SINTERCAST AB 
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* Revenue for period: SEK 5.3 million (SEK 6.0 million).
Year-to-date: SEK 9.3 million (SEK 11.4 million)
* Operating result: SEK -1.0 million (SEK -1.9 million).
Year-to-date: SEK -3.7 million (SEK -4.1 million)
* Earning/share: SEK 0.4 per share (SEK -0.1 per share).
Year-to-date: SEK -2.1 per share (SEK 3.3 per share)
* Cashflow: SEK -0.3 million (SEK -1.5 million). Year-to-date: SEK
0.1 million (SEK -4.6 million)
* Events after balance sheet date: New rights issue and option
programme proposed to Extraordinary meeting
* Series production increases at Dashiang Precision foundry in
China as new products come on-stream
* First ever SinterCast-CGI production trial in India to begin
during August at the DCM Engineering foundry
Second quarter volumes indicate that series production has
stabilised. Opportunities remain
for new installation revenue and series production announcements
during the second half of 2009
Current Production and Outlook
Series production for the second quarter ran at an annualised rate of
approximately 400,000 Engine Equivalents (20,000 tonnes). This
volume is effectively the same as the first quarter of 2009 and
provides an indication that the underlying automotive demand has
stabilised. The production volume during the first half of 2009 is
down from the fourth quarter 2008 level of 625,000 Engine Equivalents
(31,250 tonnes), but this decrease directly parallels the overall
reductions in the wider automotive industry and is not indicative of
any specific reductions related to the SinterCast technology or to
CGI. Although the production seems to have stabilised, the Company
judges that it is prudent not to anticipate any significant recovery
in automotive sales during the balance of 2009, or indeed through
much of 2010. Any near-term increases in the production volume would
therefore primarily depend upon the start of production of new
SinterCast-CGI products rather than a recovery of existing
programmes.
During the period, a Mini-System 2000 process control system was
installed at the Luitpoldhütte foundry in Germany. Luitpoldhütte is
a global leader in the production of complex heavy section iron
castings for the agriculture, off-highway, construction and
industrial power sectors, and a member of the international Concern
Tractor Plants (CTP) group. The long-term technology supply
agreement with Luitpoldhütte broadens SinterCast's footprint in the
German foundry industry and significantly improves SinterCast's
ability to supply the CGI needs of the off-road sector. The second
quarter also resulted in a further hardware upgrade/expansion at the
Tupy foundry in Brazil, in anticipation of increased CGI production
activities. Coupled with revenue received from the intensified trial
activities earlier in the year, the Luitpoldhütte installation and
the Tupy expansion resulted in an effectively neutral cashflow result
for the second quarter, amounting to SEK -0.3 million.
Despite the economic downturn, several positive developments are
underway in the market. In China, production of exhaust components
at the Dashiang Precision foundry has increased as new CGI products
have successfully come on-stream and ramped-up. SinterCast is also
scheduled to begin its first ever CGI production trial in India
during August, at the DCM Engineering foundry, the largest
independent cylinder block foundry in India. SinterCast-CGI
prototype components will be cast for several OEMs in the domestic
market. Also, following a delay of several months, it is expected
that the extended production trial that was initiated during 2008
will resume during the third quarter. SinterCast continues to
support ongoing discussions for new installations and remains
optimistic for additional installation revenue during the second half
of 2009. The Company also anticipates the launch of the first
SinterCast-CGI V-diesel engine for the North American passenger
vehicle sector during the second half of the year.
Internally, the development of the new System 3000 process control
system is proceeding according to schedule and is planned for market
launch during the autumn. The System 3000 incorporates a suite of
comprehensive advances in the functionality of the hardware, software
and the consumable Sampling Cup.
Based on the apparent stabilisation of the current production
programmes, and the expected market recovery during SinterCast's five
year planning horizon, the five year outlook remains unchanged from
the outlook published as of 31 March 2009. The current outlook is
summarised as follows:
Approximate Annual Production Potential and
Revenue
30 June 2009 31 March 2009
Activity KEQVS* MSEK/yr** KEQVS* MSEK/yr**
Current Series 400 9 400 9
Production1
Potential Mature Volume2 1,000 23 1,000 23
Production Orders 500 12 500 12
Secured3
Development Pipeline4 2,600 60 2,600 60
Near-term Market 4,100 94 4,100 94
Opportunity5
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 June 2009 and 23
SEK/Engine Equivalent on 31 March 2009
Financial Summary
Revenue
The revenue for the SinterCast Group relates primarily to income from
equipment (sales and leases), series production and engineering
service. During April-June 2009 revenue decreased by 12% compared to
the same period 2008, to SEK 5.3 million (SEK 6.0 million). Series
production revenue amounted to SEK 3.1 million, representing a 37%
decrease compared to 2008. Equipment revenue for the period was SEK
1.7 million (SEK 0.6 million), primarily related to the Mini-System
2000 installation at the Luitpoldhütte foundry in Germany and the
hardware upgrade/expansion at the Tupy foundry in Brazil.
During January-June, revenue decreased by 18 % to SEK 9.3 million
(SEK 11.4 million). The decreased revenue for the period results
mainly from the decreased series production among foundry customers.
A total of 20,600 (27,500) Sampling Cups were sold during the period.
Equipment revenue for January-June 2009 exceeded the equipment
revenue for the same period during 2008.
Revenue Breakdown April-June January-June
2009 2008 2009 2008
Number of Sampling Cups shipped 9,300 16,500 20,600 27,500
Equipment 1 1.7 0.6 2.0 1.8
Series Production 2 3.1 4.9 6.4 8.6
Engineering Service 3 0.4 0.4 0.8 0.9
Other 0.1 0.1 0.1 0.1
Total 5.3 6.0 9.3 11.4
(Amounts in SEK million if not otherwise
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
Result
The April-June 2009 operating result of SEK -1.0 million is SEK 0.9
million higher than the same period 2008, primarily affected by
reduced gross margins of SEK -0.3 Million, cost reductions of SEK
-0.7 million and income from capitalised development of SEK 0.5
million.
The result for the April-June 2009 period amounted to SEK 2.0 million
(SEK -0.3 million), primarily related to the revaluation of the
deferred tax asset, SEK 2.5 million.
The operating result for the January-June 2009 period amounted to SEK
-3.7 million and is SEK 0.4 million higher than the same period 2008.
The gross margin was reduced by SEK 1.6 million to SEK 5.7 million
(SEK 7.3 million), which was compensated by cost reductions and by
income from the capitalised development. The cost reductions are
primarily related to salaries, travel and external consultants,
stemming from the Company's pro-active liquidity protection plan.
The result for the period amounted to SEK -11.7 million (SEK 18.5
million), primarily related to the revaluation of the deferred tax
asset, SEK -8.0 million.
Result Summary April-June January-June
2009 2008 2009 2008
Operating Result -1.0 -1.9 -3.7 -4.1
Result for the period 2.0 -0.3 -11.7 18.5
Result after tax per share (SEK) 0.4 -0.1 -2.1 3.3
(Amounts in SEK million if not otherwise
stated)
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. As of 31 December 2008,
this calculation resulted in SEK 70.1 million, representing 11.8% of
the Company's total carried-forward tax losses, being used as the
basis of the deferred tax asset calculation. However, the global
economic crisis has resulted in a reduced forecast of secured
production orders, and a corresponding reduction of the
carried-forward tax losses being taken into consideration. As of 30
June 2009, SEK 39.9 million (6.7%) of SinterCast's total
carried-forward tax losses have been used as the basis of the updated
calculation, resulting in SEK 10.5 million being capitalised as a
deferred tax asset. The Company will continue to review its forecast
on a quarterly basis, and to capitalise additional tax assets as new
production orders are confirmed.
Deferred Tax Asset April-June January-June
2009 2008 2009 2008
Estimated future taxable profit 39.9 80.0 39.9 80.0
Change in carried-forward tax loss taken 9.6 5.0 -30.2 80.0
into consideration
Deferred tax asset 10.5 22.4 10.5 22.4
Tax result 2.5 1.4 -8.0 22.4
(Amounts in SEK million if not otherwise
stated)
Employee Stock Option Programme
As of 30 June 2009, the cost of the existing 2006-2010 employee stock
option programme was calculated at a total amount of SEK 3.2 million
(SEK 4.3 million as of 30 June 2008), based on a closing share price
of SEK 30.4 on 30 June 2009 (SEK 121). During 2009, SEK 0.5 million
(SEK 0.8 million) was accounted for as costs related to the option
programme. The Board of Directors has also proposed a new employee
stock option programme, to be decided upon by an Extraordinary
General meeting of the shareholders on 20 August 2009. In the event
that the proposed new option programme is approved, all employees
will automatically forfeit any options held in the 2006-2010
programme, such that there will only be one active programme at the
outset of the proposed new option programme.
Cashflow, Liquidity and Investments
The April-June 2009 cashflow result was SEK -0.3 million (SEK -1.5
million), providing a Group liquidity of SEK 9.1 million on 30 June
2009 (SEK 11.7 million). The January-June 2009 cashflow result was
SEK 0.1 million (SEK -4.6 million). The liquidity was primarily
affected by a bank loan received from Sörmlands Sparbank in the
amount of 3.0 MSEK million, an operational loss of SEK -2.8 million
(SEK -3.0 Million) and a decrease in working capital of SEK 0.6
million (SEK -1.6 Million). The bank loan is conditional and will be
reviewed during December 2009. Investments during the period
amounted to SEK 0.7 million (SEK 0.0 million).
Cashflow Summary April-June January-June
2009 2008 2009 2008
Cashflow from operating activities -1.2 -1.3 -2.8 -3.0
Cashflow from working capital 1.6 -0.2 0.6 -1.6
Cashflow from investment activities -0.7 0.0 -0.7 0.0
Cashflow from financing activities - - 3.0 -
Cashflow total -0.3 -1.5 0.1 -4.6
Liquidity 9.1 11.7 9.1 11.7
Investments 0.6 0.0 0.7 0.0
(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, 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 4.1 million Engine Equivalents. This reduction of
approximately 28% is less than the overall automotive market decline
of 40~60% during the same period, primarily because the launch of new
SinterCast-CGI components have 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 during 2009, the ultimate effect of the global
economic recession cannot yet be fully quantified.
Liquidity
SinterCast regularly monitors its cash position with reference to
market forecasts and expense budgets, and has implemented a
pro-active liquidity protection plan that has included personnel
reductions. While the Company believes that new installation
opportunities can provide cash injections to 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
400,000 Engine Equivalents is insufficient to provide positive
cashflow, resulting in a near-term cash burn outlook for the
Company. As a result of the current series production level and the
broader market uncertainty, and in consideration of the fact that SEK
3.0 million of the Company's current SEK 9.1 million liquidity is
comprised of a bank loan that is due for review in December 2009, the
Board of Directors has judged that it is in the best interest of the
shareholders to proceed with a new rights issue at this time. The
new rights issue, if approved by an Extraordinary General Meeting of
the Shareholders on 20 August 2009, will ensure the long-term
security of the Company and enable the Company to take offensive
operational actions as the market recovers. On this basis, the Board
of Directors has proposed a pre-emptive rights issue of shares and
warrants that will generate SEK 23.1 million, prior to transaction
costs.
Market Penetration and Competition
Virtually every company encounters competition, and SinterCast is no
exception. However, based on SinterCast's pioneering and 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 in the industry. 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 it's 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 cylinder block and head
production capacity. With respect to the development of alternatives
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.
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) came 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. 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.
Events After the Balance Sheet Date
There have been no significant events since the balance sheet date of
30 June 2009 that could materially change these financial statements,
with the exception of the Board of Directors' proposal for a new
rights issue and a new employee stock option programme, to be decided
upon at an Extraordinary General Meeting of the Shareholders on 20
August 2009.
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.
Personnel
As of 31 June 2009, the Group had 13 (16) employees, two (three) of
which were female. The core technical staff has the necessary skills
and resources to support ongoing customer activities and to support
the current intensified market development. Further recruitment will
be phased with the development of field activities, particularly the
need to support new installations.
Extraordinary General Meeting 2009
An Extraordinary General Meeting of the Shareholders will be held at
14:00 on Thursday 20 August 2009 at the premises of Remium AB,
Kungsgatan 12-14, Stockholm, Sweden.
Information
The Interim Report July-September 2009 will be published on 4
November 2009
The Interim Report October-December and Full Year Results 2009 will
be published on 10 February 2010
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
This report has been reviewed by the company's auditors
The Board of Directors and the CEO certify that the half-yearly
financial report provides a true and fair overview of the operations,
outlook, financial position and results of the Company and the Group,
and describes the material risks and uncertainties that the Company
and the companies in the Group face.
Stockholm, 19 August 2009
Ulla-Britt Fräjdin-Hellqvist Aage Figenschou Andrea
Chairman of the Board Vice Chairman of the Fessler
Board Member of
the Board
Robert Dover Steve Dawson
Member of the Board President & CEO
Member of the Board
For further information please
contact:
Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Tel: +46 8 660 7750
Mobile: +44 771 002 6342
e-mail: steve.dawson@sintercast.com
Website: www.sintercast.com
Review Report
We have reviewed this report for the period 1 January 2009 to 30 June
2009 for SinterCast AB. The board of directors and the CEO are
responsible for the preparation and presentation of this interim
report in accordance with IAS 34 and the Swedish Annual Accounts Act.
Our responsibility is to express a conclusion on this interim report
based on our review.
We conducted our review in accordance with the Swedish Standard on
Review Engagements SÖG 2410, Review of Interim Report Performed by
the Independent Auditor of the Entity. A review consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with Standards on Auditing in Sweden, RS, and
other generally accepted auditing standards in Sweden. The procedures
performed in a review do not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Based on our review, nothing has come to our attention that causes us
to believe that the interim report is not prepared, in all material
respects, in accordance with IAS 34 and the Swedish Annual Accounts
Act, regarding the Group, and with the Swedish Annual Accounts Act,
regarding the Parent Company.
Stockholm, 19 August 2009
PricewaterhouseCoopers
Liselott Stenudd
Authorised Public Accountant
Auditor in Charge
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
B&W 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
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Copyright © Hugin AS 2009. All rights reserved.SINTERCAST : Results April-June 2009
August 19, 2009 at 03:15 am EDT
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