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SinterCast Results October-December 2023

08:00 / 28 February 2024 SinterCast Press release

Record production. Record revenue. Record profit

Fourth Quarter 2023

• Revenue for Period: SEK 36.0 million (SEK 32.9 million), up 9% year-on-year. Recurring revenue increased by 10% to SEK 33.3 million (SEK 30.2 million), to account for 92.5% of the revenue
• Operating Result: SEK 15.6 million (SEK 8.0 million), up 95%, yielding 43.4% (24.3%) operating margin
• Earnings per Share: SEK 2.18 per share (SEK 1.11 per share), up 97%
• Cashflow from Operations: SEK 10.7 million (SEK 11.8 million)
• 9 million tonnes of CO2 saving in 2023; 59 million tonnes saved since 1999
• 11 consecutive quarters of year-on-year production growth
• Share buyback programme of up to SEK 5 million initiated: 11,338 shares acquired as of 31 December 2023 (SEK 1.2 million); 22,601 acquired as of 28 February 2024 (SEK 2.4 million)

Full Year 2023

• Revenue for Period: SEK 134.4 million (SEK 118.7 million), up 13% year-on-year, benefitting from 6.3% year-on-year production increase, strong consumables sales and favourable exchange rates. Recurring revenue increased by 12% to SEK 127.0 million (SEK 113.4 million), to account for 94.5% of the revenue
• Operating Result: SEK 42.7 million (SEK 30.6 million), yielding 31.8% (25.8%) full-year operating margin
• Earnings per Share: SEK 5.94 per share (SEK 4.68 per share), up 27%
• Cashflow from Operations: SEK 45.5 million (SEK 25.4 million), up 79% following improved operating results and reduced inventory
• Dividend: Proposed ordinary dividend of SEK 5.50 per share (SEK 5.00 per share) and extraordinary dividend of SEK 0.60 per share (SEK 0.50 per share), equivalent to SEK 43.1 million (SEK 39.0 million), to be paid in two equal instalments
• Installed Base: 57 (57) installations, 25 (25) fully automated systems, 25 (25) mini-systems and seven (seven) tracking systems) in 13 (13) countries

CEO Message

Record revenue on strong consumables sales
Fourth quarter revenue finished up 9% at SEK 36.0 million, benefitting from an 11.7% increase in Sampling Cup shipments, a 5.6% increase in year-on-year series production, and favourable exchange rates. The continued growth in series production resulted in four quarterly records again in 2023, extending the current string of year-on-year increases to 11 consecutive quarters.

Following strong production of 4.2 million Engine Equivalents in the third quarter, production flattened to 3.7 million Engine Equivalents in the fourth quarter. The reduction was primarily due to a five-week stoppage on one major production line, for maintenance reasons unrelated to CGI or SinterCast, and due to the normal Christmas shutdown period. The five-week stoppage affected the annualised fourth quarter volume by approximately 300,000 Engine Equivalents. The 4Q volume was also affected by the cessation of production at the original Scania foundry in Sweden, where SinterCast has supported CGI production since 2013. The planned production stop at the original foundry follows the successful ramp at the new Scania foundry and, following an initial inventory alignment, will not have any ongoing effect on volumes, as all Scania CGI components are produced at SinterCast foundries. Despite the decrease in year-end volume, cost reduction initiatives implemented during the third quarter, together with two retirements in the second quarter, contributed to a 95% increase in the fourth quarter operating result. The operating result finished at SEK 15.6 million (SEK 8.0 million), yielding an operating margin of 43.4% (24.3%).

Full-year series production established a new record, finishing up 6.3% at 3.7 million Engine Equivalents. Together with strong consumables sales, a 76% increase in installation revenue and favourable exchange rates, full-year revenue increased by 13%. Full-year revenue amounted to SEK 134.4 million, of which 94.5% was derived from recurring revenue related to series production, including the Production Fee levied for each Engine Equivalent, consumable sales, and software licence fees. The full year operating margin finished at 31.8%, providing a significant increase over the previous year (25.8%) and setting a marker toward our full-year goal of 40% by 2028.

We estimate that approximately 1.5 million engines were produced during 2023 with “SinterCast-Inside”. Commercial vehicles provided the largest contribution to the full-year series production, with 16% growth, accounting for 51% of the total volume. As we have said for more than ten years, commercial vehicles provide the largest growth opportunity for SinterCast, as most heavy duty commercial vehicles continue to evolve toward CGI to improve engine performance and fuel efficiency. The remainder of the 2023 production volume was for Super-Duty pick-up trucks (30%), full-size pick-up trucks (10%), mid-size pick-up trucks and SUVs (5%), and off-road equipment (4%). With more than 95% of our series production derived from commercial vehicles, pick-up trucks and industrial equipment, we estimate that the improved fuel efficiency of the vehicles that use our technology saved approximately 9 million tonnes of CO2 in 2023. This increases our cumulative contribution since the start of our series production in 1999 to 59 million tonnes, providing a significant step toward our goal of 100 million tonnes of CO2 reduction by 2028.

Despite the positive market outlook, we previously announced that one of our high volume programmes will reach its end-of-life stage during mid-2024, causing a temporary decrease in volume. It is not yet clear if the five million Engine Equivalent milestone will be reached before the stoppage occurs. Regardless, the temporary decrease does not change our ability to surpass the five million Engine Equivalent milestone and we maintain our ambition to reach the seven million Engine Equivalent milestone, with long-term growth beyond.

During the quarter, in-house activities continued to strengthen the supply base to support the future market growth and to ensure the long-term security of supply. 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 4.3 million, of which SEK 0.6 million was allocated to the fourth quarter.

Positive installation outlook for 2024
In hindsight, 2023 was a good year for installation revenue. With only one installation commitment before the start of the year, we pulled together several orders for spare parts and system upgrades, and secured a new mini-system installation at the Roslagsgjuteriet foundry in Sweden in December. With SEK 6.0 million in full-year installation revenue, providing a 76% increase relative to 2022, we didn’t leave any drops in the installation lemon during 2023.

At the outset of 2024, the installation pipeline looks stronger than usual, benefitting from the GIFA world foundry trade fair in June 2023 and a return toward capital expenditures in the foundry industry following the Covid years. Installation discussions are currently underway for system upgrades and expansions, new CGI System 4000 installations, and new Ladle Tracker installations. We estimate that the current level of installation discussions provides the opportunity to exceed the pre-Covid historical average of SEK 8 million in installation revenue during 2024 and 2025.

For more information:

Dr. Steve Dawson
President & CEO
SinterCast AB (publ)
Office: +46 150 794 40
Mobile: +44 771 002 6342
Corporate Identity Number: 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 28 February 2024.

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