Three consecutive quarterly records in 2022
Third Quarter 2022
· Revenue for Period: SEK 29.8 million (SEK 25.3 million)
· Operating Result: SEK 12.9 million (SEK 8.0 million)
· Earnings per Share: SEK 1.55 per share (SEK 1.05 per share)
· Cashflow from Operations: SEK 10.7 million (SEK 13.2 million)
· Series production up 12.5% year-on-year; positive growth outlook
· Strong ramp for new 13 litre engine at Scania; 11 litre version announced and additional volume for China
· First Automobile Works, China, begins development of two new commercial vehicle engines
· Positive outlook for installations – new orders received from Dongfeng Auto and Dongya Technology in China
· Revenue for Period: SEK 85.8 million (SEK 77.8 million)
· Operating Result: SEK 26.1 million (SEK 23.7 million), negatively affected by the termination of the WHB deferred purchase agreement, in the amount of SEK 4.9 million
· Earnings per Share: SEK 3.57 per share (SEK 3.62 per share)
· Cashflow from Operations: SEK 13.3 million (SEK 28.7 million)
· Dividend Payment: second instalment of SEK 2.50 per share to be paid on 10 November 2022 with record date of 7 November 2022
· Installed Base: 57 (55) installations in 14 Countries(25 (25) fully automated systems, 25 (24) mini-systems and seven (six) tracking systems)
Series production at all-time high; positive growth outlook
Following strong production through the summer shutdown period, with July and August both setting new monthly highs, the volume in September was lower than anticipated, primarily due to decreases in two high-volume programmes caused by supply chain constraints. Ultimately, annualised production in September finished at 3.6 million Engine Equivalents, resulting in 3.6 million Engine Equivalents for the third quarter, equalling the all-time quarterly record set in the previous quarter. Year-on-year production for the third quarter was up by 12.5% while year-to-date production for the January to September period was up by 13%. The highlight of the quarter was the strong ramp of the new Scania commercial vehicle production following the return from the summer shutdown, reinforcing the positive growth outlook for the rest of the year and for 2023.
Benefitting from strong series production and increased USD / SEK exchange rates, revenue for the period increased by 18%. The revenue from series production, derived from the production fee, consumables and software licence fees, increased by 32% as Sampling Cup shipments also recovered during the quarter. During the first two quarters, Sampling Cup shipments were down by 20% as customers reduced inventory levels in response to improving global supply chains. However, year-on-year Sampling Cup shipments for the third quarter increased by 27%, recovering some of the earlier deficit. Year to date, Sampling Cup shipments remain 9% behind 2021, impacting the revenue comparison by approximately SEK 2.5 million. Installation revenue is similarly down by SEK 2.9 million year-to-date. Ultimately, the revenue for the first three quarters of the year finished at SEK 85.8 million, providing a 10% year-on-year increase.
Commercial vehicles accounted for 45% of the production volume during the second quarter, providing the largest contribution, and the largest growth opportunity. The ramp of the new Scania 13 litre engine provided a strong contribution to the commercial vehicle wave during the third quarter, and is expected to provide one million incremental Engine Equivalents when mature volume is reached. In addition to the 13 litre ramp, Scania recently announced two new developments that will provide incremental volume for SinterCast. The Scania announcements include the launch of a new 11 litre version of the engine that will be used by the global Traton group, plus the construction of a new wholly-owned manufacturing facility in China that is planned to start production during late-2024 or early-2025. With an intended production of at least 20,000 commercial vehicles per year for the domestic Chinese and the Asian export market, the Chinese facility provides further growth opportunities for SinterCast.
First Automobile Works (FAW) in China started production of a new 16 litre commercial vehicle engine during the second quarter. As a new entry in the market, and in the face of continued Covid-related challenges in China, the production has not yet provided a meaningful contribution and the volume is expected to remain limited during the fourth quarter. However, FAW has recently started the development of new 11 litre and 13 litre derivatives of the 16 litre engine, also with SinterCast-CGI cylinder blocks. Pre-production of these engines commenced during the third quarter and initial series production is expected during 2023. Considering that China is the largest heavy duty commercial vehicle market in the world, and that FAW has been the sales leader for six consecutive years with approximately 25% market share, the new 11 litre and 13 litre CGI engines provide a significant growth opportunity for SinterCast within the five year planning horizon, and beyond.
During the period, Ram Trucks announced that sales of the 3.0 litre V6 diesel engine used in the Ram 1500, with SinterCast-CGI cylinder block and bedplate, would be discontinued by year-end, affecting the current volume by approximately 2%. While the overall market continues to benefit from pent-up demand and improving semiconductor supply, the outlook is simultaneously burdened by increasing energy prices, inflation, recession concerns, and geopolitical conflict. Despite the increased uncertainty, SinterCast has posted quarterly production records in each of the three quarters in 2022, providing a strong foundation for further growth. With lower than expected volume in September, the target to reach the monthly four million Engine Equivalent milestone before year-end has become more difficult, and it is now likely that this milestone will fall into 2023. We maintain our targets of reaching the monthly five million Engine Equivalent milestone in 2024; and, continuing our track record of delivering double-digit compounded annual growth rates.
Considering that China is the largest heavy duty commercial vehicle market in the world, and that FAW has been the sales leader for six consecutive years with approximately 25% market share, the new 11 litre and 13 litre CGI engines provide a significant growth opportunity for SinterCast within the five year planning horizon, and beyond.
Improving installation outlook
During the period, two new orders were received CGI process control systems in China. These include a fully automated System 4000 at the Dongfeng Automobile foundry and a mini-system installation at the Dongya foundry. The Dongfeng Auto installation will be commissioned during 2023 and will enable the new greenfield facility to compete for future CGI commercial vehicle orders within the Dongfeng Group. The Dongya installation is planned to be commissioned during the fourth quarter with the start of industrial power production beginning before year-end.
Following reduced investment commitments throughout the foundry industry during the Covid years, the installation revenue thus far during 2022 revenue has been limited to SEK 1.3 million. While the Ladle Tracker installation at the Teksid foundry in Mexico and the mini-system at the Dongya foundry in China will provide a welcome boost during the fourth quarter, full-year installation revenue is expected to be well below the historical average of SEK 8 million. Building on the System 4000 installation at Dongfeng Automobile, and with ongoing discussions for CGI process control systems, capacity upgrades and Tracking installations, we expect installation revenue to return to historical levels in both 2023 and 2024.
SinterCast is the world’s leading supplier of process control technology for the reliable high volume production of Compacted Graphite Iron (CGI). The properties of CGI enable improved transport solutions, increasing efficiency and reducing carbon emissions in passenger vehicle, commercial vehicle and industrial power applications. As a specialist supplier of precision measurement and process control solutions to the metals industry, SinterCast also supplies the SinterCast Ladle Tracker® and SinterCast Cast Tracker® technologies, to improve production efficiency and Industry 4.0 traceability in a variety of applications. With 57 installations in 14 countries, SinterCast is a publicly traded company, quoted on the Small Cap segment of the Nasdaq Stockholm stock exchange (SINT). For more information: www.sintercast.com
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This press release contains information SinterCast AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. This information was submitted for publication, through the agency of the President & CEO Dr. Steve Dawson, at 08:00 CET on 4 November 2022.
This information was distributed by MFN https://www.mfn.se/