AUSTRALIA: Orbital announces 'disappointing' loss
Orbital Engine Corporation today announced an operating loss (before Texmaco provision) of $14.3 million for the six months ended 31 December 2001 compared to an operating loss of $16.2 million in the previous corresponding period. In addition, Orbital has made a $6.4 million provision in respect of its investment in Indonesian licensee Texmaco, taking the total loss after tax to $20.7 million for the half year.
Orbital foreshadowed both the scale of the operating loss and the Texmaco provision in an announcement to the ASX on 19 December 2001.
Newly appointed CEO Peter Cook said the results, while foreshadowed some months ago, were clearly disappointing.
``These results highlight the challenges for the Company but they also point to the opportunities,'' Mr Cook said.
``They show that Orbital has achieved continued growth in system sales revenue, despite a contraction of the underlying marine market, and it is imperative that we achieve further growth in this area as well as other revenue streams.''
N.B. All figures Australian dollars
``Licence and royalty income was stable while engineering revenue was halved, mainly reflecting the downturn in the US auto industry and the deferral of engineering programs. Current indications are that engineering revenue will increase during 2002.''
``Nevertheless, we have already acted decisively to reduce operating costs and staffing levels to reflect the prevailing trading conditions. The results show a 16.4% reduction in overhead expenses and we will continue to keep a very tight rein on costs.''
Mr Cook commented that Orbital's business units were aiming to be more financially rigorous and commercially astute.
``With the benefit of hindsight, it is clear that Orbital has invested in projects that have not yet come to fruition. In future, we need to ensure that our money is invested in areas with prospects of earlier commercial returns.''
Mr Cook reiterated Orbital's expectation of an improved operating result in the second half of the financial year, ending in June 2002.
``The forecast we released to the market on 19 December is unchanged. In the absence of any licence fees, we anticipate a second-half operating loss of approximately $5 million to $7 million.''
The company said in a statement that highlights of the six month period included the unveiling by General Motors of the XV8 concept engine at the Frankfurt Motor Show. The XV8 incorporates an air-assisted direct fuel injection system jointly developed by Orbital and Delphi Automotive Systems, an Orbital licensee and the world's largest Tier 1 automotive supplier.
Orbital also commenced a joint marketing program with Delphi. Joint presentations have been made to automotive companies around the world, generating an increased level of interest. Orbital and Delphi are also working on a joint evaluation vehicle that will be available for customer demonstrations and appraisals later in 2002. This program will focus on the demonstration of Orbital Combustion Process (OCP) direct injection (DI) technology for mass production.
In-vehicle testing of OCP DI was conducted with Johnson Matthey, the world's leading developer and supplier of automotive catalysts. An important milestone was achieving improved fuel economy in combination with reduced emissions, using standard 3-way catalyst technology that can tolerate the high sulphur levels in United States' fuel.
Orbital will present a paper outlining the latest developments in the successful application of OCP DI technology to turbo charged engines at the prestigious Society of Automotive Engineers annual congress in Detroit in March 2002.