Surface Transforms plc (LON: SCE) has today announced that it has been notified of its selection as a tier one supplier of a carbon ceramic brake disc to a major German automotive company – previously described by Surface Transforms as “OEM 5”.
Pursuant to this selection, Surface Transforms has received an order for the production tooling. The final stage of the selection process is the signing of a master purchase agreement which is anticipated to take approximately 4-8 weeks to finalise. However, the principal commercial terms are already agreed.
Specifically, the selection is for Surface Transforms to be the sole supplier of the carbon ceramic brake disc option on one axle of a new edition of an existing well-known model of German OEM 5. The existing model already uses carbon ceramic discs as an option and therefore the forecast production volumes reflect this experience. The lifetime revenue on this specific car model contract is estimated to be approximately €11.8m commencing in October 2021. Annual revenue is estimated to be approximately €2.0m per year before tapering off during 2026.
In addition, whilst this selection is the first with German OEM 5, the commercial understanding embraces the opportunity to be selected for further multiple vehicle platforms in the customer’s portfolio over time. These potential awards could generate revenues of many times the value of this first contract. Following entering into the Agreement, the ceramic brake disc product will be part of German OEM 5’s approved product list and whilst there will always be testing on new models, these tests are more about sizing and system integration than product evaluation. Moreover pricing has been agreed across the potential range of platforms providing a link between increasing volumes and reduced product pricing. The customer has stated that the potential for further model-by-model awards will reflect their experience of Surface Transforms’ supply chain and quality performance.
Kevin Johnson, Surface Transforms CEO commented:
“This award is the culmination of fifteen years of technical innovation and shareholder support. We are delighted with the news and want to thank both our employees for their efforts during this period and our shareholders for their support through the ups and downs of that journey.
“We also want to thank the customer for their professionalism throughout the whole evaluation process, the outcome of which has validated our claims of technical superiority. We fully understand their decision to issue further contracts on a model by model basis as their facelifted or new model cars go into production. We are confident that Surface Transforms’ supply chain and quality performance in the intervening period, combined with the already agreed competitive pricing, will make their decision an easy one.
“This is a very good day for Surface Transforms and we look forward to further extending our relationship with this major new customer.”