Can you please comment on the effect of the global economic crisis on SinterCast’s current activities and business outlook for 2009.


Shareholder, name withheld

I would like to begin by stating that we share the frustration of our shareholders. Despite some delays in the targeted new System 2000 installations, we were pleased with the overall development of our business during 2008, and particularly with the second half of the year. In September, we achieved record annualised production of 750,000 Engine Equivalents, a 65% year-on-year increase. In October, we began series production of a new high volume cylinder block and head for DAF and, in November, we announced the ongoing series production of exhaust components in China. Together, these two new orders have the potential to provide a 25~30% growth beyond September’s 750,000 Engine Equivalent base. But despite these positive developments, the SinterCast share has declined.

As we mentioned in our 3Q Interim Report, it is inevitable that the global economic crisis will affect SinterCast, both in the customer market and in the share market. The most recent “Automotive Stock Watch”, published by Automotive News Europe and PricewaterhouseCoopers on 8 December 2008 shows that, on average, the shares of the survey’s regularly followed group of 15 representative automotive suppliers are down by 72% from their 12-month highs. The ‘best’ performer is down by 52% and the worst is down by 100%. Eight of the 15 are down by more than 66%. SinterCast is neither unique nor immune.

Although there have been many published opinions about the global economy and the automotive prognosis for 2009 and 2010, the truth is that nobody knows how the crisis will evolve and how/when it will recover. The CEO’s of many major OEMs have declined to comment on 2009/10 volumes stating that it would be “dishonest” or “irresponsible” to provide public projections at this time. We agree with this position. Certainly, if the OEMs do not yet know their volumes, it is not possible for SinterCast to know more. This also applies to the questions that we have received regarding the Company’s liquidity. At the moment, there are no plans to seek a new cash injection, but the cash position obviously depends on the length and depth of the downturn. We have an active Liquidity Protection Plan where we carefully and regularly review different market scenarios and adjust the expense side accordingly. Spending is limited to items required for the operation of the Company and the support of customers. The most professional thing that SinterCast can do is to monitor the development on a regular basis and to read-and-react in the best interest of the Company and its shareholders.

Throughout all of this, SinterCast has one important advantage. SinterCast is not a ‘normal’ supplier of automotive components. For the component or commodity suppliers, when the global market declines by x%, their revenues equally decline by x%. However, for SinterCast, many of our current programmes are still in the ramp-up phase and may be more vulnerable to a decreased growth rate rather than a volume reduction. And, for the new launches, even if the volumes may not be as high as originally expected, all new production provides incremental volumes.

Many shareholder e-mails have also suggested that more Press Releases would be helpful. With respect, we do not believe that this is appropriate. We will issue Press Releases when we receive new orders, but it is not our intention to issue general updates. General information won’t attract new investors to the Small Cap segment, and such Press Releases can also put the Company’s credibility at risk. We don’t believe that general updates will be helpful, and issuing such releases would take valuable time away from the most important focus – the business development.

SinterCast has established its technology and grown a strong business base. There is no need to change the strategy or the business model. However, like most companies, we are entering into a difficult 2009 and we will apply our experience and determination to navigate the best possible path for the Company.