CTSU Catalytic (DI)

    RNS Number : 6359K
  Catalytic Solutions, Inc.
  23 December 2008
   

 For immediate release  23 December 2008

    

    Catalytic Solutions, Inc.

    (The "Company")

    Trading Update


    Catalytic Solutions, Inc. (AIM:CTS and CTSU), the company behind Mixed Phase Catalyst (MPC�) technology,  is today providing the
following trading update.

    TKK transaction

    The Board of Directors is pleased to announce that it has reached an agreement with Tanaka Kikinzoku Kogyo Kabushiki Kaisha ("TKK"), its
joint venture partner in Asia Pacific, to sell the IP rights to part of its Heavy Duty Diesel ("HDD") catalyst technology to TKK.  

    Under the terms of the Purchase & Sale Agreement (the "Agreement"), which has been approved by the Boards of the Company and TKK,
Catalytic Solutions will sell certain patents relating to HDD catalyst technology to TKK for use in the Asia Pacific region only. The
Agreement accelerates the exercise of the acquisition rights of TKK under the terms of the TC Catalyst Incorporated ("TCC") joint venture
and requires that the respective equity ownership of TKK and Catalytic Solutions in the TCC joint venture changes to 70/30 in order to
reflect the change in contributor of the HDD technology to the joint venture. The Agreement also provides Catalytic Solutions with a right
to purchase up to 19.9% more of the TCC joint venture and a right of first refusal to reacquire the patents in the event that TKK chooses to
dispose of them. Under the Agreement, the Company will receive total consideration of approximately $7.9 million which is expected to be
received in two tranches in December 2008 and the first quarter of 2009, respectively, following completion of the registration of the assignment of the patents in certain countries within Asia.

    Catalytic Solutions will continue to own rights to the utilization of the HDD catalyst technology in the remainder of the world,
including the United States. In addition, TKK has agreed that it will not compete with the joint venture that it enjoys with the Company in
the Asia Pacific region for the duration of the TCC joint venture, which has a minimum duration of 10 years. The transaction does not affect
the remaining HDD Systems or Energy Systems groups of the Company.

    Operational performance

    Trading during the third quarter ended 30 September 2008 was in line with management expectations with sales of $18.5 million,
representing a 143% increase in revenue compared to $7.6 million for the third quarter of 2007.  Revenues for the first half of the current
fiscal year, as previously reported, were $26.8 million. 

    Part of the strategic focus of the management team has been to broaden and to diversify the Company's business. The Company's Energy
Systems and Heavy Duty Diesel Systems ("HDD Systems") subsidiaries, which together constitute approximately 55% of the total revenue for the
period to 30 September 2008, continue to perform well, driven by increasingly stringent emissions legislation in the United States. This
legislative stimulus is expected to continue to provide momentum to the Company's revenue growth.

    With the acquisition of Engine Control Systems in late 2007, the HDD Systems group contributed $6.6 million (36%) of revenue in the
third quarter of 2008 and the Energy Systems group doubled its revenue to $2.6 million from $1.3 million in the third quarter of 2007. It is
also anticipated that there may be a delay in the implementation of certain projects resulting in a portion of revenue to shift from the
fourth quarter of 2008 to 2009. This revenue is recognised on a percent of completion method.

    The Company's Light Duty Vehicle ("LDV") Catalyst group, however, has not been immune to the softening of the automotive manufacturing
sector and, while the group continues to win business with automotive manufacturers, some customers have varied their order volumes in
accordance with the terms of their supply agreements to account for reduced market demand. Consequently, the revenues of the LDV Catalyst
division, which has the lowest gross margins of the Company's three business groups, are currently running at reduced levels. However, the
Company still saw revenue from catalyst sales increase to $9.3 million in the third quarter of 2008, from $6.3 million in the third quarter
of 2007, and account for 46% of catalyst sales for the nine months ended 30 September 2008. Reduction to this peak is expected going
forward, which will partially be offset by expected new business from existing customers in 2009.

    The Company has reviewed its internal revenue estimates for the remainder of the current year and the year ending 31 December 2009.  As
result of this review, the Board of Directors believe that the Company's revenue performance in both 2008 and 2009 is expected to fall below
its previous expectations by approximately 17% to 20%.  The reduction in 2009 estimates reflects the impact of the significant reduction in
sales in the automotive industry on the LDV Catalyst group. At this time, the Company has not seen a material softening in the HDD Systems
and Energy Systems groups, and will continue to monitor these two businesses closely.  

    As anticipated, the Company has finalized the sale of its building in Canada, and the net proceeds from the sale of this building of
approximately CDN $1.8 million have been used to pay down a portion of its debt.  In addition to the funding from TKK, the Board of
Directors is evaluating various alternatives to effectively secure the Company's liquidity position going forward. These include equity
funding and other strategic options.

    Given the current economic climate, the Company is aware of the need to focus on cash conservation and profitability and is therefore
continuing to evaluate cost and cash containment options in addition to those cost reduction actions announced on 26 September 2008.  The
Company has deferred the investment in the manufacturing facility in the Czech Republic to 2010. In addition, the company has further
streamlined its manufacturing operations in the LDV catalyst segment, resulting in cost savings of over $1 million annually in addition to
the annual cost savings of $4 to $5 million announced on 26 September 2008.

    An updated Company presentation is available on its website at www.catalyticsolutions.com, which highlights the recent significant
progress made by the Company, updated trading performance and details on its liquidity position in light of the global slowdown. 
      For further details, please contact:

 Catalytic Solutions, Inc.       Canaccord Adams       Buchanan
 Charlie Call, Chief Executive   Robert Finlay         Communications
 Officer                         Guy Blakeney          Charles Ryland
 Tel: +1 (805) 639-9463          Bhavesh Patel         Ben Willey
 Steve Golden, Chief Technical                         Christian Goodbody
 Officer
 Tel: +1 (805) 639-9464          Tel: 020 7050 6500
 Nikhil Mehta, Chief Financial                         Tel: 020 7466 5000
 Officer
 Tel: +1 (805) 639-9461

    About Catalytic Solutions, Inc.

    We are a global manufacturer and distributor of emissions control systems and products, focused in the Heavy Duty Diesel (HDD), Energy
Systems and Light Duty Vehicle (LDV) markets. Catalytic Solutions' emissions control systems and products are designed to deliver high value
to our customers while benefiting the global environment through air quality improvement, sustainability and energy efficiency. We have over
28 years' experience in the HDD Systems market and more than 20 years' in the Energy Systems market.  Our proven technical and manufacturing
competence in the LDV market meets auto makers' most stringent requirements, having supplied over 8 million parts to LDV customers since
1996. Catalytic Solutions' group of clean tech businesses includes: HDD Systems (Engine Control Systems - acquired in 2007), a leading
environmental business specializing in the design and manufacture of verified exhaust emissions control solutions. Globally, the HDD Systems
business offers a full range of products for the original equipment manufacturer (OEM), aftermarket and retrofit markets in order to reduce exhaust emissions created by on-road, off-road
diesel, stationary diesel, gasoline and alternative fuel engines including propane and natural gas; Energy Systems (Applied Utility Systems
- acquired in 2006), a provider of cost-effective, engineered solutions for the clean and efficient utilization of fossil fuels.  The Energy
Systems business provides emissions control and energy systems solutions for gas turbines, industrial boilers and process heaters used
largely by energy plants and refining companies; and LDV/HDD Catalysts, the business behind Catalytic Solutions' proprietary Mixed Phase
Catalyst (MPC�) technology enabling the Company to produce catalyst formulations for gasoline, diesel and natural gas induced emissions that
offer superior performance, proven durability and cost effectiveness for multiple markets and a wide range of applications. A family of
unique high-performance catalysts has been developed - with base-metals or low platinum group metal (PGM) and zero-PGM content - to provide increased catalytic function and value for
technology-driven automotive industry customers. Catalytic Solutions, Inc. currently has operations in the USA, Canada, France, Japan,
Sweden and an Asian joint venture.


    Forward looking statements

    This announcement contains forward-looking statements relating to the Company and its products that involve risks and uncertainties,
including statements regarding future products and developments that are not historical facts. Such statements are only predictions and the
Company's actual results may differ materially from those anticipated in these forward-looking statements. These statements may be
identified by the use of forward-looking terminology including "believe," "expect," "may," "will," "should,'' "could," "project", "plan",
"seek," "intend,'' or "anticipate'' or the negative thereof or comparable terminology and statements about industry trends and the Company's
future performance, operations and products. Such forward-looking statements involve known and unknown risk, uncertainties and other
important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be
materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the
Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking
statements speak only as at the date of this announcement.  

This information is provided by RNS
The company news service from the London Stock Exchange
 
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