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SinterCast Results July-September 2023

08:00 / 8 November 2023 SinterCast Press release

Record Series Production in August and September provides positive outlook for strong finish to 2023
Third Quarter 2023
· Revenue for Period: SEK 40.3 million (SEK 29.8 million), up 35% year-on-year.  Recurring revenue from Engine Equivalents increased by 37% to SEK 37.3 million (SEK 29.2 million)
· Operating Result: SEK 14.3 million (SEK 11.1 million), up 29%, yielding 35.5% Operating Margin after non-recurring costs of SEK 2.4 million
· Earnings per Share: SEK 2.00 per share (SEK 1.55 per share), up 29%
· Cashflow from Operations: SEK 12.2 million (SEK 10.7 million), up 14%
· All-time high of 4.5 million annualised Engine Equivalents in September
· Record production of 4.2 million annualised Engine Equivalents in third quarter, provides tenth consecutive quarter of production increase

Year-to-Date 2023
· Revenue for Period: SEK 98.5 million (SEK 85.8 million), up 15% year-on-year, benefitting from 7.5% year-on-year production increase, strong consumables sales and favourable exchange rates
· Operating Result: SEK 27.1 million (SEK 22.6 million), up 20%
· Earnings per Share: SEK 3.76 per share (SEK 3.57 per share), up 5%
· Cashflow from Operations: SEK 34.7 million (SEK 13.3 million), up 161% following improved payment terms at major customer
· Dividend Payments: Second installment of SEK 2.75 per share to be paid on 15 November with record date of 10 November
· Installed Base: 56 (57) installations, (25 (25) fully automated systems, 24 (25) mini-systems and seven (seven) tracking systems) in 13 (13) countries

CEO Message
Strong Production, Strong Outlook
Reflecting on our journey over the last thirty years, the third quarter stands out as a highlight.  After celebrating our achievement of the four million Engine Equivalent milestone in June, the third quarter started strong with our highest July on record.  The momentum continued to increase, with consecutive monthly records of 4.3 million annualised Engine Equivalents in August and 4.5 million in September.  Ultimately, annualised production for the third quarter finished at 4.2 million Engine Equivalents, providing a new quarterly record, 17% year-on-year growth and marking our tenth consecutive quarter of year-on-year growth. 
The recent strong production also boosts the full-year outlook.  At the three-quarter point, year-on-year series production is up 7.5% and, with two months left in the year, the current production provides the opportunity to post yet another year of double-digit series production growth.
Consumable shipments were also strong during the third quarter, up 40% compared to the year-ago quarter.  Initially, year-on-year consumable shipments were down 32% at the end of the first quarter, as key customers reduced stock levels following the post-Covid normalisation of supply chains.  However, the recent strong demand has pulled the year-to-date volume 2% ahead of 2022.  In total 145,600 Sampling Cups have been shipped year-to-date, with 63,000 units accounted for in the third quarter. 
Together, the increases in series production and consumables sales, combined with favourable exchange rates, resulted in a 35% quarterly increase in year-on-year revenue and a 15% increase in year-to-date revenue. The strong growth in series production and consumables sales also resulted in a 27% increase in year-on-year recurring revenue to SEK 37.3 million.  The increase in recurring revenue, paired with a stable gross margin of 76.5% for the quarter, exemplifies the soundness of our business, with growing volume and steadily increasing profits.  Operating margin for the quarter finished at 35.5%, well above our current target of 30% and setting a marker toward our long-term goal of 40%.

Production was strong on all fronts in September, with increased volume for the new Traton Group commercial vehicle engine and no impact from the UAW strike against the Detroit 3 automakers (Ford, GM and Stellantis) that began in North America on 14 September. 
At the outset of the strike, SinterCast had potential exposure with three high volume engine programmes at Ford and one high volume programme at Stellantis.  The strike against Ford was resolved on 26 October, with no interruption of SinterCast volume.  The strike against Stellantis was resolved on 28 October, also with no interruption of the SinterCast volume.  The negotiated terms at both Ford and Stellantis are currently being voted upon by the UAW members.  The result of the ratification votes is expected to be known during mid-November.  The strikes at Ford and Stellantis focussed on vehicle assembly plants while the SinterCast engine production is conducted at separate facilities that were not affected by the strike.

During the quarter, in-house activities intensified to strengthen the supply base to support the future market growth.  The activities are related to the ordering of tooling for the production of the patented Sampling Cup, including new tooling at the current sole supplier in Sweden after 24 years of continuous production, and the ongoing development of a second source for Sampling Cup production in Slovakia. To date, the total capital investments for these proactive expansions amounts to approximately SEK 3.7 million, of which SEK 1.7 million was allocated to the third quarter.  These activities are expected to be completed before year-end, assuring the long-term security of supply.
Upturn in Installation Activities
The initial commissioning of the System 4000 CGI installation at the Dongfeng Auto foundry in China during September provided SEK 2.5 million in installation revenue, increasing the year-to-date installation revenue to SEK 3.9 million.  As a greenfield foundry, the initial commissioning was done during the construction phase and the final commissioning and training will be completed during early-2024 when the foundry becomes operational.  The current installation opportunities also include an ongoing extended trial of a CGI mini-system for the industrial power sector that has the potential to result in a system sale before year-end.  Despite lower than normal installation revenue in 2022 and 2023, it is expected that the current opportunities will enable the average installation revenue during the 2024 to 2025 period to return to the historical level of approximately SEK 8 million per year.
Climate Contribution
The third quarter volume corresponds to the production of approximately 300,000 vehicles, of which more than 95% are commercial vehicles, pick-up trucks and off-road equipment.  Throughout their service lives, these fuel-efficient vehicles will contribute to the cumulative saving of more than three million tonnes of CO2.  At the three-quarter point, we forecast that our total CO2 contribution for full-year 2023 will be more than nine million tonnes. This will increase our cumulative savings to approximately 59 million tonnes, bringing us another step closer to our five-year target of saving 100 million tonnes of CO2. In perspective, Tesla reported combined CO2 saving from its global fleet of cars, energy storage systems and solar panels of 13.4 million tonnes in 2022.

Succession Plan Announced
On 20 September, SinterCast announced the recruitment of Dr Vítor Anjos.  A Portuguese citizen born in 1982, Dr Anjos has considerable experience in the international foundry and automotive industries and is a specialist in the core SinterCast fields of cast iron thermal analysis and process control.  He will join the company on 1 January in the capacity of Operations Director and as a member of the executive management team.  The recruitment provides an in-house succession path for the current CEO, planned for the 2026 Annual General Meeting.

For more information:

Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Office: +46 150 794 40
Mobile: +44 771 002 6342
CIN: 556233-6494

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 8 November 2023

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This information was distributed by MFN