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Welcome to Orbital's web-site, and to
the "From the CEO" newsletter.
 It
is now some 3 months since joining Orbital and I would like to keep
you updated on key activities during that period.
Firstly, our end of year results were
announced showing a profit of $0.5m. Taking into account a $1.2m
reduction in profit due to the strong Australian Dollar, the FY08
results were similar to that of the previous year. Orbital received
its first cash dividend payment from Synerject, our 50:50 Joint
Venture partnership with Continental AG (previously Siemens VDO),
a return from previous investment by Orbital, with Synerject expected
to be a major contributor to Orbital's profit going forward. Most
important is that we have a strong cash position of $8.8m to fund
our continuing operations and our growth initiatives.
As a part of our plans to increase our
Investor Relations profile, Orbital has presented the annual results
and introduced our plans to explore new markets to the financial
community in Sydney, Melbourne and Perth. The presentation information
is available through our website (http://www.orbeng.com.au/orbital/investorinformation/news/080908.pdf).
As with much of the world, we are watching
closely the issues impacting the US economy as a significant portion
or our revenues and profits are driven from our US customers and
licensees. Our sales prospects from this region remain steady, however
we can expect that the significant downturn in the US economy will
impact our business this year. The extent of the impact is unknown
at this time. On the positive side, the FlexDI products that we
have in the US market, such as Mercury Marine's highly successful
Optimax Outboard series, remain attractive to the customer due to
significant fuel savings and lower operating costs compared to standard
products, helping us to maintain our position in the market.
As discussed in my first newsletter,
my plan is to explore expansion opportunities into alternative fuel
technologies. These are specifically Compressed Natural Gas (CNG)
and Liquid Natural Gas (LNG) for internal combustion engines. The
price and availability of crude oil product derivatives such as
petrol and diesel will drive key growth opportunities in this market
sector for Orbital going forward.
Orbital's initial entry into the alternative
fuel business, the acquisition of Boral Alternative Fuel systems,
now named OGP, continues to do well. The higher and continuously
volatile petrol costs have resulted in increased LPG retrofit volume
in Australia by some 19% for the period January to August compared
to the previous year. In the period June to August, it was 42%.
The sales of OEM vehicles fitted for LPG increased by 60% up to
the end of August compared to the same period previous year.
The government rebates for LPG conversion
has significantly contributed to the increase in retrofits since
August 2006 and further serves to confirm that Australia views alternative
fuel technologies as a real opportunity to reduce fuel costs to
consumers and also to reduce harmful greenhouse gas emissions. The
recent Brack's Review of Australia's Automotive Industry report
(http://www.innovation.gov.au/automotivereview/Documents/
aug08%20final%20report_secure.pdf) recommended increasing the
rebate for OEM fitted systems from $1,000 to $2,000 which could
further bolster this market segment.
At Orbital, we are already working on
developing new business for next generation LPG liquid injection
systems. As the market evolves, LPG liquid injection is expected
to replace the current LPG vapourising systems over time. Orbital
has 25 years of experience developing state-of-the art fuel injection
and engine management systems and by using this experience and leveraging
the strength of our partners, I am confident that we can offer the
market in Australia and possibly Asia higher performance alternative
fuel system options. This business opportunity fits with Orbital's
core engine combustion technology strength and allows us to build
a local business in Australia. My plan is to raise Orbital's local
profile by growing our domestic business while continuing to support
our international customer base.
The interest in Australasia is not limited
to LPG. Using Orbital base technology and infrastructure, we can
develop new systems for natural gas application to internal combustion
engines targeted at the mining and heavy duty transport industry
where the technology can deliver significant fuel cost savings and
reductions in green house gasses.
Clearly alternative fuel technologies
is a growth industry that Orbital can participate in to the benefit
of our shareholders.
Orbital's work for the Australian Government
has continued with the second National Service Emission Study (NISE)
for the Roads and Traffic Authority of NSW and with the release
of the report "Evaluating the Health Impacts of Ethanol Blend
Petrol" prepared by Orbital and CSIRO for the Department of
the Environment, Water, Heritage and the Arts. This report is available
on the Government web-site:
http://www.environment.gov.au/atmosphere/fuelquality/publications/pubs/ethanol-health-impacts.pdf
I very recently visited India to review
our programs with one of our key customers in Asia, Bajaj. The Bajaj
FlexDI Autorickshaw program continues with a measured introduction
into the market. Customer feedback is positive, with both Bajaj
and Orbital wanting to ensure that this product meets all the expectations
of the market. Whilst volume and expansion plans are customer confidential
information the important message is that the program is up and
running and our valued customer Bajaj is committed to growing this
market. While in India, I also visited other customers and paid
my first to visit to UCAL, a valued licensee of Orbital technology
and the key supplier of the Orbital FlexDI systems to Bajaj. The
executive management of UCAL remain committed to the Bajaj program.
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On-site at UCAL.
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During my travels I also met with Continental
AG key executives. I moved to Orbital from Continental and maintain
a close relationship. Orbital has been in partnership with Continental
AG for the past 11 years and both companies see mutual benefits
for a long term continued association.
In the forthcoming months, I plan further
visits to Orbital's key customers here in Australia and around the
world to understand their needs and to discuss how we can best provide
value add service to them.
I hope to meet with many of you at Orbital's
Annual General Meeting on 22nd October.
Regards
Terry Stinson
Chief Executive Officer and Managing Director
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