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									Orbital Corporation Ltd Annual General Meeting
Good morning ladies and gentlemen and welcome to the 18th Annual General
Meeting of Orbital Corporation Limited. My name is Don Bourke and I will be chairing
today's meeting.
We have a quorum of shareholders present, so I am pleased to declare the meeting
With me today are my fellow non-executive Directors, Grahame Young and John
Marshall, and Managing Director and Chief Executive Officer, Dr Rod Houston. Also
present is Mr Keith Halliwell, our Chief Financial Officer and Company Secretary.
In addition, we have with us today Denise McComish, representing our auditors,
I will start proceedings this morning by giving you a brief overview of Orbital's year,
including a financial overview and strategic milestones. Rod Houston will then follow
up with a more detailed review of the 2006 financial year after which we will conduct
the formal business of the meeting. We will then take questions from the floor.
(Profit & loss account)
Following a loss of $1.4 million recorded in the first half of the 2006 year, I am
pleased to report that the Company has enjoyed a turnaround in the 2nd half and has
been able to achieve a profit of $0.5 million in the full year. This is a $2.2 million
improvement compared to the full year loss of $1.7 million in 2005.
The turnaround achieved in the 2nd half year was a result of an increase in
engineering activity, reduced overheads and the typical improvement in royalties and
Synerject profit as our customers build product for the northern hemisphere summer.
As explained at last years AGM, Orbital's engineering business has switched from
traditional automotive customers to the emerging markets in China and India. In
addition Orbital has refocussed on product development opportunities with customers
wishing to introduce Orbital's DI technology. That transition resulted in a shortfall in
project revenue evident in 2005 and the 1st half of 2006; however it is pleasing to
see that the change in focus is now complete and there is a steady provision of
engineering work and an order book in excess of $8m, as we started the new
financial year. We anticipate further opportunities for engineering revenue in the
topical gaseous applications including LPG and CNG DI applications.
Licensing and royalty revenue increased 8% year on year. Royalties earned in the
European scooter market are still under pressure due to lenient emissions
regulations however the marine sector has more than compensated with unit
volumes up by 20% in 2006. Both Mercury Marine and Tohatsu introduced new
product during the year and 2 stroke engines in the marine sector are enjoying
renewed support. Bajaj have released their DI autorickshaw pilot vehicles and subject
to feedback from these tests, plan full production launch early in 2007.
As noted last year Orbital targeted cost savings of $1 million per annum and it is
pleasing to report that we have achieved approximately $1.5 million (annualised)
which have benefited the 2006 result and will have benefits going forward.
Synerject have had a good year! Revenue increased by 37% to A$77 million and
Orbital's equity accounted share of Synerject's result increased by 41% to $4.1
million. The increase in revenue was partly underlying organic growth in Synerject's
traditional customer base but also includes revenue from the Delavan acquisition
effective from the beginning of March. The Delavan plant, which manufactures
engine management modules for Johnson and Evinrude outboard engines, is
meeting our expectations, and while not contributing significantly to the bottom line
last financial year is expected to perform strongly in the 2007 financial year.
Synerject's next growth opportunity will be centred around the manufacture and sale
of a newly developed electronic control unit with applications primarily in the Chinese
market but also opportunities in Europe. Synerject are presently establishing the
manufacturing base in China with planned production in January 2007 for its first
Chinese customer.
To support this growth Synerject has negotiated new long term independent banking
arrangements. These finance arrangements which were put in place in June 2006 do
not require support by parent company guarantees demonstrating the maturity and
financial stability of this joint venture.
Synerject will benefit from the ownership of the Delavan plant for the full year and will
continue to introduce operating and cost efficiencies throughout the 2007 financial
year. We are confident that this will prove to be a valuable investment. Synerject's
results in 2007 will however be impacted by the investment in manufacturing facilities
in China. This is an opportunity which will have significant long term financial returns
and we believe that the short term investment cost will be more than justified.
The engineering order book underpins the engineering group running at near
capacity and the cost reductions put in place last financial year will provide bottom
line benefits. We anticipate royalty growth from Orbital's existing DI customers and
the launch of the Bajaj DI autorickshaw will provide a step change in royalties in the
2nd half year.
Overall, your Board is confident that the turnaround demonstrated in the 2006 2nd
half year will continue and Orbital will achieve an improved result in the 2007 financial
In the last 12 months Orbital has announced new customer licence arrangements
covering gasoline, spark ignited heavy fuels and gaseous applications. This provides
confidence in our technology and Orbital's long term prospects.
We believe that the global focus on fuel efficiency, alternative fuels and
environmental concerns support our strategy. We look forward to the future working
with a range of customers and technologies in what is becoming a truly global
<B> Rod Houston Chief Executive Officer's Speech Orbital Corporation Limited
Annual General Meeting</B>
Good morning ladies and gentlemen, I would like to provide you with a more detailed
overview of the operations at Orbital. I have been in the position of CEO for over a
year now and I have had some time to better appreciate the opportunities and
challenges we have for the future. This presentation will give you a short summary of
these and will finish with a look to the future markets and environment in which
Orbital currently operates.
I think it is useful to capture at the beginning of this presentation (slide 2) some of the
key strategic achievements over the last year, which are summarized in the slide
shown here. These include:
Acquisition of the Delavan facility in March by Synerject
Polaris entering into a license agreement for Orbital DI products
Negotiation of long term finance arrangements for Synerject
Improvement in Engineering services order book by 100% at June 2006 compared to
the same period last year
Broadened product and technology portfolio in key areas such as alternative fuels
and gaseous fuels
Now (slide 3) I would like to review the three major business segments of your
company, followed by a discussion of the outlook.
As your chairman has summarized previously we have positive signs of a turn around
in our business, and we see catalysts for growth in our business given the growing
economies in our region as well as the influence of the tightening emissions
Synerject is a supplier and manufacturer of electronic engine management systems
(EMS) and electronic fuel injection systems to the non- automotive vehicle market.
The company was initially formed in 1997 with Siemens-VDO as a 50:50 joint venture
to manufacture the Orbital DI fuel system for automotive and non-automotive
applications. In 2003 the company expanded to include access to all Siemens-VDO
engine management systems and components for non-automotive global
This joint venture company has been profitable over the past four years now
(cumulative profit after tax of $14.9m) and cash positive for the past five years
(cumulative $25.4m in cash flow). The net debt for Synerject has been reduced from
US$20m to less than US$4m by the end of June, which enabled them to negotiate its
own finance (normal bank loan) and ultimately pay dividends to it's parents in the
The components and systems sold by Synerject (including its new acquisition) are
divided into three main technologies:
Orbital air assist DI engine management systems including fuel systems and
electronic control units which also earn a royalty for Orbital
Engine management systems incorporating direct injection systems for the BRP E-
TEC products which are not linked to royalty payments for Orbital
Engine management systems incorporating electronic port fuel injection (PI) systems
which are not linked to royalty payments for Orbital
You will see a number of the customer end products incorporating these components
in the reception area today including some of the new models released by Tohatsu
this year. I would encourage you all to take the opportunity to discuss with me or my
colleagues, any of these applications and understand which Synerject components
are included on the products.
I would like to give you an update on this market segment in which Synerject operate
and the key drivers for change in this market which will give you further insight into
the current and future potential value of this asset.
Synerject's current focus in the non-automotive market covers a diverse range of
products including motorcycles, scooters, ATVs and Marine outboards. As shown
(slide 7) the overall market volume for this product sector is in the order of 39 million
vehicles and is expected to grow at a rate of 5% annually between 2006-2012, taking
it up to over 50 million vehicles (approaching automotive global vehicle volumes).
The majority of this volume are motorcycles (90%) and the vast majority of this
motorcycle market are in China and India.
Looking at the China and India markets alone the total volume of motorcycles is in
the order of 22 million manufactured this calendar year and is expected to grow to
over 30 million in the next 5-6 years. Today however nearly all of this market in China
and India utilizes a simple carburetor fuel system without electronic control systems.
One of the key drivers for the introduction of Synerject's products is the staged
introduction of emissions legislation across the globe in all of these non-automotive
markets. Synerjects current revenues are derived from the European and US
markets where the emissions legislation for recreational vehicles has already forced
the change from carburetors to some form of electronic engine management and fuel
injection systems, including the introduction of Orbital DI.
Having established the potential vehicle volumes of the overall market and the key
drivers for new technology (i.e. emissions reduction and improved fuel efficiency), we
can look at the projected value of the engine management system market (including
components). This data is based on our best estimates of the overall market and the
predicted penetration of electronic EMS. The current total market value is
approximately $450m, with the majority of the business in Europe and the USA.
Current estimates suggest that the total market could grow to in excess of $1.6 billion
by 2012, with the major growth occurring in China and India as they transition to
various forms of engine management systems. These figures would be subject of
course to the exact timing of the emissions legislation and the ability to develop
solutions specifically suited to these high volume, low cost markets.
The average value of EMS components per vehicle in these Asia markets will be
much lower to match the lower cost motorcycle products compared to the
recreational products in the US and European markets. In response Synerject (slide
10) have made significant investment over the last two years and are well advanced
in the development of a new line of highly integrated and low cost electronic control
units (ECUs). One of these new designs (M3 ECU) is shown here along with an
example of the product fitted to one of the first customer applications, which will be in
launched in Europe in 2007.
In the medium to long term the majority of Synerject sales growth is expected to
come from India and China as their emissions legislation start to be become more
stringent in 2008-2010.
Synerject have already established a good working relationship with UCAL in India
who have been licensed as a local supplier for Orbital DI. In China, Synerject are
establishing a new engineering customer support group in Chongqing and are
establishing a manufacturing facility in Changchun for the manufacture of the new M3
ECU products.
It is clear that in order to continue to grow strongly Synerject will need to invest into
new products, launch production in Asia and potentially look at further strategic
relationships as well as acquisitions. As discussed today you can see that these
steps are well underway, and we see Synerject as a valuable manufacturing
investment for the future.
<B>Engineering Services</B>
Orbital's engineering services business provides professional engineering
consultancy services to engine manufacturers, OEMs, suppliers and governments on
a global basis. The provision of these services creates a significant revenue stream
while allowing Orbital to work closely with its customers on advanced powertrain
applications and developments, some of which also involve the application and
development of Orbital proprietary technology.
As explained earlier by the Chairman, the Engineering services business started out
with a very low order book at the beginning of FY06, however this improved
significantly in the second half as a result of the change in focus of our marketing to
the emerging markets (including Asia) and the strong interest and growth from the
alternative fuels and gaseous fuels markets. These strategies along with market
changes have started to deliver good results with the improvement in the forward
engineering order book which stands at $8 million as of July 1st, 2006, almost double
the order book value at the same time last year.
This order book also shows a significant proportion of the services relate to the
application and development of Orbital technology. In particular this relates to new
programs in the area of spark ignited heavy fuel (kerosene and diesel), applications
for direct injection gasoline as well as new gaseous applications covering both LPG
and CNG DI. The increased level of Orbital DI technology programs is a result of the
continued commitment to technical innovation and internal R&D expenditure at
Orbital which I will discuss in more detail later.
Orbital has also continued to build on our reputation for the effective delivery of
professional engineering services outside our traditional proprietary (OCP)
technology. This has enabled us to develop new customer relationships which in
some cases have become more long term strategic relationships, which have then
lead to the development of more long term engineering contracts with key customers
such as UCAL and Bajaj. Going forward I see further opportunities to develop longer
term strategic partnerships with other key customers keen to grow their products and
their competence to meet the new emissions and fuel efficiency challenges for the
global automotive and non-automotive market.
The growth in the Chinese automotive and engineering services industry continues at
a high level, driven by their desire to export into stringent emissions markets and the
introduction of new emissions and fuel efficiency constraints in China. Orbital have
achieved some success in winning new customers from this region over the last year
through increased sales and marketing efforts. This is an important engineering
services market for Orbital, however in terms of overall revenue targets and the
difficulty of extracting good margins in this market, China will not be our only focus.
In summary I believe our competitive advantages in this engineering services
business of a highly competent and flexible skill base, strong IP portfolio (including
OCP) and willingness to provide education and training has helped develop a
growing list of new opportunities with the potential to deliver a sustainable and
growing business.
<B>Licensing and Royalties </B>
Orbital licenses its patented direct injection technology to OEMs and suppliers.
Royalties and license fees are derived from a wide range of customers in the marine,
motorscooter and motorcycle sectors (see slide for products).
Licensing and royalty revenue increased by 8% compared to the prior year, most of
which relates to increased royalties from the marine sector which has shown a 20%
increase in engine volumes year on year. (slide 14) The 2-stroke DI market has held
up well in this sector due to the inherent 2-stroke benefits in performance, light
weight, fuel efficiency and lower maintenance. I believe we will continue to see the DI
2-stroke market share hold its own as this product has good acceptance and as
shown here the Mercury Optimax engine (with Orbital DI) can show a clean pair of
heals to the best of the 4-stroke competitors (with better acceleration, top speed and
fuel efficiency).
The European DI scooter market has continued to struggle in an environment of
lenient emissions regulations which have enabled the continued sale of low cost
carburetor solutions. New initiatives (with Synerject) to re- invigorate this market have
been undertaken over the last 12 months leading to the development of a second
generation prototype DI fuel system with improved functionality and lower cost. This
new system will take advantage of some of the new components being developed by
UCAL (e.g. fuel pump and air compressor) as well as integration of some of the
components to reduce parts count.
I have recently returned from Europe where we presented this new generation DI
system to some of our customers, and there was a good reception for the proactive
approach we have taken to support this market. I am optimistic about the long term
prospects for both the DI scooter and motorcycle markets based on positive
customer feedback I received.
Bajaj are progressing well with the DI autorickshaw program and production launch
will follow an extensive pre-pilot vehicle release which is currently underway.
I am encouraged by the positive feedback from Bajaj and the recent expansion of
their license to cover gaseous rickshaw applications adds to the potential long term
growth of this DI application. Bajaj are an exciting and fast growing company with
volume growth of 20-30% year on year over the last 2-3 years and they have major
plans for becoming number one in India and the Asia-pacific motorcycle market. The
DI autorickshaw product has the potential to contribute significantly to the future
royalty stream for Orbital, and is important to our plans given the softness we are
experiencing in the near term European scooter market.
There continues to be strong interest shown in assessing the capability of Orbital DI
4-stroke systems for future motorcycle and recreational applications. The
investigations by a number of OEMs are at the production feasibility level, and cover
both gasoline and spark ignited heavy fuel (kerosene and diesel) and could lead to
significant revenues streams from royalties, engineering services and Synerject sales
in the future.
In the automotive sector regulations for improved fuel economy or reduced carbon
dioxide emissions are still quite limited, and up to now the OEMs have been able to
meet market demands without the adoption of sophisticated (lean operation) direct
injection systems. Clearly, however with the reality of diminishing global reserves of
oil and with fuel prices increasing there is increasing pressure from the market for
improved fuel economy.
In some markets (e.g. Europe) the response to high fuel prices has been an
increased market share of diesel engine equipped vehicles. This market shift has
however seen a reduction in the vehicle profit margins for the OEM due to the very
high cost of the diesel engine (50-70% higher including fuel system and exhaust after
treatment). I believe along with an increasing number of the industry OEMs that there
is significant scope to improve the gasoline engine efficiency by spending some of
this difference in cost on a combination of direct injection, turbocharging and variable
valve control which can match the fuel economy and driving characteristics of the
diesel engine. This would favour the introduction of sophisticated DI technology such
as Orbital DI.
However, there remain some key challenges for OCP DI adoption in this market not
the least of which is a number of established competitive technologies including high
pressure single fluid DI which has become the incumbent.
There are some emerging opportunities for OCP DI in the new automotive markets
such as China where there is significant fuel economy legislation combined with a
hunger for leapfrog technology. Therefore it is important that we continue to update
the technology in this area to keep this market opportunity active, which leads me
into a brief discussion of some of the research and development activities at Orbital.
<B>R&D </B>
Orbital has continued to invest in further research and development to extend the
capability and value of the Orbital technology.
The increased level of engineering services programs which utilize the Orbital
technology is a result of the continued commitment to technical innovation and
internal R&D expenditure at Orbital. Consequently Orbital has been able to continue
to build on it's intellectual property portfolio in key areas for the future. An example of
the outcomes from this committed expenditure is the development of a new gaseous
DI injector suitable for both LPG and CNG applications in automotive and non-
automotive markets. In the case of automotive this development enables the
conversion of gasoline engines to operate on CNG or LPG without the loss of
performance normally associated with port injected gaseous systems. In non-
automotive the new gaseous systems can take advantage of simpler DI system
integration, without the need for fuel pumps and separate air circuits.
The first production application for this DI gaseous technology is likely to be in India,
where CNG/LPG is already mandated in certain cities. In many markets the high
dependence on oil imports combined with legislated CNG adoption will see an
increased interest in the global market for this type of technology and associated
engineering services.
As discussed previously, Orbital have developed a second generation 2-stroke DI
system which demonstrates improved functionality (lower emissions, better
driveability) and lower cost (sourcing new components from UCAL in India and
integration). This program is specifically targeted at re- invigorating the 2-stroke DI
market, which is a hallmark of our technology and a key differentiator of our
engineering services.
As referred to last year, as part of our advanced combustion research, Orbital have
established a program to develop a new combustion system which utilizes a
combination of mechanical features (variable valve-train, engine downsizing and
turbo charging) plus advanced combustion control techniques (using OCP DI or other
DI systems to supply fuel).
The intent is to develop a range of evolutionary combustion solutions which can
handle various fuels (including Ethanol blends, CNG and gasoline) and deliver fuel
economy similar to or better than today's diesel engines. This program further
enhances Orbital's reputation as a leading edge development group for combustion
and is responsible for a number of new patents which will enhance the value of
Orbital's intellectual property into the future for the auto and non-auto markets.
<B>Future Objectives/Outlook</B>
The potential for manufacturing revenue growth via Synerject is positive with good
long term prospects for growth in the non-automotive EMS supply business. This will
require investment in the short term to expand into the markets in Asia, including
establishing new engineering and manufacturing facilities in China. This investment
will dampen the short term profit growth for Synerject, but this is an important step if
we are to realize the overall growth targets and maintain the 15% market share of the
non-auto EMS market going forward.
There have been some positive signs that the engineering services business can
deliver an on-going positive contribution while also enabling the development of new
customers and advancing the application of the Orbital technology. Due to our strong
order book at the beginning of the year, we have seen a significant improvement in
first quarter revenue compared to the same period last year. This will give us a much
better platform to provide an improved full year result for this business segment.
We have also started taking on a broader range of consulting roles -- Assisting some
of our customers with their IP strategies and general commercialization strategies,
and others with fuel and EMS system evaluation outside our traditional market
I expect to see an improvement in licensing and royalties for this financial year, due
mainly to launch of the Bajaj autorickshaw. Supporting this program launch is a key
focus of our efforts as this first program is key element of growing our long term
relationship with Bajaj and ensuring the continued success of the product in this new
very large market place.
In the medium to long term there are good opportunities to grow royalty revenue from
the introduction of new DI 4-stroke and 2-stroke products in the motorcycle and
recreational markets including the first gaseous DI applications.
I believe there is a good future for Orbital as the global emissions legislation tightens
and greenhouse gas concerns continue to influence change. This has the potential to
open up other markets and business opportunities including the Utility, Lawn and
Garden market which has global annual volumes in excess of 60 million units and
just like the motorcycle and recreational market will be forced into technology change
by new emissions legislation over the next 5-6 years. This low cost market will
require some novel approaches to develop even lower cost solutions and possibly
new business relationships -- but this could be the next new field for Orbital.
Before closing I would like to thank the following:
Orbital employees for their total commitment and support
Orbital board for their advice and council
The shareholders for their continued support.
In summary
We have some good prospects in all three parts of our business.
We have achieved some important milestones particularly through our joint venture
Synerject. but our future is not without risk and our challenge is to manage these
Thank you.

The Manager
 Company Announcements Office
 Australian Stock Exchange Limited
 20 Bridge Street

Dear Sir

In accordance with Listing Rule 3.13.2 and section 251AA of the Corporations Act
2001, Orbital Corporation Limited advises that all resolutions put at the Company's
Annual General Meeting held on 24 October 2006 were passed on a show of hands.
Details of the resolutions and the proxy voting in respect of each are as follows:
That the Remuneration Report be adopted.
Total number of proxy votes exercisable by all proxies validly appointed 19,017,136
Total number of proxy votes which specified that:
The proxy is to vote for the resolution 11,865,130
The proxy is to vote against the resolution 3,577,926
The proxy is to abstain on the resolution 505,942
The proxy may vote at the proxy's discretion 3,068,138
That Mr D W J Bourke be re-elected as a director of the Company.
Total number of proxy votes exercisable by all proxies validly appointed 9,017,136
Total number of proxy votes which specified that:
The proxy is to vote for the resolution 14,121,791
The proxy is to vote against the resolution1,507,392
The proxy is to abstain on the resolution 253,509
The proxy may vote at the proxy's discretion 3,134,444
That approval be given for the acquisition of ordinary shares in the Company to the
value of $1,000 by Dr R A Houston, Managing Director and Chief Executive Officer of
the Company, under the Employee Share Plan and up to 1,243,750 ordinary shares
in the Company, directly or indirectly, by Dr R A Houston under the Executive Long
Term Share Plan in the manner set out in the Explanatory Notes the Remuneration
Report be adopted.
Total number of proxy votes exercisable by all proxies validly appointed17,424,373
Total number of proxy votes which specified that:
The proxy is to vote for the resolution12,027,872
The proxy is to vote against the resolution 3,130,217
The proxy is to abstain on the resolution 708,339
The proxy may vote at the proxy's discretion 1,557,945
Yours faithfully
K A Halliwell
Company Secretary

 Orbital Corporation Limited
 ABN 32 009 344 058
 4 Whipple Street, Balcatta, 6021
 PO Box 901, Balcatta, 6914
 Western Australia
 Ph +61 8 9441 2311
 Fax: +61 8 9441 2133
 Website: www.orbitalcorp.com.au
Source: Orbital Corporation Limited
CONTACT: Orbital Corporation Limited, +61-8-9441-2311,
Fax, +61-8-9441-2133
Web site: http://www.orbitalcorp.com.au/

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