Record series production in September and third quarter
Third Quarter 2014
* Revenue for Period: SEK 13.4 million (SEK 14.0 million)
* Operating Result: SEK 3.1 million (SEK 2.3 million)
* Earnings per Share: SEK 0.5 per share (SEK 0.3 per share)
* Cashflow from Operations: SEK 2.6 million (SEK 1.3 million)
* Record series production of 1.95 million Engine Equivalents in September
* Record series production for third quarter with 10% year-on-year increase
* New installation secured at Impro Industries in China for industrial power
applications
* Ford 2.7 litre petrol engine performance confirmed with 325 horsepower and
508 Nm of torque
2014 Year-to-Date
* Revenue: SEK 38.9 million (SEK 37.5 million)
* Operating Result: SEK 6.7 million (SEK 5.2 million)
* Earnings per Share: SEK 1.2 per share (SEK 0.9 per share)
* Cashflow from Operations: SEK 3.5 million (SEK 6.8 million)
* Installed Base: 23 fully automated systems and 16 mini-systems in Europe,
Asia and the Americas
Series Production*
For graph, please see PDF
Annualised series production reached 1.80 million Engine Equivalents in the
third quarter, providing a 10% year-on-year increase. Series production in
September established an all-time annualised record of 1.95 million Engine
Equivalents.
* Annualised average production of Engine Equivalents during the quarter (1
Engine Equivalent = 50 kg)
CEO Comments
Record series production in September and third quarter
Series production in September approached the two million Engine Equivalent
milestone with record annualised production of 1.95 million Engine Equivalents.
The strong September production buoyed the traditionally lower summer shutdown
months to provide record quarterly production of 1.80 million Engine
Equivalents, resulting in three consecutive quarters of record series production
and a 10% year-on-year increase. The outlook remains positive in each of the
passenger vehicle, commercial vehicle and industrial power sectors, as
competitive benchmarks and market awareness continue to grow. It is estimated
that the current series production programmes have the potential to provide
approximately 2.5 million Engine Equivalents at mature volume.
Each of the top five series production programmes posted yearly high volume
during September, as improving automotive sales and lower fuel prices
contributed to increased passenger vehicle sales in Europe and increased pick-up
sales in North America. European commercial vehicle volumes also increased as
the ramp up of new Euro 6 emissions vehicles continued during the quarter.
Revenue for the third quarter is lower than revenue in the third quarter of
2013, but this is due to the record installation performance achieved in 2013.
All other metrics, including series production, consumables, CGI product
development intensity and the overall market acceptance of CGI have improved
considerably and provide a positive outlook for future growth.
North American pick-up applications continue to provide increased volumes and
future growth potential. Series production of the Ford 2.7 litre V6 petrol
engine began to make a larger contribution to the total volume, as production
increased in advance of the announced start of model year 2015 F150 pick-up
sales in December. In parallel, Ford has publicly confirmed that the 2.7 litre
engine will provide 325 horsepower and 508 Nm of torque and journalist drive
reports have been consistently positive about the performance, refinement and
driveability of the engine. Also during September, Ram introduced changes in
its Michigan truck plant that enable an increase in capacity and an increase of
the diesel build capability. This development is in agreement with the planned
increase of engine production presented by Mr Raffaele De Vivo, President of VM
Motori North America, at SinterCast's 2014 AGM. Ram has stated that
approximately 60% of diesel sales have been conquest customers from rival truck
brands. This pressure, in the traditionally loyal pick-up sector, may motivate
diesel responses from other OEMs.
New installation for industrial power sector
During the period, Impro Industries in China acquired a SinterCast licence in
preparation for the start of series production of industrial power components.
A Mini-System 3000 has been delivered and the installation is planned to be
commissioned during the fourth quarter, with production starting thereafter.
The SinterCast installation, together with engineering support, will enable
Impro Industries, which specialises in heavy-duty and industrial power castings,
to produce CGI components conforming to the international ISO 16112 standard for
the export market. The agreement marks SinterCast's eighth installation in
China and fourteenth installation in Asia, broadening SinterCast's presence and
brand awareness, and providing additional opportunities to increase SinterCast-
CGI production in the industrial power sector.
Ductile Iron technology
Development of the ductile iron technology continued through the quarter with
intensified training of new R&D personnel, foundry trials, data analysis and
application programming. Further field trials will be conducted during the
fourth quarter at selected foundries in Europe and discussions are ongoing to
establish reference case studies for prolonged trials during the first half of
2015. The SinterCast ductile iron technology is expected to provide additional
benefit to customers by reducing magnesium consumption, improving mould yield
and reducing casting defects in the foundry, and by improving machinability.
Financial Summary
Revenue
Revenue for the SinterCast Group relates primarily to income from equipment,
series production and engineering service.
Revenue Breakdown July - September January - September
(Amounts in SEK million if not 2014 2013 2014 2013
otherwise stated)
-------------------------------------------------------------------------------
Number of Sampling Cups 28,700 27,800 94,800 89,900
shipped
Equipment (1) 1.1 3.2 3.8 5.9
Series Production (2) 11.9 10.5 33.9 30.2
Engineering Service( 3) 0.3 0.3 1.1 1.2
Other 0.0 0.0 0.1 0.2
-------------------------------------------------------------------------------
Total 13.4 14.0 38.9 37.5
-------------------------------------------------------------------------------
Notes: 1. Includes revenue from system sales and leases and sales of
spare parts
2. Includes revenue from production fees, consumables and
software licence fees
3. Includes revenue from technical support, on-site trials and
sales of test pieces
July-September 2014 revenue amounted to SEK 13.4 million (SEK 14.0 million).
Revenue from series production increased by 13% to SEK 11.9 million (SEK 10.5
million), due to record annualised series production of approximately 1.80
million (1.60 million) annualised Engine Equivalents during the quarter and the
increased shipment of 28,700 (27,800) Sampling Cups. During the period, a Mini-
System 3000 was shipped to Impro Industries foundry in China. However, the
total revenue for the quarter was lower due to the heightened installation
activity during the third quarter of 2013. Engineering Service amounted to SEK
0.3 million (SEK 0.3 million).
January-September 2014 revenue amounted to SEK 38.9 million (SEK 37.5 million).
Revenue from series production increased by 12% to SEK 33.9 million (SEK 30.2
million) due to increased production and Sampling Cup shipments. Equipment
revenue amounted to SEK 3.8 million (SEK 5.9 million), following the shipment of
a Mini-System 3000 to Impro Industries foundry in China and a System 3000 Plus
to one of China's largest automotive component conglomerates. Engineering
Service amounted to SEK 1.1 million (SEK 1.2 million) following support provided
to various customers globally and the sale of test pieces. The revenue from the
leased installations is accrued over the lease period.
Results
The business activities of SinterCast are best reflected by the Operating
Result. This is because the "Result for the period after tax" and the "Earnings
per Share" are influenced by the financial income and costs and by the
revaluation of tax assets.
Results Summary July - September January - September
(Amounts in SEK million if not otherwise 2014 2013 2014 2013
stated)
-------------------------------------------------------------------------------
Operating Result 3.1 2.3 6.7 5.2
Result for the period after tax 3.5 2.4 8.6 6.0
Earnings per Share (SEK) 0.5 0.3 1.2 0.9
-------------------------------------------------------------------------------
The July-September 2014 Operating Result of SEK 3.1 million (SEK 2.3 million)
increased as a result of higher gross results of SEK 0.5 million, higher
operational expenses of SEK 0.3 million and higher other operating income
(exchange gains) of SEK 0.6 million.
The Result for the period after tax amounted to SEK 3.5 million (SEK 2.4
million), primarily related to the increase in the Operating Result of SEK 0.8
million, the increased financial net of SEK 0.4 million and the decreased tax
income of SEK 0.1 million.
The January-September 2014 Operating Result of SEK 6.7 million (SEK 5.2 million)
increased as a result of higher gross results of SEK 1.5 million primarily
derived from higher revenue, combined with higher operational expenses of SEK
0.7 million and increased operating income (exchange gains) of SEK 0.7 million.
The Result for the period after tax amounted to SEK 8.6 million (SEK 6.0
million), primarily related to the increased operating result of SEK 1.5
million, the increased financial net of SEK 0.9 million (primarily exchange
gains), and increased tax income amounting to SEK 0.2 million, primarily due to
the deferred tax adjustment.
Deferred Tax Asset
Tax amounted to SEK 0.9 million (SEK 0.7 million) during the January-September
2014 period, primarily explained by the SEK 1.0 million increase in the deferred
tax asset during the second quarter (SEK 0.8 million during the first quarter
2013). The estimated future taxable profit and deferred tax asset calculation
is reassessed every quarter. As of 30 September 2014, SEK 133.3 million (SEK
128.5 million) of SinterCast's total carried-forward tax losses have been used
as the basis of the updated calculation, resulting in SEK 29.3 million (SEK
28.3 million) being capitalised as a deferred tax asset.
Cashflow, Liquidity and Investments
Cashflow Summary July - September January - September
(Amounts in SEK million if not otherwise 2014 2013 2014 2013
stated)
-------------------------------------------------------------------------------
Cashflow from operations, before change 3.3 2.8 7.3 6.3
in working capital
Change in working capital -0.7 -1.5 -3.8 0.5
-------------------------------------------------------------------------------
Cashflow from operations, after change in 2.6 1.3 3.5 6.8
working capital
Cashflow from investing activities -0.5 -0.2 -0.8 -0.5
Cashflow from financing activities - - -8.5 -7.0
-------------------------------------------------------------------------------
Cashflow total 2.1 1.1 -5.8 -0.7
Liquidity 42.0 34.7 42.0 34.7
-------------------------------------------------------------------------------
July-September 2014 cashflow from operations, before changes in working capital,
increased by 18% to SEK 3.3 million (SEK 2.8 million). Cashflow from operations
after changes in working capital amounted to SEK 2.6 (SEK 1.3 million),
primarily related to, compared to the same period last year, higher cashflow
from operations before changes in working capital (SEK 0.5 million), increased
cashflow from receivables (SEK 0.3 million), increased cashflow from stock (SEK
0.1 million) and increased cashflow from operating liabilities (SEK 0.4
million). Following investments of SEK 0.5 million, primarily from new patents
(SEK 0.2 million), the total cashflow result amounted to SEK 2.1 million (SEK
1.1 million).
January-September 2014 cashflow from operations, before changes in working
capital, increased by 16% to SEK 7.3 million (SEK 6.3 million). The increased
cashflow is primarily due to higher operating results of SEK 1.5 million.
Cashflow from operations after changes in working capital was SEK 3.5 million
(SEK 6.8 million), primarily related to, compared to the same period last year,
increased cashflow from operations before changes in working capital of SEK 1.0
million, decreased cashflow from receivables (SEK 0.4 million), decreased
cashflow from stock (SEK 0.9 million) and decreased cashflow from operating
liabilities (SEK 3.0 million). Following the dividend of SEK 8.5 million (SEK
7.0 million), the total cashflow result for the period was SEK -5.8 million (SEK
-0.7 million), resulting in SEK 42.0 million (SEK 34.7 million) in liquidity on
30 September 2014. Investments, including new patents, amounted to SEK 0.8
million (SEK 0.6 million) during the period, of which SEK 0.8 million (SEK 0.5
million) resulted in cash outflow.
Risks and Uncertainty Factors
The main uncertainty factor for SinterCast continues to be the timing of the CGI
market ramp-up. This primarily depends on OEM decisions for new CGI engines and
other components, the global economy for new vehicle sales, and the individual
sales success of vehicles equipped with SinterCast-CGI components.
The global economy has developed differently in Europe, Asia and the Americas
over the last few years. The Asian and European economies continue to be
uncertain and this may impact passenger vehicle and commercial vehicle sales in
these regions. However consumer confidence has recently increased in North
America and SinterCast has benefitted from increased vehicle sales. SinterCast's
geographical diversification helps to mitigate changing macroeconomic conditions
in the different regions.
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. SinterCast judges that its technology and engineering know-how
provides the most reliable and cost-effective solution for series production of
high quality CGI.
New powertrain technologies, such as vehicle electrification (hybrid and plug-in
vehicles) and fuel cells attract significant media attention; however, the
development and implementation of these technologies remain a long-term prospect
and SinterCast does not expect these technologies to have a significant effect
on the Company's competitive position for the foreseeable future.
For full risk and uncertainty factor information, please see note 26 on p.46 in
SinterCast's Annual Report 2013
Organisation
With successful high volume CGI production in foundries located in Europe, Asia
and the Americas, SinterCast has established a global organisation with
employees and offices in Sweden, the United Kingdom, the United States, China
and Korea. A new Research Engineer joined the Company during the period. As of
30 September 2014, the Group had 19 (17) employees, four (three) of whom are
female. The Company is well positioned to support global market activities and
to drive SinterCast's future growth.
Parent Company
SinterCast AB (publ) is the Parent Company of the SinterCast Group, with its
registered office located in Stockholm, Sweden. The Parent Company has 14 (12)
employees. The majority of the operations are managed by the Parent Company
while local operations in the United Kingdom, United States, Korea and China are
managed by the local companies. The information given for the Group in this
report corresponds in all material respects to the Parent Company. However, the
result for the period may differ between the Group and the Parent Company due to
intercompany transactions between the Parent Company and its subsidiaries.
Accounting Principles
The information provided on behalf of the Group in this interim report has been
prepared in accordance with Sweden's Annual Accounts Act and IAS 34 Interim
Financial Reporting. The reporting for the Parent Company has been prepared in
accordance with Sweden's Annual Accounts Act and RFR 2. The accounting policies
that have been applied for the Group and the Parent Company are in agreement
with the accounting policies used in preparation of the Company's latest annual
report.
No material transactions have taken place between SinterCast and the Board or
the Management during the period.
Events after the Balance Sheet Date
There have been no significant events since the balance sheet date of 30
September 2014 that could materially change these financial statements.
Nomination Committee
The Nomination Committee, elected by the Annual General Meeting 2014, consists
of Karl-Arne Henriksson, Chairman, Andrea Fessler, Ulla-Britt Fräjdin-Hellqvist
and Hans-Erik Andersson. Shareholders wishing to provide input or proposals
should provide written submissions to the Nomination Committee (e-mail:
nomination.committee@sintercast.com) before 18 March 2015.
Annual General Meeting
The Annual General Meeting 2015 of SinterCast AB (publ) will be held on
Wednesday 20 May 2015.
Shareholders wishing to have a matter considered at the Annual General Meeting
should provide written submissions to agm.registration@sintercast.com or to the
Company: SinterCast AB (publ), P.O. Box 10203, SE-100 55 Stockholm, Sweden, at
least seven weeks prior to the Annual General Meeting for the proposal to be
included in the notice of the meeting. Further details on how and when to
register will be published in advance of the Annual General Meeting.
Information
The Interim Report October-December 2014 and Full Year Results 2014 will be
published on 11 February 2015
The Interim Report January-March 2015 will be published on 29 April 2015
The Interim Report April-June 2015 will be published on 29 July 2015
The Interim Report July-September 2015 will be published on 11 November 2015
Beginning with this report, all Interim Reports will be published at 08:00 CET
This report has been reviewed by the Company's Auditors
Stockholm 5 November 2014
For further information please contact:
Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Office: +46 8 660 7750
Mobile: +44 771 002 6342
e-mail: steve.dawson@sintercast.com
website: www.sintercast.com
Report of Review of Interim Financial Information
Introduction
We have reviewed the condensed interim financial information (interim report) of
SinterCast AB (publ) as of 30th of September 2014 and the nine-month period then
ended. The Board of Directors and the CEO are responsible for the preparation
and presentation of the interim financial information 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.
Scope of Review
We conducted our review in accordance with the International Standard on Review
Engagements ISRE 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 International Standards on Auditing,
ISA, 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.
Conclusion
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, 5 November 2014
Öhrlings PricewaterhouseCoopers AB
Tobias Stråhle
Authorised Public Accountant
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 size, weight, noise and emissions. The SinterCast technology, with 39
installations in 12 countries, is primarily used for the production of petrol
and diesel engine cylinder blocks and exhaust components for passenger vehicles,
medium-duty and heavy-duty cylinder blocks and heads for commercial vehicles,
and industrial power engine components for marine, rail, off-road and stationary
engine applications. SinterCast's series production components range from 2 kg
to 9 tonnes, all using the same proven process control technology. The
SinterCast share is quoted on the Small Cap segment of the Stockholm NASDAQ OMX
stock exchange (Stockholmsbörsen: SINT). For more information:
www.sintercast.com
END
[HUG#1868612]
