The near-term market opportunity presented in the 1Q10 report was 4.1 million Engine Equivalents. This is lower than the 4.3 million Engine Equivalents presented in the 4Q09 report. Can you comment on the reason for the reduction when the automotive industry seems to be increasing its predictions?

Shareholder, name withheld

My initial reaction is that this change in the near-term market opportunity should not be regarded as significant. The published value of the near-term market opportunity is a direct result of the net calculation generated by SinterCast’s internal 5-year forecast, and is not a subjective indication of the market development or recovery.

The internal 5-year forecast includes estimated volumes for programmes that are in already in series production, plus known programmes that are still in the development phase. The start-of-production dates, ramp-up rates, mature volumes and probability factors are updated for each programme every quarter, as new information becomes available. The change presented in the 1Q10 Report reflects a combination of minor adjustments in several programmes, plus a truncation (‘rounding’) effect. The change from 4.3 to 4.1 million Engine Equivalents is less than 5%, and changes on this order should be regarded as normal ‘needle-quiver’ in a 5-year forecast, especially as the industry progresses through a market recovery.

I would also like to note that the Near-Term Opportunity result published in each of the 1Q09, 2Q09 and 3Q09 Interim Reports was 4.1 million Engine Equivalents, and therefore equal to the 1Q10 Report. This suggests that the 4Q09 Report was the one that was by affected adjustments and truncation – not the 1Q10 Report.

Finally, with regard to the reference to the automotive industry recovery, SinterCast’s internal 5-year forecast does include provisions for market recovery, based on published market research. Given that a recovery factor is already included in the near-term market opportunity, it is unlikely that a current increase in vehicle sales (global sales – not specifically SinterCast-CGI vehicles) will have sufficient weight to influence SinterCast’s total production pool over the 5-year period of the forecast.