of new SinterCast-CGI components has provided incrementalvolumes. It is also noted that SinterCast's production of componentsother than automotive cylinder blocks and heads has not decreased assignificantly as the core cylinder block and head sector, thusproviding a compensating effect on the overall series productionvolume. While SinterCast continues to support new productdevelopment activities, and anticipates new production launches andinstallation revenue, the Board believes that it is still notpossible to determine the ultimate effect of the global economicrecession or the timing and rate of the overall market recovery.LiquiditySinterCast regularly monitors its cash position with reference tomarket forecasts and expense budgets, and has implemented apro-active liquidity protection plan that has included personnelreductions. While the Company believes that new installationopportunities can provide cash injections to further reinforce theliquidity, and that new series production launches can provide apositive contribution to production volumes and revenues, the timingof the overall recovery in the automotive and foundry industriesremains uncertain. The current series production volume ofapproximately 500,000 Engine Equivalents is insufficient to providepositive cashflow. In consideration of all factors, the Board ofDirectors determined that it was in the best interest of theshareholders to proceed with a new rights issue, which was approvedby an Extraordinary General Meeting of the Shareholders on 20 August2009, and has since resulted in a net cash injection of SEK 18.4million with the prospect of an additional SEK 11.6 million beingraised during September 2010 from the warrants related to the newrights issue. The rights issue ensures the long-term liquidity of theCompany and enables the Company to be more pro-active in itsoperations in advance of the market recovery.Market Penetration and CompetitionVirtually every company encounters competition, and SinterCast is noexception. However, based on SinterCast's pioneering and leadingrole in the development and application of CGI since the early1990's, SinterCast enjoys global brand recognition and respect as theCGI technology leader and is welcomed by the industry as a reliableand trustworthy partner in the industry. As the CGI market hasdeveloped, some foundry supply companies have proposed alternativeCGI technologies. To SinterCast's knowledge, these have includedHereaus-Electronite, OxyCast, OCC and NovaCast. It is also possiblethat some foundries may opt to produce CGI using in-house control anddiscipline, but this is generally judged to become less likely asproduct complexity and production volumes increase, and asspecification requirements become more rigidly enforced by theend-users. SinterCast judges that it's technology and engineeringknow-how provides the most reliable and cost-effective solution forthe production of high quality CGI. Based on its proven technology,production experience and engineering service, SinterCast willcontinue to support new CGI development activities to furtherincrease its share of the world CGI cylinder block and headproduction capacity. With respect to the development of alternativeautomotive technologies such as biofuels, hybrids and fuel cells,SinterCast does not expect these to have a significant effect on theCompany's competitive position for the foreseeable future.Accounting PrinciplesThe information provided on behalf of the Group in this interimreport has been prepared in accordance with Sweden's Annual AccountsAct and IAS 34 Interim Financial Reporting. As of 1 January 2009,several amendments to existing standards, new interpretations and onenew standard (IFRS 8) came into effect. In accordance with IAS 1,SinterCast has opted to present the Group's total earnings dividedinto two statements: a separate income statement and a statement ofcomprehensive income. Furthermore, the consolidated statement ofchanges in shareholders' equity only includes transactions with theGroup's owners. As of 1 April 2009, development costs that can bedirectly attributed to the design and testing of identifiable andunique new products controlled by the Group are recognised asintangible assets when the criteria of IAS38 are met. Beginning withthe 3Q09 report, SinterCast has reassessed the estimated futuretaxable profit and deferred tax asset calculation to reflect thetypical lifecycle of an engine programme in the automotive industry.The reporting for the Parent Company has been prepared in accordancewith Sweden's Annual Accounts Act. The accounting policies that havebeen applied for the Group and for the Parent Company are inagreement with the accounting policies used in the preparation of theCompany's latest annual report.During the period, no material transactions have taken place betweenSinterCast and the Board or the Management, with the exception oftheir unanimous participation in the new rights issue.Events after the Balance Sheet DateThere have been no significant events since the balance sheet date of30 September 2009 that could materially change these financialstatements.Parent CompanySinterCast AB (publ) is the Parent Company of the SinterCast Group,with registered office located in Stockholm, Sweden. The ParentCompany has 10 (12) employees. The majority of the operations areconducted by the Parent Company, including responsibility for therepresentative office in China and sales representatives inAustralia, India, Japan and Korea. Operations in the UK and the USAare managed by the local companies. The information given for theGroup in this report corresponds in all material respects to theParent Company.PersonnelAs of 30 September 2009, the Group had 13 (16) employees, two (three)of which were female. The core technical staff has the necessaryskills and resources to support ongoing customer activities and theoverall market development. Further recruitment will be phased withthe development of field activities, particularly the need to supportnew installations.Annual General MeetingThe Annual General Meeting 2010 of SinterCast AB (publ) will be heldon 20 May 2010.Nomination CommitteeThe Nomination Committee, elected by the Annual General Meeting 2009,consists of Ulla-Britt Fräjdin-Hellqvist, Lars Ahlström and TorbjörnNordberg. The Nomination Committee can be contacted at:nomination.committee(at)sintercast.comInformationThe Interim Report October-December and Full Year Results 2009 willbe published on 10 February 2010The Interim Report January-March 2010 will be published on 28 April2010The Interim Report April-June 2010 will be published on 25 August2010The Interim Report July-September 2010 will be published on 3November 2010For further information please contact:Dr. Steve DawsonPresident & CEOSinterCast AB (publ)Tel: +46 8 660 7750Mobile: +44 771 002 6342e-mail: steve.dawson(at)sintercast.comwebsite: www.sintercast.comSinterCast is the world's leading supplier of process controltechnology for the reliable high volume production of CompactedGraphite Iron (CGI). With at least 75% higher tensile strength, 45%higher stiffness and approximately double the fatigue strength ofconventional grey cast iron and aluminium, CGI allows enginedesigners to improve performance, fuel economy and durability whilereducing engine weight, noise and emissions. SinterCast produces avariety of CGI components ranging from 2 kg to 17 tonnes, all usingthe same process control technology. The end-users of SinterCast-CGIcomponents include Aston Martin, Audi, Caterpillar, Chrysler, DAFTrucks, Ford, Ford-Otosan, General Electric Transportation Systems,General Motors, Hyundai, Navistar, Jaguar, Kia, Land Rover, MAN, MANDiesel, Porsche, PSA Peugeot-Citroën, Renault, Rolls-Royce PowerEngineering, Toyota, Volkswagen, Volvo and Waukesha Engine. TheSinterCast share is quoted on the Small Cap segment of the NordicExchange, Stockholm (Stockholmsbörsen: SINT). ENDThe full report with tables can be downloaded from the followinglink:http://hugin.info/1205/R/1352393/327147.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 04.11.2009 - 09:01 Uhr
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