Sintercast

For those unfamiliar with SinterCast, could you describe the business, what the company does, and which end markets it addresses?

SinterCast is a leading technology provider that enables the reliable high volume production of Compacted Graphite Iron, or CGI, a type of cast iron that is stronger and stiffer than conventional cast iron. We achieve this through a proprietary process control technology that SinterCast develops, licenses, and installs at foundries worldwide, delivering tangible cost benefits through improved quality and reduced scrap.

The primary application for CGI is internal combustion engines. Because the material is stronger and stiffer, it allows for higher combustion pressures inside the engine, resulting, together with other improvements, in up to 12% increase in torque and improved fuel efficiency of up to 8% compared to conventional engines. At the same time, the structural strength of CGI means the engine itself can be made smaller and lighter. These benefits are most pronounced in larger engines, where any efficiency gain translates directly into lower CO₂ emissions and reduced operating costs.

Our business model is built on a production fee charged per unit of CGI produced by our foundry customers and the sale of consumables used for each material analysis. This creates a high proportion of recurring revenue that scales directly with production volume. In the second quarter of 2026, recurring revenue accounted for 93.5% of total revenue, which reflects the strength of this model even in a period of lower volumes.

The end markets we address today are primarily heavy-duty commercial vehicles, representing approximately 50% of production, pick-up trucks at approximately 45%, and industrial applications such as power generation, marine, railway, and off-road at the remaining 5%.

The Q2 2026 interim report confirms that series production in the first half of 2026 was 15% higher than in the second half of 2025, and new orders in North America are increasing by approximately 140%. How would you characterise where we are in the recovery cycle, and what gives you confidence that the momentum is sustained?

The 15% increase in series production in the first half of 2026 compared with the second half of 2025 is an important signal. It confirms that we have moved beyond the market’s weakest phase and that the recovery we anticipated is beginning to take hold. I find it particularly encouraging that the improvement is broad-based, with our European market production up 27% over the same comparison period.

In North America, the situation is especially dynamic. New orders in commercial vehicles are increasing by approximately 140% compared with the second half of last year, driven by both a long-overdue cycle of fleet renewal and the pre-buy effect ahead of the EPA 2027 emissions standard taking effect in January next year. Fleet operators who deferred purchasing decisions over the past two years are now returning to the market with urgency.

What gives me confidence that this is sustained rather than temporary is the combination of regulatory and structural forces at work. EPA 2027 in North America and Euro 7 in Europe from 2029 require higher combustion pressures that make CGI the engineering solution of choice. These are not cyclical factors. They are structural commitments from regulators and OEMs alike. The order books we are seeing today are the visible expression of that commitment.

The Q2 report highlights that recurring revenue accounted for 93.5% of total revenue in the quarter, even as volumes remained below prior year levels. What does this tell us about the strength of SinterCast’s business model, and how does that translate into earnings power as volumes recover?

The recurring revenue figure of 93.5% in the quarter is a direct reflection of how the business model is designed. Our production fee and the consumable Sampling Cup are tied to actual foundry production, not to equipment sales or one-off transactions. When volumes are lower, as they have been, those revenue streams decline, but they do not disappear. When volumes recover, they expand while the costs for the operations remain relatively stable.

This is where the earnings power becomes compelling. For example, the two exclusive suppliers that produce our consumable Sampling Cups are currently operating at approximately 50% of their capacity. The growth in volume we are expecting from the programme launches in late 2026, through 2027 and beyond can be absorbed without meaningful capital investment or headcount additions.

The path to our 40% operating margin target by 2028 is built on precisely this dynamic: recovering volumes, the price revisions secured, and a cost base that does not need to grow to support the growth. The Q2 result of 27.1% operating margin, in what remains a below-trend volume environment, demonstrates that the underlying business model is sound.

SinterCast’s process control technology underpins approximately two thirds of all CGI produced globally. You now have a new high-volume programme entering production in early 2027, in addition to the programmes already announced for 2030 and beyond. How should investors read the current installation pipeline as an indicator of future revenue?

Approximately two thirds of all CGI produced globally is made using SinterCast process control. That is the market position from which we operate, and it is the context within which every new programme announcement should be understood.

The installation pipeline is an important leading indicator of future recurring revenue starting in the next years. There is always a lead time between the moment a foundry installs our system and the moment series production begins and production fees start to be charged. The Q2 announcement of a new high-volume commercial vehicle programme at Ironcast, with production starting in early 2027, is a good example, where the foundry has previously ordered a system expansion to allow for the higher volume production ahead. Together with the two programmes for the same engine announced in June 2025, those three awards are expected to increase our current series production volume by approximately 13% at mature volumes.

Looking further out, the pipeline includes two additional commercial vehicle programmes targeting production start in 2030, and a new programme that entered our pipeline during the quarter itself, also targeting early 2027. Taken together, they support our long-term outlook to reach approximately eight million Engine Equivalents by 2031, corresponding to annual revenues well above SEK 200 million.

SinterCast has outlined a strategy to complement its core CGI business through acquisitions of high-quality businesses with strong recurring revenues and attractive margins. How would you describe the progress made so far, and what role do acquisitions play in the overall growth strategy?

We are making good progress with the acquisition opportunities we have identified. The focus is on businesses that complement our core expertise, that have strong recurring revenue streams and attractive operating margins, and where we can leverage SinterCast’s technology, international platform, and commercial relationships to create additional value.

Our balance sheet is strong and our cash generation is robust, which puts us in a good position to be selective and disciplined in our approach, while maintaining a healthy balance between reinvestment and dividend distribution. The Board has been actively engaged in guiding this process, and we are making good progress. I do not want to get ahead of where we are in those discussions, but the direction is clear and the intent is serious.

Acquisitions are not a replacement for CGI growth. They are an extension of it. The CGI business generates the cash and provides the platform. Acquisitions extend our reach and diversify our revenue base over time. That is the logic, and I am confident we will be in a position to demonstrate tangible progress.

Can you give three reasons as to why SinterCast is an attractive investment today?

The first reason is the structural growth in CGI adoption. We expect CGI penetration in new commercial vehicles to increase significantly over the coming years, driven by tightening emissions regulations and the practical limitations of electrification in heavy-duty applications. CGI is growing substantially faster than electrification in this segment, a dynamic that is not always fully understood by the market.

The second reason is the programme pipeline. The new programme wins of the past 18 months provide strong visibility into future volume growth, with new programmes entering production in 2026, 2027, 2028, and extending to 2030. All of these represent incremental volumes, and each one translates directly into recurring revenue. The pipeline has never been stronger.

The third reason is the business model itself. With recurring revenue consistently above 90% of sales, a gross margin above 70%, and a highly scalable business model, SinterCast has exceptional operational leverage. As volumes recover and new programmes ramp up, a significant proportion of incremental revenue will directly improve the operating result. The combination of growth visibility and margin expansion potential is compelling.

Finally, this is your first quarterly report as President & CEO. With your background in CGI metallurgy and direct experience of the competitive landscape, what do you believe the market currently underestimates about SinterCast?

I think the market sometimes underestimates the depth of the structural shift that is underway in commercial vehicle engines. The conversation around electrification has, at times, created the impression that internal combustion engine development is winding down. The reality I see is the opposite. OEMs are investing in next-generation engines precisely because the efficiency and emissions requirements set by regulators demand it, and CGI is central to meeting those requirements, either with conventional fuels or with new net-zero emissions fuels or hydrogen combustion. The long-term demand environment for what we do is as strong as I have seen it.

I also think the scalability of the business model is not fully reflected in how the company is perceived. The ability to grow revenue substantially without a corresponding growth in costs, because our supplier infrastructure has the capacity and our headcount is stable, means that the earnings potential at normalised or higher volumes is significantly different from what current numbers suggest.

More broadly, I come to this role having seen SinterCast from the outside for many years. The technical leadership is genuine, the customer relationships are deep, and the market position is one that has been built over decades and is not easily replicated. I am proud to lead this company, with its committed employees, into its next phase, and I am confident that the foundations in place will support the growth we have outlined.