Attention ASX Company Announcements Platform Lodgement of Open Briefing
05 Mayo 2004 - 1:26AM
PR Newswire (US)
Attention ASX Company Announcements Platform Lodgement of Open
Briefing PERTH, Australia, May 5 /PRNewswire-FirstCall/ -- The
following is a transcript of an interview between
corporatefile.com.au and Peter Cook, CEO of Orbital Engine Corp:
Date of lodgement: 05-May-2004 Title: Open Briefing. Orbital Engine
Corp. CEO on Bajaj, Outlook Record of interview:
corporatefile.com.au Orbital Engine Corporation Limited recently
announced a technical cooperation agreement with Bajaj Auto
Limited, one of India's largest producers of two and three wheeler
vehicles. How will Orbital derive revenue under the agreement and
what are the implications for earnings going forward? CEO Peter
Cook Our arrangement with Bajaj is a fairly standard licence and
royalty agreement. A small amount of the licence fee was payable on
the signing of the agreement and certain milestone payments are due
over the next 12 months or so. Then, once Bajaj goes into
production, we'll derive a royalty from every unit made. The
implications for earnings are twofold. Firstly, the volume and size
of the Bajaj autorickshaw market is significant relative to those
of other licences we hold. We're hopeful it will prove to be of a
similar value to the Mercury royalty stream for us. Secondly, this
is the first time our product will be used on a commercial vehicle
- autorickshaws are predominantly taxis in India -- and the fuel
benefits will have a significant meaning for the operator. We're
hopeful we'll see significant market penetration and growth in the
sector overall. corporatefile.com.au The agreement gives Bajaj
exclusive use of Orbital's fuel injection technology on its
autorickshaws for three years following the commencement of
production. Why was it necessary to provide exclusivity? Does this
relate only to the Indian market? CEO Peter Cook The exclusivity is
only in the Indian market and is restricted to a particular
capacity range of two stroke engines. We agreed to this because
Bajaj has pioneered, grown and developed this market sector and it
wanted to make certain there were no competitive pressures from
other manufacturers moving into the sector with what it sees as the
superior technology. corporatefile.com.au What other opportunities
are there for Orbital in the Indian market? CEO Peter Cook This is
our first venture with a commercial vehicle and our first venture
into the Indian marketplace, so we have to tread a little warily.
We're optimistic however, that with some success in this sector,
and particularly with our emissions and fuel economy demonstrated
on a commercial vehicle, there'll be other opportunities over time.
corporatefile.com.au Orbital said at its first-half results
announcement that it expected the results of the second half ending
June 2004 to be in line with the first half, excluding any foreign
exchange gains or losses. First-half net profit was $2.1 million.
How do results so far in the half compare with this expectation?
CEO Peter Cook At the time, we also alerted the market that one of
the sectors where we derive royalties, the 50cc scooter market in
Europe, was reasonably volatile with manufacturers under profit
pressure from changing market circumstances. We're still concerned
about that, and the position could deteriorate, but on our current
reading of the environment in Europe, we believe our second half
should be consistent with our first half. I should also add that
despite these concerns in Europe, we have a greater level of
confidence about the market for outboards. Current indications are
quite positive for Mercury's Optimax range in North America.
corporatefile.com.au Is the volatility of the 50cc market in Europe
a cyclical event, or are there signs that it could be a structural
change that could have a long-term impact? CEO Peter Cook It could
be either. Like a lot of European manufacturers, our licensees have
found it very difficult to sustain a position against imported
Asian products. But they're moving to secure manufacturing points
in Asia, so we're hopeful that this is just a cyclical shake-out.
corporatefile.com.au Orbital's overhead expenses fell to $7.2
million in the first half from $10.6 million in the previous
corresponding period. What has been the trend in overheads in the
second half and to what extent will your head office relocation
contribute to lowering costs over the remainder of the year and
going forward? CEO Peter Cook There'll be some minor savings in
terms of occupancy and related costs, but we're not seeing any
significant change in overheads compared with the first half. We've
got our overheads fairly stable and where we want them to be.
corporatefile.com.au Can you give any guidance on the level of any
one-off costs that might be associated with the head office
relocation? To what extent are these cash costs? CEO Peter Cook The
one-off costs were all cash and amounted to some $950,000. They
were either fully provided for in earlier financial periods or will
be capitalised and therefore will have no impact on this year's
profit. The costs related to two elements, the termination and
make-good obligations under the lease and the refurbishment of one
of our existing buildings into which we've relocated.
corporatefile.com.au Orbital reduced its net operating cash outflow
to $0.3 million in the first half, compared with $6.1 million
previously. The result included some final redundancy payments
relating to the Synerject restructure. As you generate positive
cash from operations, what will be your priorities for employing
the cash? CEO Peter Cook We now want to rekindle some support work
for our underlying Orbital combustion process technology, and
particularly second generation products for OEMs that have our
product out in the marketplace. Our first generation product's been
in the market for upwards of five to six years, so we'll be looking
to do some product improvement aimed at lowering cost for the OEM,
achieving easier application and reducing the number of components.
This will be a very focused development spend, not a research
spend, and will be driven off the needs of our customers. We'd
therefore expect it to be reflected fairly quickly in improved
royalties and improved market penetration. corporatefile.com.au
Orbital's shares are currently trading at around $0.15, more than
30 percent below their 52-week high of $0.22 in September. Given
you're still within the period during which the New York Stock
Exchange is monitoring the company for compliance with its listing
rules, does the share price fall have any implications for your
NYSE listing? CEO Peter Cook The answer's got to be yes. One of the
issues the NYSE considers is market capitalisation, so decline in
share price is relevant. We've now been monitored by the NYSE for
18 months, and we're not fully meeting all of their requirements
although we are requesting that the company be allowed to continue
to trade on the exchange on the basis that we expect to move back
into a position of full compliance in the medium term. We're
committed to ensuring that our US-based shareholders have an
accessible market on which to trade their ADRs and our preference
is to remain listed on the NYSE. In the event that proves not to be
possible, we'll canvass alternate markets in the US.
corporatefile.com.au 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
CONTACT: Peter Cook, Chief Executive Officer of Orbital Engine
Corporation, +61-8-9441-2311, or , or USA, +1-810-245-0621 Web
site: http://www.orbeng.com.au/ http://www.orbeng.com/
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