2020 was my thirtieth year in SinterCast. It was also my strangest year in SinterCast. In February, we wondered if the local problems in China would interrupt the supply of parts for any of our high volume vehicles. By March, some of our foundries started to close. By April, most of our foundries were closed. In May, we postponed the AGM and the dividend proposal. Governments and industry alike, nobody foresaw the depth or the duration of the Covid impact.
While Covid continues to influence the global foundry and automotive industries, the recovery has been rather encouraging. By the end of June, all of our high-volume foundries had resumed production and the annualised volume increased from the low-point of 1.0 million Engine Equivalents in April to 2.7 million in July. The production stabilised at around 2.7 million Engine Equivalents for the rest of the year, representing 80~85% of our pre-Covid run-rate. From where we stood in May, if somebody had offered me to finish the year at 80~85%, I would’ve taken it.
The highlight of 2020 for SinterCast was our installation performance. Entering 2020 with a ten-year average installation revenue of SEK 7.4 million, and on the back of record installations in 2019, we established a new record of SEK 16.6 million in 2020. We were expecting a second-consecutive installation record in 2020, but Covid delays concentrated the majority of the 2020 installation activity into the last part of the year. This added to the challenges for secure travel, for our manning, and for our ability to complete the on-site activities before year-end to honour our pledge. More than double our ten-year average and 40% above our previous record set in 2019 – impressive in a normal year; exceptional in 2020. Ultimately, the installation revenue provided the strength to propose an increased dividend of SEK 4.00 per share, which will bring the cumulative distribution to our shareholders to SEK 208 million since our first dividend offering in 2010. At the outset of 2021, there is a prevailing optimism in our industry. With North American commercial vehicle sales at near-record levels and passenger vehicle sales at more than 90% of the pre-Covid volume, we share the optimism. We will recover as the overall economy recovers. We will recover by not having a nadir quarter. And we will grow as new programmes come on-stream, particularly the new 16 litre cylinder block at First Automobile Works (FAW) in China and the new 13 litre cylinder block and head at Scania in Sweden.
The FAW and Scania commercial vehicle programmes reinforce our longstanding prediction that, in the fullness of time, all commercial vehicle engines will become CGI. And, as shown on page 17 of this report, we welcome the public consensus from AVL, FEV and Ricardo – the global ‘Big 3’ of engine design – that the next generations of commercial vehicle engines need CGI to meet performance and emissions requirements. As the largest of our Five Waves, and with no foreseeable alternative to diesel for heavy duty long haul trucking, commercial vehicles will lead our charge toward the five million Engine Equivalent milestone, and our growth beyond.
With the Covid restrictions preventing much of our normal travel and on-site customer support, we took advantage of having the Team at home-base to accelerate our internal product development and our external market development activities. With 28 software upgrades and the implementation of 33 process improvements, 2020 was one of our most prolific development years. We also supported our foundry and OEM customers with new engine development programmes – for petrol and diesel, for car and truck – that will improve our market opportunity for the next decade, and beyond.
In closing this year’s message, please allow me to step beyond my normal address to our shareholders and turn to our employees. I would like to express my sincere appreciation for their individual and collective efforts over the past twelve months. Whether it was new installations, customer service or keeping the internal development and administrative activities rolling, everybody answered the bell. I thank my colleagues for their discipline, their committment, their support, and their loyalty.
Dr Steve Dawson
President & CEO
* Originally published in the 2020 Annual Report