Orbital Engine Corporation Ltd (NYSE: OE): CEO Update PERTH, Australia, Oct. 27 /PRNewswire-FirstCall/ -- Date of lodgement: 27-Oct-2003 Title: Open Briefing. Orbital Engine Corp. CEO's Q1 Update Record of interview: corporatefile.com.au Orbital Engine Corporation Limited said at its recent AGM that profit after tax for the first quarter ended September 2003 was $3.2 million ahead of the previous comparable period, while underlying trading generated cash of $0.6 million. Are you in a position to now give firmer earnings guidance for the current year ending June 2004? CEO Peter Cook There are certain non-recurring elements in the first-quarter results, notably the timing of some license fees and the receipt of ACIS credits, which did contribute to the good start to the year. For the full year, we'd expect to see a better performance than last year overall. We expect the year to be profitable and cash positive. I'm reluctant to be more specific given there are factors beyond our control, for example the direction of the Australian dollar, which could have an impact on our earnings. corporatefile.com.au Synerject, your 50:50 joint venture with Siemens VDO Automotive, was restructured in April 2003. In the first quarter, Orbital's earnings share from the joint venture was $0.4 million, up 16 percent. How does the Synerject contribution compare with expectations and to what extent are the benefits of the restructure being realized? CEO Peter Cook Synerject continues to meet its targets and it's meeting the expectations of both joint venture partners. corporatefile.com.au Following the restructure, Synerject now controls the system sales business and Orbital has three income streams - royalties, license fees and fee-for-service income from engineering services. What's been the trend in these three areas during the first quarter and what are your expectations for the full year? CEO Peter Cook It's worthwhile clarifying what we regard as our three business sectors. One is Synerject, which we've just discussed. The second is royalties and licenses, which we link together because they relate to income from our intellectual property. And the third is our engineering service activities. I'm pleased to report that royalties and licenses are slightly ahead of the same period last year and that engineering services are comfortably ahead of the same period last year. We expect some growth in our royalty and license income this year. It'll be positive but modest. We expect to continue to improve our volumes and market share in existing makes and models as well as planned new model launches. However, that has to be taken in the context of a flat scooter market, particularly in Europe, which is our major market, and a declining personal watercraft (PWC) market. Also, we've advised the market we're targeting 20 percent growth in our engineering revenue this year. In our current environment, these are both fairly aggressive targets. corporatefile.com.au Orbital raised a total of $6.2 million via a share placement and the offer of a share purchase plan to existing shareholders. Is the improved financial position enabling you to win more or better quality development projects? CEO Peter Cook One of the reasons we targeted 20 percent growth in the engineering services area was because of our strengthened balance sheet. It's just one of the components we needed to put in place to achieve that level of growth, and it's contributing. corporatefile.com.au Orbital's overhead expenses fell nearly $6 million to $19.5 million in 2003, implying average monthly overhead expenses of $1.6 million. What's been the overhead run rate during the first quarter and what's the expected trend over the remainder of the year? CEO Peter Cook Our first quarter run rate is on target and we see very few difficulties with our overheads for the remainder of the year. As we've said, we expect the annualized impact of last year's overhead expense reductions to be picked up fully in 2004. There'll be some further reductions based on initiatives we'll take this year, but they'll be modest in comparison. corporatefile.com.au Kwang Yang Motor Co. Ltd. (Kymco), one of Taiwan's biggest motorcycle manufacturers, recently announced it planned to use Orbital Combustion Process (OCP) technology in models scheduled for release next year. What will this mean for Orbital in terms of earnings? CEO Peter Cook I always hesitate to predict the success of an individual make or model, however there are certainly positive aspects for us. One is that Kymco plans to launch a larger 100 cc capacity scooter in Europe, which would be an innovation in that marketplace. Another plus is that Kymco will be our first Asian scooter manufacturer, so our product will now have some presence in the Asian markets. corporatefile.com.au Why did Kymco adopt OCP technology and what opportunities are there for OCP to be used by other Taiwanese motorcycle makers? CEO Peter Cook Kymco saw the merits of our technology a number of years ago in terms of the improved emissions, the improved fuel economy and the easy start it offers on scooters. But it'd be wrong to deny the impact Taiwanese emissions legislation has had in the overall process. And the success the European manufacturers have had with our technology would also have played a part given the export markets are a significant portion of Taiwanese producers' total build. We've also had a long history with Sanyang, the other significant Taiwanese scooter maker and even though it's chosen to compete with Kymco's models using alternative technology, both Orbital and Synerject have made a major contribution to the development of those models. corporatefile.com.au You also recently announced that the New York Stock Exchange has confirmed it no longer considers Orbital below the US$1 listing criterion, but will continue to monitor the company for another seven months. What's the broad purpose of the NYSE's continued monitoring of the company and what happens after seven months? CEO Peter Cook The NYSE's on-going listing requirements are multi-factorial, only one of which is the share price. It's only in relation to the share price that the exchange has advised we're now in conformity. On two of the other factors, shareholders' equity and market capitalisation, we've improved but are not yet fully in conformity with its stated requirements. So the exchange will continue to monitor our progress at regular intervals through to April 2004. At that time it will consider our overall progress, which has been positive up until now. (Q) Thank you Peter. For previous Open Briefings with Orbital Engine, visit http://www.corporatefile.com.au/ For more information about Orbital Engine, visit http://www.orbeng.com.au/ DATASOURCE: Orbital Engine Corporation Limited CONTACT: Keith Halliwell of Orbital, +618-9441-2311, or in the US 1-866-714-0668 Web site: http://www.orbeng.com.au/ http://www.corporatefile.com.au/

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