direct injection poised for orbit

Mr Cook is a little more upbeat.
Note that all the other Direct injection systems have to be compared with the OEC system - it is the one to beat or meet.

Got some in your bottom drawer?

Regards

Desmond


Direct injection poised for orbit
Finance
David King
17 November 2003
The Australian
6 - NSW Country 27

(c) 2003 Nationwide News Proprietary Ltd

Perth engine minnow Orbital feels Detroit will come to its way of
thinking, writes David King

IT'S been 20 years since Orbital Engine Corp burst on to the
Australian Stock Exchange in a flurry of blue sky and expectation,
but managing director Peter Cook still won't guarantee that the
global automotive industry will adopt his company's technology.

"Guarantees? In absolute terms there are no guarantees," says the man
who has been charged with bringing the Ralph Sarich-founded group to
profitability.

"But having said that ... you can sense the way the industry is going
and that something will occur.

"There is sufficient evidence now that direct injection (engines)
will occur in some form or another, and it will end up out in the
marketplace."

And this is the Orbital story. When will the blue sky come? When will
the massive conglomerates of Detroit adopt the innovation of a
company based in faraway Perth?

The answer from Orbital is soon, it hopes, and in the meantime it's
going to make some money.

Orbital Engine Corp was born in Perth in 1972, the brainchild of
entrepreneur Ralph Sarich, who partnered with BHP to develop what was
essentially a form of rotary engine.

In 1984 the company listed on the ASX under Sarich Technologies, and
ceased to develop the engine, instead focusing on air-assisted fuel
injection systems.

Today Sarich is only a minor shareholder -- Cook has never met him --
and Orbital is involved in power train engineering, and developing --
but not manufacturing -- direct injection systems.

"The vision of this business is to bring as many players, ideally
large players, into our underlying technology as possible," says
Cook.

"The vision is still to see Orbital's combustion process out there on
a wide range of engines."

Cook has been at the company's helm for nearly two years, and when he
arrived things looked grim.

"We were haemorrhaging a lot of money, we didn't have a stable income
stream, so we've focused on getting the business stabilised in those
terms," he says.

The company now looks on track to turn a profit in 2003-04, a welcome
step forward for long-suffering shareholders.

Since listing, Orbital has burned through about $200 million in
shareholders' funds and has only recorded a profit once -- in the
early 1990s -- and most concede this was largely a paper profit.

But the company's recent performance has improved.

"We made a $1 million profit in the six months to June 30, 2003, and
we said that we have made a very good start in the first quarter of
this fiscal year," says Cook.

"It would be the first profit from underlying trading."

Cook says the company now has three main income streams.

The first is a fee-for-service business, where it takes on paid
engineering work for anyone with an interest in combustion
technologies.

The second is from licence fees and royalties on products already in
the marketplace, of which there are many.

The third is the income derived from its share of profit in
Synerject, a joint venture with Siemens, which manufactures the
unique componentry in its air injection systems.

Orbital's technologies are in the marketplace and seem to be used in
every form of motor engine not including the car.

"There are 30 products in the marketplace carrying our technology,"
Cook says.

"We carry about 1000 patents that represent our cumulative
intellectual property."

The company's direct injection systems are used in high-capacity
outboard motors manufactured in the US by Mercury.

They are also used in the outboard engines made by Japan's Tohatsu.

The technologies are found in Bombardier's personal water craft --
"don't call it a jetski, that's a brand name" -- and on a number of

Continued -- Page 28

From Page 27

models of motor scooters made by Aprilia, Peugeot and Piaggio
(Vesper).

Cook says that breaking into the global automotive industry could
never and should never be an easy task.

"We have to recognise that the automotive industry is probably the
world's largest consumer business," he says.

"And it is extremely safety conscious, and very careful. It can't
tolerate product recalls.

"It's right that it (the industry) investigates it thoroughly, and
that it takes a long time."

Because of this Cook says the switch from port injection to the more
fuel-efficient and environmentally friendly direct injection systems
manufactured by Orbital will be a gradual process.

But if the automotive industry does move to direct injection, Cook is
confident Orbital will be well placed to capitalise.

"We are the benchmark that the industry looks at," he says.

"Every time the industry takes a look at a competing technology it's
against us."

But whether the US giants will go across to direct injection is a
complex equation, dependent on legislation, cost and government
inclination.

In short, nobody could make any guarantees, but as Cook says, "we are
well placed".

And with this in mind, what would a shareholder be buying into if
they invested in Orbital today?

"They are buying into a small innovative company that sits in a very
niche market," says Cook.

"It's got some good intellectual property that's already being
exploited in the marketplace -- admittedly it's in niche products and
lowish volume products -- but with a huge amount of upside in terms
of broader roll-out."