CEO Message
With record production, record revenue and record profit in 2023, we set new benchmarks for SinterCast. Our goal for 2024 is to beat them all.
No matter how you measure, 2023 was a good year for SinterCast. If you measure growth, we delivered four consecutive quarters of growth again in 2023, extending our string of year-on-year increases to eleven consecutive quarters. For those who measure money, our full-year revenue increased by 13% to reach 134.4 million, with recurring revenue accounting for 94.5% of the total. Considering our operating margin of 31.8%, that corresponds to a profit of SEK 1.5 million per employee, reinforcing our position as one of the most profitable companies in the Nordic region. Finally, for those who measure Engine Equivalents, we reached the four million milestone in June, and we averaged 4.0 million Engine Equivalents throughout the second half of the year. From the start of our series production in 1999, it took us 16 years to reach the two million milestone. We made the next two million in half the time.
But perhaps the most important measurement is our contribution to society. SinterCast-CGI engines are smaller, lighter and more fuel efficient. During 2023, approximately 1.5 million engines were made with “SinterCast-Inside”, increasing our total to more than 13 million vehicles. With more than 95% of our series production derived from commercial vehicles, pick-up trucks and off-road equipment, the improved fuel efficiency of the vehicles that use our technology saved approximately nine million tonnes of CO2 in 2023. This increases the cumulative contribution since the start of our series production to 59 million tonnes, providing a significant step toward our goal of 100 million tonnes of CO2 savings by 2028.
Looking forward to 2024, our target remains double-digit growth, as ever. The bulk of our growth will come from the continued ramp of the new Scania 13 litre engine that will be used throughout the Traton Group. When we received the Traton order in 2019, we said that it would provide one million Engine Equivalents of incremental growth. Scania and Navistar are already in production but we’re not yet halfway through the ramp. In the next phase, the extension of the engine to MAN trucks will drive our growth over the next couple of years. Further afield, we also expect to receive the first contributions from FAW in China during 2024. As the largest commercial vehicle manufacturer in the world, with production on par with the entire European or American markets, our business with FAW provides the opportunity for considerable upside, not just in 2024 but throughout the rest of this decade. Despite the positive outlook, one of our high volume programmes will reach its end-of-life stage during mid-2024, causing a temporary decrease in volume. With most of our programmes lasting for well more than ten years, churn is an uncommon part of business. But it’s happened to us before and we’ll absorb the loss and get back to growth, as we have in the past. With full-year production of 3.7 million Engine Equivalents in 2023, the double-digit bar for 2024 is set at 4.1 million. We’re confident we can beat that.
It’s clear that the media, governments and financial markets have championed electrification. But new development is rarely fast or easy. From our inside position in the industry, we see that the tone is starting to evolve from euphoria to reality. Ford has delayed more than ten billion dollars of spending on electrification and has shifted its focus from large vehicles to small cars. GM has delayed the launch of its electric pick-up and said that it will re-introduce hybrids as a bridge to battery electric vehicles. Earlier this month, Apple abandoned its electric vehicle project. In parallel, the EU changed its initial ruling and has decided to allow engines beyond 2035, while the EPA has relaxed its initial targets for electric vehicle uptake “in recognition of market realities.” Mercedes also prolonged its engine outlook and pushed its electric vehicle targets from 2025 to 2030, echoing the EPA position and stating that it would take a “more flexible approach that puts profitability first and adjusts to the realities of the current market.” And all of these reversals are for cars. It won’t be easier – or faster – in our core market for large vehicles with long driving ranges and demanding duty cycles.
For a few years now, I’ve said that the 2020’s will be the decade of development and decision. A lot of development is still needed, not only for batteries, fuel cells and net-zero fuels, but also for infrastructure, cost parity and consumer acceptance. The debate is beginning to evolve from engines to energy, where the burning of renewable net-zero fuels and hydrogen in otherwise normal internal combustion engines provides an attractive solution for all stakeholders. I also believe that the next phase of the debate will shift from decarbonisation to defossilisation. I believe that renewable fuels derived from carbon capture will become an important part of the solution for net-zero mobility, benefitting society and enabling the SinterCast contribution in perpetuity.
Our core market is strong and growing and we’re confident in double-digit growth throughout our five-year planning horizon, and beyond. With the leadtimes in our industry, we’re already supporting our foundry and OEM partners with the development of new engine programmes that are planned for launch in 2028 and 2030. But we’re not resting. Together with Tupy, our largest foundry partner, we’ve developed a new concept for small car engines that provides the same weight as aluminium with 54% lower manufacturing CO2 emissions. This concept is actively being evaluated by OEMs for hybrid and range extender applications, running on ethanol and net-zero fuels. We are also actively supporting three hydrogen engine projects for commercial vehicles. The first of these – the MAN H38 heavy duty hydrogen engine pictured on page 14 of this report – will be on sale in the Traton Group from 2025. With the commercial vehicle industry beginning to embrace hydrogen engines as a primary path, this is another exciting development that offers the potential for SinterCast in perpetuity.
Last year marked twenty years of high volume series production for SinterCast. Our technology, our team and our business are proven and mature. Our economic outlook is equally mature. With a gross margin of more than 70%, the business that we have built is highly scalable. Our revenue will continue to deliver double-digit growth while a handful of retirements, with internal successors already identified, will ensure stable operating costs throughout our five-year planning horizon. I’m convinced that we will deliver on our target of more than 40% operating margin by 2028. We will also deliver on our growth targets. This growth is how we will establish our legacy. This growth is how we will contribute to society. This growth is how we will reward our shareholders for their trust and support.
Dr. Steve Dawson
President & CEO
Originally published in the 2023 Annual Report