Ceramic Fuel Cells Regulatory News (CFU)

24 Apr 2008 08:54

Ceramic Fuel Cells Limited24 April 2008 24 April 2008 Quarterly Cash Flow Report and Trading Update Ceramic Fuel Cells Limited, (AIM / ASX: CFU) a leading global fuel celldeveloper, has released its cash flow report for the third quarter, ended 31March 2008. The report is available on the company's website: www.cfcl.com.auand also as set out below. Financial Review Net operating cash outflow for the third quarter was A$3.6 million (£1.7million), which was A$1 million (£0.4 million) lower than the previous quarter.Net operating cash outflow for the three quarters from 1 July 2007 to 31 March2008 was A$12.9 million (£6.0 million), an average of A$4.3 million (£2.0million) per quarter. Third quarter expenditure on Research and ProductDevelopment was lower than the prior quarter. Total cash and financial assets at the end of the quarter was A$39.2 million(£18.4 million). Operational Review Product development The Company continues to make good progress on the micro combined and heat(m-CHP) product development projects with its utility customers and appliancepartners in five key markets. All of the Company's European appliance partnershave now received NetGenPlusTM units. The status of the projects is described below: Germany The Company has shipped five units to its partners EWE and Bruns Heiztechnik inGermany. During 2007 one NetGenTM unit was installed at Bruns' facility, andanother one at EWE's premises. From January 2008, one NetGenPlusTM unit has beeninstalled at Bruns' facilities and integrated with a Bruns boiler. TwoNetGenPlusTM units are also being installed at EWE. The semi-integrated mCHPunit comprising a NetGenPlusTM unit and a Bruns' boiler is scheduled to beoperational in the current quarter. Work has also begun on developing componentsfor a fully-integrated mCHP unit. Two CFCL engineers are based in Oldenburg,Germany, working full time with EWE and Bruns. France The Company continues to make progress in its exclusive collaboration with Gazde France, the largest gas utility in Europe, and De Dietrich Thermique, aleading French boiler manufacturer. In January 2008 the Company shipped aNetGenPlusTM unit to De Dietrich Thermique. This unit is now installed at DeDietrich Thermique's facility in Strasbourg and has been integrated with a DeDietrich Thermique boiler. Two CFCL engineers are based in Strasbourg workingfull time with De Dietrich Thermique. United Kingdom The Company's project with its UK partners E.On UK and Gledhill Water StorageLtd is also progressing well. In January 2008 the Company shipped a NetGenPlusTMunit to Gledhill. This unit is now installed at Gledhill's product developmentfacilities in Blackpool. A semi-integrated mCHP unit is scheduled to beoperational in the current quarter. One CFCL engineer is based in the UK workingfull time with Gledhill. Holland The Company's partners in the Benelux markets are Nuon and the Remeha Group.CFCL's French partner De Dietrich Thermique is part of the Remeha Group and willalso be developing products for the Benelux markets. During the quarter thepartners developed the detailed specifications and project plan for thesemi-integrated unit, which is scheduled to be operational in the currentquarter. During the quarter the Company also announced a volume order from Nuon,described below. Japan In January 2008 the Company further extended its target markets by signing anagreement with Paloma Industries Ltd to evaluate and develop m-CHP products forthe Japanese market. CFCL will supply Paloma with a NetGenPlusTM unit for Palomato operate at its site in Japan. The project is on schedule for the unit to bedelivered in mid 2008. Japan is the largest market in the world for fuel cell m-CHP units. The PalomaGroup services more than 10 million homes in Japan, and has significantmanufacturing and sales operations across Asia, Oceania and the Americas. Palomaowns the Rheem, Solahart and Raypak brands and is the largest hot watermanufacturer in the United States. Volume Order In February the Company announced that it has received a volume order from Nuon,the Company's utility partner in Holland. CFCL and Nuon have agreed on a set ofperformance targets for a commercial unit. On CFCL's achievement of thesetargets, Nuon will order 50,000 fuel cell systems, to be delivered over a fiveyear period from the completion of CFCL's volume manufacturing plant, scheduledfor June 2009. Delivery of the units is expected to start in the second half of2009 and ramp up from 2010. CFCL will supply fuel cell modules to its appliancepartner the Remeha Group, which will integrate the modules into complete mCHPunits for on-sale to Nuon. The order is a significant commercial milestone withthe potential to generate substantial revenue for the Company over the fiveyears. Volume Manufacturing Supply Chain Partners During the quarter the Company signed Co-operation and Supply agreements withleading advanced ceramics manufacturers, CeramTec AG and H.C. Starck, both basedin Germany. These partnerships combine CFCL's expertise in solid oxide fuelcells with CeramTec and H.C. Starck's manufacturing capabilities and expertise,securing the Company's supply chain for mass manufacture of high quality fuelcells at commercially viable unit costs. Under the agreements, CFCL will collaborate with CeramTec and H.C. Starck toproduce advanced solid oxide fuel cell components and to continually improvecell performance and manufacturing processes and reduce unit costs. Onceoptimised, CeramTec and H.C. Starck will supply fuel cells to CFCL at pre-agreedprices until December 2011, securing long term cost visibility for CFCL. Supplyof the fuel cells is expected to commence in the second half of 2008, withincreases in forecast volumes from 2009. German Plant In February 2008 the Company announced that it is investing €12.4 million in theconstruction of a manufacturing plant in Heinsberg, Germany for the commercialproduction of its fuel cell systems. CFCL will assemble its fuel cell systems atits Heinsberg facility in automated and semi-automated production lines in astaged scale-up operation. Initial capacity will be 10,000 units per year. Theplant has been designed to allow an increase in capacity of up to 160,000 unitsper year within the existing building. The plant is expected to be making fuelcell stacks from June 2009. During the quarter the Company formally engaged CEL International Ltd as 'EPCM'contractors to manage the project. CEL had previously assisted the Company tofinalise the equipment specifications and plant design, and formulate theproject plan and costings. CEL works on approximately £250M capital value ofprojects per year and has significant experience in successfully managingcapital works projects in the chemicals industry, including fuel cellmanufacturing plants. The project is on time and on budget. Australia Manufacturing During the quarter the Company continued to manufacture metal-ceramic stacks atits upgraded facilities in Melbourne. CFCL's GennexTM fuel cell modules,comprising metal-ceramic stacks and new balance of plant components, are beingintegrated into NetGenPlus units for product development partners. UK Powder Plant During the quarter the Company produced zirconia powder from its high qualityceramic powder plant in Bromborough, Merseyside, UK. The Company will use thispowder for its internal use as well as for potential sales to externalcustomers. During the quarter the Company supplied powder samples to severalpotential customers, including CeramTec, one of the Company's fuel cellcomponent suppliers. The Company believes the plant is capable of making a rangeof high quality powders for several large and growing markets, including themarkets for bio-medical applications, thermal barrier coatings and catalystsupport materials. The Company also believes that in the medium term the plantand the associated intellectual property can provide a range of options tomaximise shareholder value. During the quarter the Company hosted an Open Day for analysts at theBromborough plant. Copies of the presentations are available at http://www.cfcl.com.au/Recent_announcements. Technical During the quarter the Company released its latest technical data showingresults of a fuel cell stack running on natural gas. The stack producedapproximately 1.1kW at an electrical efficiency of 53% and a degradation rate of1.52% per 1000 hours. The Company also announced that advances in power density have enabled theCompany to increase the nominal output from each of its fuel cell stacks to 2kWof electricity at minimal additional balance of plant cost. This significantlyreduces the unit's cost per kW and increases the unit's CO2 savings. The Company continues to make technical improvements in degradation anddurability which are the key metrics for commercial fuel cells. Patents From January 2008 the Company has been granted five further patents. In February 2008 a patent was granted for a coating to protect steel used infuel cell stacks from corrosion. This can improve the fuel cell stack electricalefficiency and lifetime. CFCL has already been granted patents on the inventionin Europe, USA, Australia and New Zealand. A patent has now been granted inCanada, with a patent application also pending in Japan. Another patent was also granted in February, for a process of using hydrogen toremove sulphur from fuel. This can allow fuel cells to use many types of fuels,including gasoline, diesel, kerosene, LPG and natural gas, and substantiallybroaden the markets where CFCL's fuel cell systems may be readily deployed. Thepatent has been granted in Australia, with patent applications pending inEurope, USA, Japan and Canada. An Australian patent was granted for a feedthrough technology used to allowyttria-stabilized zirconia plates to be used as interconnectors in fuel cellstacks. Patent applications are also pending in Europe, USA and Japan. AnotherAustralian patent was granted for a fuel cell sealing arrangement, withapplications pending in Europe and Japan. Finally the Company has been granted a patent in Europe for the use of copperbased alloys for use as interconnectors in SOFC stacks. The patent is in forcein Australia and the USA, and applications are in progress in Canada and Japan. Rule 4.7B Appendix 4C Quarterly report for entities admitted on the basis of commitments Introduced 31/3/2000. Amended 30/9/2001 Name of entityCERAMIC FUEL CELLS LIMITED ABN Quarter ended ("current quarter") 82 055 736 671 31 MARCH 2008 Consolidated statement of cash flows Current quarter Year to date Cash flows related to operating (9 months)activities $A'000 $A'000 1.1 Receipts from customers 296 338 1.2 Payments for (a) staff costs 1 (2,491) (7,814) (b) advertising and marketing 2 (352) (782) (c) research and product (1,913) (4,924) development 3 - - (d) leased assets (308) (2,744) (e) other working capital1.3 Dividends received - -1.4 Interest and other items of a similar nature received 912 2,1831.5 Interest and other costs of finance - - paid1.6 Income taxes paid - -1.7 Other - Net GST Received/(Paid) 169 780 - Export Market Development Grant - - received 16 17 - Sundry income received Net operating cash flows (3,671) (12,946) Notes 1. 'Staff costs' includes all company labour and associated headcountcosts, and therefore incorporates all Research & Product Development (R&PD)staff, Sales & Marketing (S&M) staff and General & Administrative (G&A) staff. 2. 'Advertising and marketing' excludes all S&M staff costs (as per note 1above). 3. 'Research and product development' costs includes all R&PD costs asdefined in Note 1(e) to the Financial Statements for the year ended 30 June2007, but excludes all R&PD staff costs (as per note 1 above). Current quarter Year to date (9 months) $A'000 $A'0001.8 Net operating cash flows (carried (3,671) (12,946) forward) Cash flows related to investing activities1.9 Payment for acquisition of: (a) businesses (item 5) - - (b) equity investments - - (c) intellectual property - - (d) physical non-current assets (1,834) (5,550) (e) other non-current assets - - 1.10 Proceeds from disposal of: (a) businesses (item 5) - - (b) equity investments - - (c) intellectual property - - (d) physical non-current assets - - (e) other non-current assets - - 1.11 Loans to other entities - -1.12 Loans repaid by other entities - -1.13 Other - Security deposits (93) (92) decreased (increased) Net investing cash flows (1,927) (5,642) 1.14 Total operating and investing (5,598) (18,588) cash flows Cash flows related to financing activities 1.15 Proceeds from issues of shares, - 2 options, etc.1.16 Proceeds from sale of forfeited - - shares1.17 Proceeds from borrowings - -1.18 Repayment of borrowings - -1.19 Dividends paid - -1.20 Other - Financial assets: Net proceeds/(Net payments) 1 7,071 18,286 Other - Share issue costs - - Net financing cash flows 7,071 18,288 1,473 (300) Net increase (decrease) in cash held 1.21 Cash at beginning of quarter/year 1,627 3,658 to date Reclassification of security (174) deposits 2 1.22 Exchange rate adjustments on foreign currency cash balances (2) (86)1.23 Cash at end of quarter 3,098 3,098 Funds held in Financial Assets 36,191 36,191Total Cash and Financial Assets 39,289 39,289 1. The net proceeds from/(payments for) the disposal and purchase ofthe company's investments are at item 1.20. 2. Under AIFRS cash deposits held as security do not meet thedefinition of cash and cash equivalents. Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the relatedentities Current quarter $A'000 1.24 Aggregate amount of payments to the parties 97 included in item 1.2 1.25 Aggregate amount of loans to the parties included - in item 1.11 1.26 Explanation necessary for an understanding of the transactions Directors' fees. Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows NIL 2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest NIL Financing facilities available Add notes as necessary for an understanding of the position. (See AASB 1026paragraph 12.2). Amount available Amount used $A'000 $A'0003.1 Loan facilities - - 3.2 Credit standby arrangements - - Reconciliation of cash Reconciliation of cash at the end of the Current quarter Previous quarterquarter (as shown in the consolidatedstatement of cash flows) to the related $A'000 $A'000items in the accounts is as follows.4.1 Cash on hand and at bank 3,098 1,6274.2 Deposits at call - -4.3 Bank overdraft - -4.4 Other - - Total: cash at end of quarter (item 3,098 1,627 1.23) Financial Assets 36,191 45,440Total Cash and Financial Assets at end 39,289 47,067of quarter 1. Under AIFRS cash deposits held as security do not meet the definitionof cash and cash equivalents. Acquisitions and disposals of business entities Acquisitions Disposals (Item 1.9(a)) (Item 1.10(a))5.1 Name of entity Not applicable Not applicable5.2 Place of incorporation or registration5.3 Consideration for acquisition or disposal5.4 Total net assets5.5 Nature of business Compliance statement 1 This statement has been prepared under accounting policies which comply withaccounting standards as defined in the Corporations Act (except to the extentthat information is not required because of note 2) or other standardsacceptable to ASX. 2 This statement does give a true and fair view of the matters disclosed. Sign here: ....................................... Date: ( ) April 2008 Print name: David Carruthers Director Notes 1. The quarterly report provides a basis for informing the market how theentity's activities have been financed for the past quarter and the effect onits cash position. An entity wanting to disclose additional information isencouraged to do so, in a note or notes attached to this report. 2. The definitions in, and provisions of, AASB 1026: Statement of Cash Flowsapply to this report except for the paragraphs of the Standard set out below. • 6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss • 9.2 - itemised disclosure relating to acquisitions • 9.4 - itemised disclosure relating to disposals • 12.1(a) - policy for classification of cash items • 12.3 - disclosure of restrictions on use of cash • 13.1 - comparative information 3. Accounting Standards. ASX will accept, for example, the use of InternationalAccounting Standards for foreign entities. If the standards used do not addressa topic, the Australian standard on that topic (if any) must be complied with. ENDS Managing Director Mr Brendan Dow discusses the quarterly review in a webcastinterview on Boardroomradio - click here or go to www.brr.com.au/cfu. For further information please contact: Ceramic Fuel CellsAndrew Neilson Tel: +61 419 950 771 Email: investor@cfcl.com.au Nomura Code Securities Tel: +44 (0) 207 776 1200Juliet Thompson / Chris Golden Hogarth Partnership (PR for CFCL) Tel: +44 (0) 20 7357 9477Sarah MacLeod / Sarah Richardson / Vicky Watkins About CFCL Ceramic Fuel Cells Limited is a world leader in developing solid oxide fuel cell(SOFC) technology to provide reliable, highly efficient and low-emissionelectricity from widely available natural gas and renewable fuels. CFCL isdeveloping SOFC products for micro combined heat and power (m-CHP) anddistributed generation units that generate electricity and heat for homes. CFCL is developing m-CHP products with leading appliance partners and utilitycustomers in Germany, France, the United Kingdom, Holland, and Japan. CFCL islisted on the London Stock Exchange AIM market and the Australian SecuritiesExchange (code CFU). www.cfcl.com.au This information is provided by RNS The company news service from the London Stock Exchange