Beginning with the 22 August 2007 half-year report, SinterCast introduced a new section entitled “Market Outlook”. The outlook refers to the “near-term” as “3~5 years”. How is the nearest 2-year period accounted for in the “near-term”?

Shareholder, name withheld

The new Market Outlook section of the interim reports is intended to:

1. Provide a general overview of the potential market development,
2. Provide an indication of the total Engine Equivalent volume (and therefore, value) of the CGI programmes that SinterCast is currently involved in, and,
3. Show the progression of different programmes as they evolve from the “Development Pipeline” to the “Announced Programmes” and to the “Series Production” category.

In the automotive industry, virtually all powertrain programmes to be introduced before 2010 (the nearest 2-year period) are already decided and the launch dates are defined. The only questions are: when will SinterCast be allowed to publicly announce the programmes; and, how quickly will the production volume ramp-up? For ‘replacement’ engines, the ramp can be relatively fast while, for new engines, the ramp may depend on the sales success of the vehicles.

The 3~5 year period is a timeframe for which many programmes are under development, but the engines may not yet have received formal approval for series production. Even if the programmes are not yet approved for production, SinterCast is frequently aware of the OEM intentions. These programmes provide sufficient confidence to be included in the “Development Pipeline” category. SinterCast is also involved in development programmes beyond the 5-year horizon, but these are not generally included in the “Development Pipeline”. Some judgement (and estimation of mature volumes) is exercised in the definition of the “Development Pipeline”, but this reflects SinterCast’s best current knowledge.

New programmes will certainly be elevated into the “Current Series Production” category within the nearest 2-year period. For example, between the 22 August report and the 7 November report, the Hyundai 3.9 and 5.9 litre commercial vehicle programmes were elevated directly from the “Development Pipeline” to “Series Production” and the MAN 10.5 and 12.4 litre commercial vehicle programmes were elevated from “Announced Programmes” to “Series Production”.

While the last of the engine programmes that comprise the total volume of 5.5 million Engine Equivalents may take up to five years to begin production, and a further two years to ramp-up to mature volumes, new programmes will continuously be elevated into the “Series Production” category providing increased near-term revenue. At the same time, new programmes will continuously enter into the “Development Pipeline” to provide long-term growth.