Orbital foresees outboard engine market rebound

PERTH, Australia – Orbital Engine Corp., which licenses its direct injection technology to several marine industry manufacturers, observed during its annual general meeting today that the outboard engine market “seems to reflect the well being of the general economy.”

“… there are some positive signs emerging this year with recovery in U.S. volumes, although they have not returned to their 2000 peak,” the company reported in a statement today.

Orbital noted that Mercury appears to have held its market position, particularly in the U.S. market and this year has extended its product offering of Optimax engines, which utilize Orbital’s direct injection technology.

The company also said it expects Bombardier’s launch of its E-TEC line of direct injection outboards to be “beneficial to total market growth and therefore likely to indirectly benefit Orbital Engine.”

Potential of PWC market appears limited

In addition to being a competitor to Mercury Marine in the outboard engine market, Bombardier is Orbital’s only customer in the personal watercraft (PWC) market.

Orbital said that PWCs “appear to have been an expensive item in a fad market that will most probably settle into a global sales base of less than 100,000 units per annum; appreciably smaller than the 750,000 reportedly sold in 2000.”

Orbital said it anticipates that the majority of new sales in the PWC sector will be large 4-stroke craft. Despite this, however, it plans to “maintain a solid relationship” with Bombardier Recreational Products as its sale is finalized because this division “has a number of other product sectors of interest, including ATVs and snowmobiles.”

Company sees evidence of turnaround

Orbital also confirmed in the statement that it has seen a turnaround in sales and earnings.

Its results “demonstrate that we have been able to stabilize the business in its current form, even deriving royalty income from only relatively low volume, niche applications of our technology in marine, recreation and motor scooters, and importantly, achieving growing revenue from out Engineering Services activities,” according to the company.

During its first quarter, sales were up 82 percent over the same quarter of last year and gross margin is up 190 percent over the same quarter, the company reported.

Profit after tax was A$3.2 million ahead of the same period of last year, and cash is positive.

In addition, Synerject, which handles the company’s licensing business and of which Orbital owns 50 percent, also has continued with its progress, according to the company. Orbital’s share of the profits was A$400,000 in the first quarter, an increase of 16 percent over the same period last year.

While these results suggest that the first half of the year will be far ahead of last year’s first half, the company said the first quarter benefited from a number of one-off events, such as the timing of certain licensing payments.

“Orbital is a small organization that often in the past found itself buffeted by political, market and consumer changes beyond our direct control,” said the company. “Similar circumstances may occur again.”

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