Following the Covid impact of 2020, we entered 2021 with a reminder that things weren’t quite back to normal yet. Series production started the year 20% below our pre-Covid volume, but promptly fell 25% behind as February brought the combined challenges of severe winter storms that suspended our production in Mexico and the onset of the semiconductor crisis. It was a challenging start. But my overall reflection of 2021 is as a year of real pace. Our foundry and OEM customers scrambled to produce as much as they could, and we in the supply community scrambled to support them. We continued our commitment to technical leadership, investing more than 15% of our revenue in R&D, releasing 23 new software versions and implementing 20 new process improvements. We honoured all of our commitments for new installations and on-site support. And, by the end of the year, we were only 6% behind our pre-Covid volume, posting our best December on record. In hindsight, I think we made about as much out of 2021 as we could.
After two fallow years, I prefer to look forward. Our series production will realise a step-growth with the pending start of production of two new commercial vehicle engines, at Scania in Sweden and at First Automobile Works (FAW) in China. And we will also grow with the combined effects of the continuing economic recovery; with the application of our current engines in new vehicles; with the industry’s need to rebuild vehicle inventories; and, with the improving supply of semiconductors. The undivided alignment of these positive factors has unfortunately been burdened by war in the Ukraine, but we maintain our outlook to break the monthly four million Engine Equivalent milestone in 2022 and we maintain our ambition to reach the five million milestone in 2024.
Over the past fifteen years, SinterCast has delivered 15% compounded annual growth and we will continue to deliver double-digit growth in the years ahead. The bulk of this growth will come from commercial vehicles, where OEMs need CGI to achieve the required increases in engine loading, engine efficiency, fuel economy and pulling power to satisfy emissions legislation and to reinforce diesel’s position as the best overall solution for long haul commercial vehicles. Today, more than 95% of heavy-duty commercial vehicles in Europe and the Americas rely on diesel engines. Most industry analysts expect diesel’s domination to continue well beyond 2030, enabling SinterCast to grow in the near-term and to benefit from sustained high volume production in the long-term.
Our growth opportunity extends beyond Europe and the Americas. China is introducing equally stringent emissions legislation and, facing the same challenges, Chinese commercial vehicle OEMs are embracing the same solutions. Following the start of our collaboration with FAW in 2010, with the installation of a Mini-System 3000 in their research foundry, we are now poised to begin series production of a new 16 litre cylinder block, using the System 4000 Plus that was installed in their new foundry complex during 2020. As China’s largest commercial vehicle OEM, FAW produces more commercial vehicles than either Europe or North America, providing additional long-term growth opportunities for SinterCast.
Electrification continues to receive considerable attention and it will continue to make in-roads in the market. We’re not immune, but we do have a strong position. SinterCast-CGI engines are used in large vehicles: 10% of our production is for full-size pick-up trucks; 40% is for super duty pick-ups; and, 40% is for heavy duty commercial vehicles. It will take many years before electrification will be able to deliver the driving range, pulling power and total cost of ownership needed to establish a significant presence in these applications. In the meantime, SinterCast will benefit from growth and society will benefit from our contribution. Our technology doesn’t enable the production of engines; our technology enables the production of better, cleaner engines.
On average, the SinterCast-CGI diesel engines in Super Duty pick-up trucks save approximately 1,000 litres of fuel per year compared to the petrol engine alternatives. This saving corresponds to approximately 2.5 tonnes of CO2 per year, per truck. And our technology is used to produce more than 1,000 of those engines every day! Our technology also contributes to the reduction of CO2 emissions during the manufacturing phase in the foundry and during the on-road use phase for passenger vehicles and commercial vehicles. We estimate that our technology enabled the reduction of more than one million tonnes of CO2 in 2021, and approximately nine million tonnes since our first engine was cast in 1999. While the industry develops alternative technologies that offer the potential for zero emissions in the future, we make big contributions to big volumes of big vehicles – today.
Ultimately, our confidence in the future led to the Board’s proposal for an increased ordinary dividend of SEK 4.50 per share, continuing our established track record of distributing 100% of the operating result. The Board also proposed an extraordinary dividend of SEK 0.5 per share to further reduce our liquidity. The total dividend proposal of SEK 35.5 million will increase our cumulative distribution to our shareholders to SEK 243 million since our first dividend was provided in 2010.
Benefits to our shareholders, benefits to our customers and benefits to society. That is the business that our technology and our team have built.
Dr. Steve Dawson
President & CEO
* Originally published in the 2021 Annual Report