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CEO Message

For a company that specialises in measurement, 2018 was a landmark year for SinterCast, achieving record performance in virtually all of the parameters that we measure.

From the foundation of a 19% increase in series production, our revenue surpassed our previous record by 16%; our operating result was 11% higher; and, our earnings per share were 21% higher. The increase in series production also drove higher Sampling Cup demand, setting new a record of 197,900 Sampling Cups shipped; 17% above our previous best. Ultimately, the progress of 2018 led to our highest dividend proposal, with a total proposal of SEK 5.00 per share. Pending approval of the proposal at the AGM on 23 May, we will have returned SEK 155 million to our shareholders since we first started to provide a dividend in 2010.

One of the highlights of 2018 was the fourth quarter start of production of the Cummins 6.7 litre turbodiesel used in Ram Super Duty pick up applications. The Cummins engine marks our first production of an in-line diesel engine for passenger vehicles, delivering the last wave of the Five Wave market development scenario that we first introduced in 2002. With a potential volume of approximately 300,000 Engine Equivalents per year, the Ram production boosted our production above the three million Engine Equivalent milestone in February 2019 and forms the basis of our target for double-digit growth again in 2019.

Looking forward, we see growth opportunities in every sector. The Cummins production secures near-term growth in the passenger vehicle sector and simultaneously reinforces the need for diesel engines, particularly in large vehicles such as SUVs and pick ups, where the SinterCast-CGI engines are used. While diesel engine take rates in Europe decreased from approximately 44% to approximately 36% in 2018, the decline was due to reduced sales of small diesel cars, where SinterCast-CGI isn’t used. In contrast to the small car trend, each of the SinterCast-CGI passenger vehicle V-diesel engines maintained stable or increasing production during 2018 and, in the US, sales of diesel engines increased as new diesel engine options were introduced in the market. For commercial vehicles, the ongoing demand for more performance and lower CO2 emissions from smaller engine packages continues to provide new CGI series production opportunities, and we continue to regard commercial vehicles as our best long term growth opportunity. The need for CGI in the next generations of heavy duty engines was reinforced by Scania’s decision to invest in a new purpose-built CGI foundry in Sweden. The decision was followed by an order for a SinterCast installation on 29 January 2019. With commissioning planned for mid2020, and with the potential for SEK 20 million of incremental annual revenue within three-to-five years after the installation, the Scania installation provides a strong base for our continued growth in the commercial vehicle sector, and to our continued goal for double-digit growth. We are also optimistic for growth in the industrial power sector, where more stringent emissions standards in the off-road sector continues to provide new SinterCast-CGI product development opportunities. Product development activities are ongoing and we maintain the ambition for industrial power and automotive non-block and head production to continue to contribute approximately 10% of the total volume, even as the core passenger vehicle and commercial vehicle production continues to grow.

The positive outlook for series production is complemented by our equally positive outlook for new installations. While the 2018 installation revenue of SEK 4.6 million was below our historical average of approximately SEK 7.0 million, the final result was partly due to the delay of two Ladle Tracker installations that were ordered during 2018, but not installed before year-end. Today, these Tracker installations, together with the China Shipbuilding Industry Corporation Mini-System 3000 installation announced during the first quarter of 2019, provide a strong start to our 2019 installation campaign. The positive installation outlook also extends to 2020 where the Scania new foundry installation provides a SEK 5 million head start to our 2020 installation campaign. With the current order book, and the new opportunities generated by our Tracking Technologies, we look forward to the opportunity for above average installation years in 2019 and 2020.

With the momentum of a strong year behind us, and the excitement of breaking the three million Engine Equivalent milestone in February, we are motivated to meet the opportunities in front of us. We look forward to continuing to work with our foundry and OEM partners to develop and launch new CGI products. We look forward to the opportunity to showcase our Tracking Technologies and to launch the fourth generation of our CGI process control technology at the GIFA World Foundry Trade Fair in Germany in June. And, we look forward to establishing new installations and new production records that enable us to continue to reward the longstanding support of our shareholders.

Dr Steve Dawson
President & CEO