2010-02-10 09:11:12 -
SinterCast Results October-December 2009
Full Year Results 2009
· Turnover for period: SEK 5.5 million (SEK 7.4 million). Full Year: SEK
20.0 million (SEK 24.8 million)
· Operating result: SEK -1.1 million (SEK -1.2 million). Full Year: SEK
-6.3 million (SEK -5.7 million)
· Result after tax: SEK -1.1 million (SEK -5.0 million). Full Year: SEK
-2.7 million (SEK 13.1 million)
· Earnings/share: SEK -0.2 per share (SEK -0.9 per share). Full Year: SEK
-0.5 per share (SEK 2.4 per share)
· Cashflow: SEK -1.9 million (SEK 0.2 million). Full Year: SEK 15.8
million (SEK -7.3 million)
· First Automobile Works become first Chinese OEM to adopt the
SinterCast-CGI technology
· System 3000 third generation suite of technologies successfully launched
· Cifunsa upgrades existing System 2000 to System 3000 technology
Series production grows by 10% during the quarter, primarily based on increased
production
of diesel engine cylinder blocks for North America and increased exhaust
component production in China
Current Production and Outlook
Following a 14-month development campaign, SinterCast launched its third
generation process control technology on 15 December 2009. Branded as the
System 3000, the new technology is based on state-of-the-art hardware and a
rugged XP embedded operating system. The System 3000 suite of technologies
incorporates the latest SinterCast process control software configured for both
pressurised pouring furnaces and ladle pouring, and a new Sampling Cup with
expanded thermal analysis measurement capability. The System 3000 was launched
following extensive durability testing corresponding to the production of more
than three million cylinder blocks under typical foundry production conditions
and provides increased levels of flexibility, robustness, accuracy and
independence for SinterCast's foundry customers.
During the period, the Cifunsa foundry in Mexico upgraded its existing
SinterCast System 2000 to full System 3000 capability. The upgrade was made as
a result of intensified product development activity and anticipated increases
in the overall market demand for CGI engine castings.
In early January, First Automobile Works (FAW), the largest vehicle manufacturer
in China, became the first Chinese OEM to adopt the SinterCast process control
technology. Under the terms of the agreement, FAW Foundry Co., Ltd., the
foundry research and development branch within the China FAW Group Corporation,
will install a SinterCast Mini-System 3000 at the R&D foundry located in
Changchun, China. The Mini-System 3000 provides the FAW Group with the
capability to independently conduct CGI product development for FAW passenger
vehicles, light-duty and heavy-duty commercial vehicles, and busses.
During the period, the Navistar ICC foundry located in Indianapolis announced
that it would cease operation during early 2010. As a result of this change,
the SinterCast System 2000 was recovered from the foundry during January 2010.
Despite an overall downturn of approximately 40% in the global automotive
industry during 2009, the start of production of new SinterCast-CGI products
resulted in a series production growth of approximately 35% during the
second-half of the year, including a 10% growth during the fourth quarter. This
growth was primarily derived from 6.7 litre V8 cylinder block produced at the
Tupy foundry in Brazil for Ford Super Duty(®) trucks in North America, and
increased production of exhaust manifolds and turbocharger housings at the
Dashiang Precision foundry in China. At year end, Sampling Cup shipments for
2009 (54,600) recovered to a comparable level with 2008 (57,600).
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 2009 30 September 2009
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series 550 13 500 11
Production[1]
Potential Mature 1,200 27 1,300 30
Volume[2]
Production Orders 400 9 200 5
Secured[3]
Development Pipeline[4] 2,700 62 2,600 60
Near-term Market 4,300 99 4,100 95
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
** Assumes 23 SEK/Engine Equivalent on 31 December 2009 and 23
SEK/Engine Equivalent on 30 September 2009
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
2009 2008 2009 2008
--------------------------------------------------------------------------------
Number of Sampling Cups shipped 18,600 13,600 54,600 57,600
Equipment [1] 0.3 3.3 2.6 5.7
Series Production [2] 4.7 3.8 15.6 17.2
Engineering Service [3] 0.4 0.3 1.7 1.8
Other( ) 0.1 0.0 0.1 0.1
--------------------------------------------------------------------------------
Total 5.5 7.4 20.0 24.8
--------------------------------------------------------------------------------
(Amounts in SEK million if not otherwise
stated)
Notes: 1. Includes revenue from System sales and leases, sales of the
Mini-Systems 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
During October-December 2009, revenue amounted to SEK 5.5 million (SEK 7.4
million). The decreased revenue for the period results primarily from lower
equipment revenue. The equipment revenue for the period was SEK 3.0 million
lower compared to the same period during 2008, when revenues were realised for
the sale of System 2000 back-up modules to Dashiang and for rental fees received
for a System 2000 installed in support of an extended production trial. It is
also noted that revenue from series production increased to SEK 4.7 million (SEK
3.8 million), mainly due to the shipment of 18,600 (13,600) Sampling Cups,
providing a compensating effect on the October-December 2009 revenue decrease.
DuringJanuary-December 2009, revenue amounted to SEK 20.0 million, representing
80% of the corresponding period in 2008 (SEK 24.8 million). The decreased
revenue for the period results mainly from the decreased equipment revenue.
Equipment revenue for the period was SEK 2.6 million (SEK 5.7 million) and is
primarily related to the Mini-System 2000 installation at the Luitpoldhütte
foundry in Germany and to the hardware upgrade/expansion at the Tupy foundry in
Brazil. Series production revenue amounted to SEK 15.6 million (SEK 17.2
million), representing 90% of series production revenues during 2008. A total of
54,600 (57,600) Sampling Cups were sold during the period.
Results
Results Summary October-December January-December
2009 2008 2009 2008
--------------------------------------------------------------------------------
Operating Result -1.1 -1.2 -6.3 -5.7
Result for the period -1.1 -5.0 -2.7 13.1
Result after tax per share (SEK) -0.2 -0.9 -0.5 2.4
--------------------------------------------------------------------------------
(Amounts in SEK million if not otherwise
stated)
The October-December 2009 operating result of SEK -1.1 million (SEK -1.2)
million was primarily affected by lower gross margin of SEK -0.3 million and
lower costs of SEK 0.3 million. The result after tax for the October-December
2009 period amounted to SEK -1.1 million (SEK -5.0 million), primarily related
to the revaluation of the deferred tax asset, as described in the section
entitled "Deferred Tax Asset".
The operating result for theJanuary-December 2009 period amounted to SEK -6.3
million and is SEK 0.6 million lower than the same period 2008. The lower
result for the year-to-date period is likewise primarily affected by lower gross
margin of SEK -2.4 million and lower costs of SEK 1.8 million. The lower costs
were affected by income amounting to SEK 0.8 million referring to the activation
of Pressurised Pouring Furnace and System 3000 development projects. The result
after tax for the year-to-date period amounted to SEK -2.7 million (SEK 13.1
million), primarily related to revaluation differences of the deferred tax
asset. The difference that affects the tax results amounts to SEK 15.8 million,
as described in the "Deferred Tax Asset" section.
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
2009 2008 2009 2008
--------------------------------------------------------------------------------
Estimated future taxable profit 80.3 70.0 80.3 70.0
Change in carry-forward tax loss taken into 0.0 -9.9 10.3 70.0
consideration
Deferred tax asset 21.2 18.5 21.2 18.5
Tax result 0.0 -3.9 2.7 18.5
--------------------------------------------------------------------------------
(Amounts in SEK million if not otherwise
stated), (FY: Full Year)
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. This reassessment reflects the Company's current judgement
that the underlying automotive demand has stabilised. As of 30 September 2009,
SEK 80.3 million (13.5%) of SinterCast's total carried-forward tax losses have
been used as the basis of the updated calculation, resulting in SEK 21.2 million
being capitalised as a deferred tax asset. The assessment as of 31 December
2009 resulted in an unchanged valuation of the deferred tax asset
Employee Stock Option Programme
As of 31 December 2009, the cost of the existing employee stock option programme
2006-2010 was calculated at a total amount of SEK 3.2 million (SEK 3.2 million
as of 31 December 2008), based on a closing share price of SEK 50.5 on 31
December 2009 (SEK 32.5). During 2009, SEK 0.7 million (SEK 0.1 million) was
accounted for as costs related to the option programme. No additional costs will
be accounted for the option programme 2006-2010, as the programme has expired.
The Extraordinary General Meeting of the shareholders approved a new 2009-2013
employee stock option programme on 20 August 2009, to begin during 4Q 2009. The
number of stock options allotted to the employees was 285,000. According to the
IFRS 2 accounting standard, the employee stock options should be expensed as a
personnel cost during the period and reported directly against equity capital.
The recorded IFRS 2 cost for employee stock options will amount to approximately
SEK 1.8 million during the period 2009-2013. Assuming that all options will
berealised at the maximum ceiling of SEK 50, the social security costs are
expected to amount to approximately SEK 3.0 million, expensed continuously
during the period in which they are incurred. Costs for the option programme
2009-2013 will be accounted for from 1Q 2010 and onwards.
Cashflow, Liquidity and Investments
The October-December 2009 cashflow result was SEK -1.9 million (SEK 0.2
million), providing a Group liquidity of SEK 24.8 million on 31 December 2009
(SEK 9.0 million). The January-December 2009 cashflow result was SEK 15.8
million (SEK -7.3 million). The Sörmland Sparbank loan in the amount of SEK 3.0
million was reviewed during December 2009 and extended until the next annual
review in December 2010. Investments during the period amounted to SEK 1.3
million (SEK 0.3 million), of which SEK 0.8 million refers to the activation of
the Pressurised Pouring Furnace and System 3000 development projects.
Cashflow Summary October-December January-December
2009 2008 2009 2008
-----------------------------------------------------------------------
Cashflow from operating activities 0.8 -0.5 -3.2 -3.3
Cashflow from working capital -2.3 1.0 -1.7 -3.7
Cashflow from investment activities -0.1 -0.3 -0.6 -0.3
Cashflow from financing activities -0.3 - 21.3 -
-----------------------------------------------------------------------
Cashflow total -1.9 0.2 15.8 -7.3
Liquidity 24.8 9.0 24.8 9.0
Investments 1.3 0.3 1.3 0.3
-----------------------------------------------------------------------
(Amounts in SEK million if not otherwise stated)
The new rights issue provided a net cash injection of SEK 18.3 million. Current
liquidity is SEK 24.8 million, with the prospect of an additional SEK 11.6
million being raised during September 2010 from the warrants related to the new
rights issue.
Risks and Uncertainty Factors
Market Development
The main uncertainty factor for SinterCast is the timing of the CGI market
ramp-up, which primarily depends on the global economy for new vehicle sales and
on the individual sales success of the vehicles equipped with SinterCast-CGI
components. The economic conditions facing the global foundry and automotive
industries have resulted in significant reductions in demand in both the
passenger vehicle and commercial vehicle sectors, causing automotive OEMs to
reduce production and, in some cases, delay production launches. The overall
decline in the automotive market has resulted in a reduction of SinterCast's
near-term market opportunity calculation from a peak of 5.7 million Engine
Equivalents on 30 June 2008 to the current value of 4.3 million Engine
Equivalents. This reduction of approximately 25% is better than the overall
automotive market decline of 40~60% during the same period, primarily because
the launch of new SinterCast-CGI components has provided incremental volumes.
It is also noted that SinterCast's production of components other than
automotive cylinder blocks and heads has not decreased as significantly as the
core cylinder block and head sector, thus providing a compensating effect on the
overall series production volume. While SinterCast continues to support new
product development activities, and anticipates new production launches and
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.
Liquidity
During the period, SinterCast regularly monitored its cash position with
reference to market forecasts and expense budgets, and implemented a pro-active
liquidity protection plan that included personnel reductions. While the Company
believes that new installation opportunities can provide cash injections to
further reinforce the liquidity, and that new series production launches can
provide a positive contribution to production volumes and revenues, the timing
of the overall recovery in the automotive and foundry industries remains
uncertain. The current series production volume of approximately 550,000 Engine
Equivalents is insufficient to provide positive cashflow. In consideration of
all factors, the Board of Directors determined that it was in the best interest
of the shareholders to proceed with a new rights issue, which was approved by an
Extraordinary General Meeting of the Shareholders on 20 August 2009, and has
since resulted in a net cash injection of SEK 18.3 million with the prospect of
an additional SEK 11.6 million being raised during September 2010 from the
warrants related to the new rights issue. The rights issue enables the Company
to be more pro-active in its operations in advance of the market recovery.
Market Penetration and Competition
SinterCast has played a leading role in the development and application of CGI
since the early 1990's. 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 2009, the Group had 13 (15) employees, two (three) of which
were female. Further recruitment will be phased with the development of field
activities, particularly the need to support new installations.
Patents
SinterCast currently holds 13 (16) patents. The core technology is primarily
protected by ten of the most recent patents that will remain valid until at
least 2015. During the early 1990s, SinterCast's strategy was to aggressively
file new patents, in order to establish and protect the value of the
technology. As the market development has evolved, SinterCast has gradually
transitioned from a strategy of publishing patents to retaining internal
know-how.
During 2009, several patents were intentionally allowed to lapse. It was judged
that these older patents no longer reflected SinterCast's current technology and
that the protection offered did not warrant continued payment of the annual
fees. SinterCast currently maintains 63 (79) individual national phase patents
granted or pending worldwide. The 13 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. As of 1 January 2009, several amendments to existing
standards, new interpretations and one new standard (IFRS 8) have come into
effect. In accordance with IAS 1, SinterCast has opted to present the Group's
total earnings divided into two statements: a separate income statement and a
statement of comprehensive income. Furthermore, the consolidated statement of
changes in shareholders' equity only includes transactions with the Group's
owners. As of 1 April 2009, development costs that can be directly attributed
to the design and testing of identifiable and unique new products controlled by
the Group are recognised as intangible assets when the criteria of IAS38 are
met. Beginning with the 3Q09 report, SinterCast has reassessed the estimated
future taxable profit and deferred tax asset calculation to reflect the typical
lifecycle of an engine programme in the automotive industry. In compliance with
IFRS 8, beginning with the 4Q09 report, the Geographical Market presentation
summary has been removed from the financial statements, to better correspond
with the internal reporting within the Group. The reporting for the Parent
Company has been prepared in accordance with Sweden's Annual Accounts Act. 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.
During the period, no material transactions have taken place between SinterCast
and the Board or the Management, with the exception of their unanimous
participation in the new rights issue.
Events after the Balance Sheet Date
There have been no significant events since the balance sheet date of 31
December 2009 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 (12)
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.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2009, consists
of Ulla-Britt Fräjdin-Hellqvist, Lars Ahlström and Torbjörn Nordberg. The
Nomination Committee can be contacted at:
nomination.committee@sintercast.com
<mailto:nomination.committee@sintercast.com>
Audit Committee
All Board Members sit on the Audit Committee, although the President & CEO does
not participate in the direct contact between the Audit Committee and the
Auditor. A separate Audit Committee has not been appointed.
Information
The Interim Report January-March 2010 will be published on 28 April 2010
The Interim Report April-June 2010 will be published on 25 August 2010
The Interim Report July-September 2010 will be published on 3 November 2010
The Interim Report October-December and Full Year Results 2010 will be published
on 9 February 2011
Annual Report
The Annual Report for 2009 will be published during the week commencing 19 April
2010.
Annual General Meeting
The Annual General Meeting 2010 will be held at 15:00 on 20 May 2010 at The
Royal Swedish Academy of Engineering Sciences (IVA), Grev Turegatan 16,
Stockholm.
The Board of Directors intend to propose to the AGM 2010 to decide that the
results for 2009 be carried forward, to propose no dividend for 2010 and, on an
annual basis, to seek shareholder approval to authorise a share buy-back
programme.
This report has not been reviewed by the Company's Auditors.
Stockholm, 10 February 2010
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 <mailto:steve.dawson@sintercast.com>
website: www.sintercast.com <http://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. SinterCast produces a variety of CGI
components ranging from 2 kg to 17 tonnes, all using the same 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, Navistar, Jaguar, Kia, Land
Rover, MAN, MAN Diesel, Porsche, PSA Peugeot-Citroën, Renault, Rolls-Royce Power
Engineering, Toyota, Volkswagen, Volvo and Waukesha Engine. The SinterCast share
is quoted on the Small Cap segment of the Nordic Exchange, Stockholm
(Stockholmsbörsen: SINT).
END
The full report with tables can be downloaded from the following link:
[HUG#1382501]
SinterCast Results October-December 2009 and Full Year Results 2009:
hugin.info/1205/R/1382501/341406.pdf
