* Turnover for period: SEK 7.4 million (SEK 5.5 million). Full Year:
SEK 24.8 million (SEK 22.8 million)
* Result after tax: SEK -5.0 million (SEK -0.7 million). Full Year:
SEK 13.1 million (SEK -4.5 million)
* Earnings/share: SEK -0.9 per share (SEK -0.1 per share). Full
Year: SEK 2.4 per share (SEK -0.8 per share)
* Cashflow: SEK 0.2 million (SEK 1.0 million). Full Year: SEK -7.3
million (SEK 0.8 million)
* Series Production begins for 12.9 L DAF cylinder block and head at
Tupy foundry in Brazil
* Series production begins for Volkswagen exhaust components at
Dashiang Precision foundry in China
* Jaguar launches new class-leading 3.0 L V6 engine with
SinterCast-CGI cylinder block
* Hyundai launches ix55 luxury SUV with 3.0 L V6 engine based on a
SinterCast-CGI cylinder block
Despite the effects of the global economic crisis, the launch of new
SinterCast-CGI series production programmes provided year-on-year
growth throughout 2008. Year-end series production amounted
to approximately 630,000 Engine Equivalents, representing growth of
40% compared to 2007.
Current Production and Outlook
Following record production during September 2008, with an annualised
production rate of approximately 750,000 Engine Equivalents (37,500
tonnes/year), fourth quarter volumes were influenced by two opposing
factors. The overall decline in global automotive sales decreased
the volume of many of SinterCast's existing series production
programmes, while the start of production of the DAF cylinder block
and head at the Tupy foundry in Brazil and of the Volkswagen exhaust
components at the Dashiang Precision foundry in China provided
incremental volumes. Ultimately, production declined from the
September peak, but year-on-year volumes increased throughout 2008.
The full-year volume finished at approximately 630,000 Engine
Equivalents (31,500 tonnes), representing growth of 40% compared to
2007.
In addition to the new DAF and Volkswagen programmes, which have the
potential to provide combined mature volumes of more than 200,000
Engine Equivalents per year, the fourth quarter also resulted in the
launch of a new 3.0 L V6 diesel engine for Jaguar. Production of the
SinterCast-CGI cylinder block for the class-leading engine began at
the Tupy foundry in Brazil during mid-2008. Despite the increased
displacement relative to the 2.7 litre predecessor, the new engine
provides a 12% improvement in fuel economy and a 10% reduction in CO2
emissions. Jaguar specifically stated that the use of a CGI cylinder
block allowed the engine to be 80 mm shorter than a conventional cast
iron engine. This provides significant weight savings and packaging
benefits, contributing to the overall fuel economy, performance and
design of the vehicle. The engine satisfies Euro 5 emissions
requirements two full years before the regulations come into force.
The global economic crisis continues to affect automotive sales
volumes. In response to reduced demand, many of SinterCast's foundry
customers observed extended shutdowns during the Christmas, New Year
and Chinese New Year periods. These shutdowns will affect shipping
volumes and revenues during the first quarter of 2009. However, 2009
will also result in the launch of new SinterCast-CGI series
production programmes, including the start of series production for
the US SUV and pick-up sectors. These new launches will help to
offset the potential decline in SinterCast's current series
production programmes. Overall, the automotive companies are
continuing their development activities to ensure the delivery of
fuel efficient and emissions compliant engines for 2010 and beyond,
and SinterCast is actively involved in this development.
The market uncertainty during the second half of 2008 also resulted
in the delay of some planned foundry installations. While these
delays prevented the Company from realising its full-year neutral
cashflow target, most foundries have maintained their intentions to
install and/or expand CGI production capability, and new
installations are expected during 2009. During the period, a
complete set of System 2000 back-up modules was delivered to the
Dashiang Precision foundry in China. The modules were installed
during January 2009 and provide Dashiang with expansion capability as
the SinterCast-CGI production continues to grow. In parallel, the
extended production trial at a major international foundry has
continued throughout the period. While the progress of the trial has
recently been affected by production demand and foundry scheduling,
the trial is expected to be concluded during the first half of 2009.
Additional installation discussions are currently active in Europe,
Asia and the Americas.
SinterCast's five year forecast has been updated to reflect the
anticipated reduction in industry volumes caused by the current
economic downturn. Accordingly, the potential mature volume of the
current series production programmes has decreased from 1.3 million
Engine Equivalents (30 September 2008) to 1.1 million Engine
Equivalents. In addition to the programmes that are already in
series production, SinterCast's foundry customers have secured orders
for new CGI components that can provide mature volumes of
approximately 1.0 million additional Engine Equivalents per year. A
further 2.8 million Engine Equivalents are currently under
development, providing a near-term total market opportunity of
approximately 4.9 million Engine Equivalents per year. The recent
changes in exchange rates between the Swedish Kronor and SinterCast's
two main revenue currencies, the Euro and the US dollar, provide a
positive effect on series production revenues.
Based on current activities and knowledge, the near-term (<5 year)
market opportunity can be summarised as follows:
Approximate Annual Production Potential and
Revenue
31 December 2008 30 Sept 2008
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series 625 17 750 13
Production[1]
Potential Mature 1,100 25 1,300 28
Volume[2]
Production Orders 1,000 23 1,000 21
Secured[3]
Development Pipeline[4] 2,800 64 3,000 65
Near-term Market 4,900 112 5,300 114
Oppportunity[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 secured 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 22 SEK/Engine Equivalent on 30 Sept 2008 and 23
SEK/Engine Equivalent on 31 Dec 2008
Financial Summary
Revenue
The revenue for the SinterCast Group relates primarily to income from
equipment (sales and leases), series production, and engineering
service. During October-December 2008, series production revenue
amounted to SEK 3.8 million, representing a 5% decrease compared to
the same period during 2007. The decreased revenue for the period
results from the combined effect of an 11% increase in Engine
Equivalent shipments offset by a 15% reduction in Sampling Cup
shipments, as foundries adjusted stock levels. Equipment revenue for
the period was SEK 3.3 million, primarily due to the sale of the
System 2000 back-up modules to Dashiang and rental fees received for
the System 2000 installed to conduct the previously mentioned
extended production trial.
Series production revenue for the full year increased by
approximately 23% compared to 2007, to SEK 17.2 million. This
increase in the series production revenue enabled the Company to
achieve increased total revenue during 2008, despite a SEK 1.2
million reduction in installation revenue compared to 2007. As
mentioned previously, the global economic uncertainty affected
foundry investment planning during the second half of 2008, although
many of the discussions remain active and provide opportunities for
new installation revenues during 2009.
Revenue Breakdown October-December January-December
2008 2007 2008 2007
Number of Sampling Cups shipped 13,600 15,700 57,600 50,170
Equipment [1] 3.3 1.2 5.7 6.9
Series Production [2] 3.8 4.0 17.2 13.9
Engineering Service [3] 0.3 0.3 1.8 1.9
Other 0.0 0.0 0.1 0.1
Total 7.4 5.5 24.8 22.8
(Amounts in SEK million if not
otherwise stated)
Notes: 1. includes revenue from System 2000 sales and leases, and
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
Result
The October-December 2008 operating result of SEK -1.2 million is SEK
0.3 million lower than the same period 2007. The operating result is
affected by investments in technical development, primarily related
to the previously mentioned extended production trial, and also to
restructuring costs taken in advance of 2009.
The full year operating result of SEK -5.7 million is SEK 0.6 million
lower than the 2007 result. This result is primarily affected by
increased investment in personnel, increased sales activities and
associated travel expenses, and new market development, primarily in
India and China. Following the capitalisation of the deferred taxes,
the result after financial net, extraordinary items and taxes was SEK
13.1 million, which is SEK 17.6 million higher than the same period
2007.
October-December January-December
2008 2007 2008 2007
Operating Result -1.2 -0.9 -5.7 -5.1
Result after calculated tax -5.0 -0.7 13.1 -4.5
Result after tax per share (SEK) -0.9 -0.1 2.4 -0.8
(Amounts in SEK million if not
otherwise stated)
Deferred Tax Asset
SinterCast calculates its estimated near-term future taxable profit
on a quarterly basis, in order to determine the valuation of its
deferred tax asset. As of 30 September 2008, this calculation
indicated that SEK 80.0 million, representing 13.5% of the Company's
total carried-forward tax losses, could be capitalised. However, the
onset of the global economic crisis has resulted in a reduced
forecast of the secured production orders. Accordingly, the revised
calculation of the near-term future taxable profit has resulted in a
reduction of SEK 9.9 million during the fourth quarter, resulting in
SEK 70.1 million (11.8%) of SinterCast's total carried-forward tax
losses taken into consideration. Additionally, with effect from 1
January 2009, the Swedish corporate tax rate was reduced from 28% to
26.4%. This change in the tax rate results in a reduction of SEK 1.4
million, incorporated in the fourth quarter result. The Company will
continue to review its near-term forecast on a quarterly basis, and
to capitalise additional tax assets as new production orders are
confirmed and as the Company's five-year tax planning horizon rolls
forward.
October-December January-December
2008 2007 2008 2007
Estimated near-term future 70.1 0.0 70.1 0.0
taxable profit
Carried-forward tax losses -9.9 0.0 70.1 0.0
taken into consideration
Deferred tax asset 18.5 0.0 18.5 0.0
Tax result -3.9 0.0 18.5 0.0
(Amounts in SEK million if not
otherwise stated)
Employee Stock Option Programme
As of 31 December 2008, the cost of the employee stock option
programme was calculated at a total amount of approximately SEK 3.2
million (SEK 6.0 million as of 31 December 2007), based on a closing
share price of SEK 32.5 on 31 December 2008 (SEK 150 on 31 December
2007). During 2008, SEK 0.1 million (SEK 0.4 million on 30 September
2008) was accounted for as costs related to the option programme.
Cashflow, Liquidity and Investments
The October-December 2008 cashflow result was SEK 0.2 million (SEK
1.0 million for 2007), providing a Group liquidity of SEK 9.0 million
on 31 December 2008 (SEK 16.3 million). The full year cashflow
result of SEK -7.3 million was primarily affected by the lower than
expected installation revenue, increased personnel and recruitment
costs (on average, 16 employees during 2008 compared to 14 employees
during 2007), and the establishment of the new representation
activities in China and India. The cashflow result of SEK -7.3
million results from the combined effect of cashflow from operations
of SEK -3.3 million, increase in working capital of SEK -3.7 million
and investments of SEK -0.3 million. The increase in working capital
affects SinterCast during the current transition period toward higher
production activities, as stock levels and accounts receivables are
increased in combination with decreased liabilities. Investments by
the Group during the period amounted to SEK 0.3 million (SEK 0.4
million).
October-December January-December
2008 2007 2008 2007
Cashflow from operating -0.5 -0.8 -3.3 -2.2
activities
Cashflow from working capital 1.0 2.8 -3.7 4.4
Cashflow from Investment -0.3 -1.0 -0.3 -1.4
activities
Cashflow total 0.2 1.0 -7.3 0.8
Liquidity 9.0 16.3 9.0 16.3
Investments 0.3 0.2 0.3 0.4
(Amounts in SEK million if not otherwise stated)
Risks and Uncertainty Factors; Global Economic Crisis
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. Despite the start of new SinterCast-CGI
production programmes during the fourth quarter, the overall market
decline resulted in a reduction of the near-term market opportunity
from 5.3 million Engine Equivalents (30 September 2008) to the
current value of 4.9 million Engine Equivalents.
Liquidity
SinterCast has historically been financed by risk capital provided by
its shareholders. SinterCast regularly monitors its cash position
with reference to market forecasts and expense budgets. During
recent years, the revenue has been increased, thus significantly
reducing the financing risk. While the Company believes that the
start of production of new SinterCast-CGI production programmes will
help to offset the global decline in automotive volumes, and that new
installations during 2009 will provide cash injections to reinforce
the liquidity, a pro-active liquidity protection plan has already
been implemented. The objective of this plan is to reduce expenses,
including personnel costs. The Board and Management continuously
monitor the status of the current and future SinterCast-CGI
programmes, as well as the overall market development, to navigate
the Company through the economic crisis.
SinterCast's risks and uncertainty factors have been described in the
Annual Report 2007. Thereafter, the global economic crisis has had a
significant impact on the automotive and foundry industries, the
ultimate effect of which cannot yet be fully quantified.
There have been no significant events since the balance sheet date of
31 December 2008 that could materially change these financial
statements.
Market Penetration and Competition
SinterCast enjoys the respect of the industry as the market leader
for CGI process control technology and CGI know-how, and is welcomed
as a reliable and trustworthy technology partner. As the market
demand for CGI continues to grow, and production demand begins to
exceed the capability of in-house techniques, it is likely that
competitive pressures will increase in the supply community. Based
on its proven technology and engineering service, SinterCast will
continue to support new CGI development activities and further
increase its share of the world CGI cylinder block and head
production capacity.
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 9001:2000 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, which began operation
on 13 March 2008. 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.
Two new employees joined the Company on 1 January 2008, both of whom
are university graduates with PhD degrees. As of 31 December 2008,
the Group had 15 (14) employees, 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 16 (18) 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 2008, 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
79 (91) individual national phase patents granted or pending
worldwide. The 16 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. 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. The effect of the reduction in the Swedish corporate tax
rate from 28.0% to 26.4 % has been accounted for during the fourth
quarter of 2008. During the period, no material transactions have
taken place between SinterCast and the Board or the Management.
Parent Company
SinterCast AB (publ) is the Parent Company of the SinterCast Group,
with registered office located in Stockholm, Sweden. The Parent
Company has 12 (11) 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 respect to the
Parent Company.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2008,
consists of Ulla-Britt Fräjdin-Hellqvist, Lars Ahlström (the second
largest shareholder as of 6 May 2008) and Lennart Svantesson.
The Nomination Committee can be contacted at:
nomination.committee@sintercast.com
Audit Committee
SinterCast established an Audit Committee during 2008. 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 2009 will be published on 22 April
2009
The Interim Report April-June 2009 will be published on 19 August
2009
The Interim Report July-September 2009 will be published on 4
November 2009 (revised from 11 November)
The Interim Report October-December and Full Year Results 2009 will
be published on 10 February 2010
Annual Report
The Annual Report for 2008 will be published during the week
commencing 20 April 2009.
Annual General Meeting
The Annual General Meeting 2009 will be held at 15:00 on 7 May 2009
at The Royal Swedish Academy of Engineering Sciences (IVA), Grev
Turegatan 16, Stockholm.
The Board of Directors intend to propose to the AGM to decide that
the results for 2008 be carried forward, to propose no dividend for
2009 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, 9 February 2009
For further information please contact:
Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Tel: +46 8 660 7750
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. SinterCast produces a
variety of CGI components ranging from 1.6 kg to 17 tonnes, all using
the same process control technology. The end-users of SinterCast-CGI
components include Aston Martin, Audi, Caterpillar, Chrysler, Ford,
General Electric Transportation Systems, General Motors, Hyundai,
International Truck and Engine, Jaguar, Kia, Land Rover, MAN, MAN B&W
Diesel, PSA Peugeot-Citroën, 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
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