Welcome back everyone to ABGSC Investor Days. My name is Henric Hintze, and I am an Equity Analyst here at ABG. With me now, I have SinterCast, a company that I follow, and the company's Operations Director, Vítor Anjos, here to present for us. Please go ahead.
Hi, Henric. Thank you so much. Good morning, everyone. It is a pleasure to be here again to introduce SinterCast and our story to all of you. I would start to briefly tell who is SinterCast. SinterCast is a company that developed a technology that enables the reliable production of compacted graphite iron, that we call CGI. CGI, it is a stronger and stiffer material compared to traditional cast iron, and it is mainly used for engine applications. The higher strength and stiffness of the material allows engines to operate at higher loads, so they will become more efficient. We can squeeze the fuel inside the chamber harder, means that we get more energy out of the same amount of fuel.
This allows then the engines to be smaller and lighter, and by being more fuel efficient, will also allow them to be cleaner and save CO2 from their operation. The ones that benefit more from the use of this technology are naturally big engines that have a higher fuel consumption, that drive many kilometers. As an example, I have here the Scania. Scania, it is our biggest commercial vehicle customer. We produce three engines for Scania, and this year they won the Green Truck Award for their new engine, a 13-liter engine, where they can achieve up to 8% of fuel saving in their operation. They do this most because they have an engine in CGI, again, stronger, and for them we produce both the block and the cylinder head. We do not produce the engines ourselves, so we are a technology company.
We supply foundries with the software, the measurement equipment, and with the process control, for them to be able to produce this material in a reliable condition. We are a service provider to the foundry to produce this. Our business model, we have a royalty for our business model. 95% of our revenue, it is recurring. We have a production fee, which is around two-thirds of that revenue, and we have one-third coming from a Sampling Cup, which is a consumable that the foundry uses every time to evaluate the quality of the iron that they are producing, and this is normally a single use consumable that the foundry uses. This consumable, we have around 200,000 of these consumables being produced and sold per year.
What we have achieved until now, we are a proven company or a proven technology company, we are in the market for many years. Our high series production started back in 2003 with engines for Ford and for Volkswagen, Audi. At the moment, we produce around 1.5 million engines per year. For you to have a comparison, that is 5x more than the number of passenger vehicles sold in Sweden. It is a really high volume production at the moment. It is a highly scalable business. Our foundries will increase their production, and we will have a higher revenue from it, but we can keep the same fixed cost operation, so we do not have to increase our number of people and our support in order to accommodate that growth. We have a revenue of around SEK 5 million per employee.
We have an operating result of SEK 1.5 million per employee and an operating margin greater than 30%. Last year it was 31.8%, and this year so far from the first quarter to the third quarter, 33.8%. As you will see further on, our goal is to achieve 40% by 2028. We have a double digit compounded annual growth, in the last 10 years it was 9%. In the last 15 years it was 15%, a very big growth. We started paying dividends back in 2010, so we have already 14 years of increasing ordinary dividend. Due to the advantages of our material to the truck manufacturers or to automobile manufacturers, we have a saving of around 10 million tons of CO2 per year. This number grows as more vehicles using our engines go to the road and the more kilometers they do.
In total, we have saved around 66 million tons of CO2 since we started our series of operation. For you to have a comparison, this 10 million tons of CO2 saving per year compares with a 14 million tons of CO2 that is emitted from the internal transportation in Sweden. It is a really big contribution that will continue to increase in the upcoming years. Who uses our engines and what segment do we support? The biggest volume is for heavy-duty trucks, the ones that require a lot of load, and have a high fuel consumption. That is 50% at the moment of the application of our technology. Then we have the super duty trucks, 30%. This is more American market. Then we have the full -size pickups, and this is mainly the Ford F-150, the best-selling vehicle in the U.S.
We have a very high volume on this, around 40,000 engines per month that we produce for this segment. Then 5% for the smaller mid-size pickup trucks like Volkswagen Amarok that we often see here in Europe. Then we have 4% for off-road applications or industrial applications. We will focus more on heavy -duty because that is where we have the big growth opportunity at SinterCast. The way to look at it is looking at the landscape of the fuel application nowadays. For heavy -duty trucks, you often hear about electrification, fuel cells, and internal combustion engine as the possible powertrains for a truck. In engines, you have multiple choices. You naturally have diesel, which is the most widely used fuel. You can also have natural gas.
But going forward, we see also that in the near future, you also have renewable fuels coming into play that also can be applied to internal combustion engines, and also hydrogen. So hydrogen, it's not a fuel source only for fuel cells. You can also use hydrogen to fuel directly an internal combustion engine. And this cartoon here shows that the decisive thing is not the powertrain in terms of environmental protection or emissions. If we have a battery electric vehicle, but that energy, it's being sourced by fossil fuels, then it will be as bad for the environment as any internal combustion engine running on diesel. So the important thing here is that the carrier of the energy, it's what will dictate if it will pollute or not.
So if you think about the internal combustion engine, if we can fuel it with a clean fuel source, it will also work cleaner because it's not the internal combustion engine that it's making the pollution, it's the fuel that we put there. So what we have to change in the way we approach the problem, and we see this happening in the latest time, is to change the discussion from powertrain or for engine source to what kind of energy we are using to fuel those power sources. So it's a discussion that goes from energy. Sorry, for engines to energy. If we get a clean fuel source for internal combustion engines, it will also be clean, and it will also protect the environment.
Looking at the distribution of the heavy -duty market at the moment, both in the U.S. and in Europe, we see that diesel, it's the main force of application in internal combustion engines. If we look at electric vehicles, it's nearly nothing. It's a residual percentage that we see of penetration of electric vehicles in heavy -duty. If we compare now what's happening in the U.S., so in the United States, they sold 276,400 trucks, and 441 of them were electric. Here in Sweden at Scania last year, they sold 96.7 thousand engines, and from this, 246 were electric. So it's a very small percentage of penetration for very specific applications that it might get some use, but not for the bulk of the use of heavy -duty.
And to explain a little bit how the industry is moving along the time in terms of emissions and also the opportunity for SinterCast in promoting and applying CGI as a material for engines, we will share here what was the evolution on the emissions legislation over the last years. So from time to time, Europe applies a limit for the emissions that are allowed from heavy -duty vehicles. And every time a new legislation is coming, then there has to be a technological leap to comply with those new regulations. And the biggest variable that engine designers can tweak in order to improve the efficiency of the engine, it's to increase the pressure of the engine during operation. So if they increase the pressure and the temperature of the engine, they can take out more energy from the same amount of fuel that they put inside.
So this increase in the pressure inside of the engine requires a material that is stronger. It gives more assurance that the engine will not fail during its lifetime of operation. We see that it was in 2005 with Euro 4, it was around 210 bar of pressure. Nowadays, it is at around 250 bars of pressure, and in the future for the Euro 7 that will come out in 2028, 2029, the pressure will probably be at 270 bar. In order to comply with this, OEMs need stronger material for their engines to do this improvement in pressure. We saw that for Euro 4, DAF started with it, so they changed their engine to a CGI engine.
As time went by, for the Euro 5, we saw DAF, MAN here in Europe, Navistar in the U.S., and Hyundai in South Korea also stepping in and having their CGI engines. With Euro 6, Scania also came on board, Daimler also started, and Hyundai increased their volumes. Today we see that TRATON Group, so this is Scania, MAN, Navistar, and Volkswagen Bus and Trucks, also further adopted CGI for their engines. In total, this means that from the new engines that are sold at the moment, 40%-50% of them have a CGI engine inside. Because we have good visibility in our market, because it takes four years for an OEM to develop a new engine, we kind of know what will happen by 2028, 2029, when the new regulation comes into force.
What we see is that CNH from Fiat, Iveco Group, already announced that they are switching for a CGI engine for the next generation. With that, others will follow, the ones that did not make this jump yet. We forecast that the penetration of CGI in the market will be around 80% by 2028, 2029, because those OEMs that did not make the change, they will have to make the change if they want to further improve their engines, and CGI is the way for them to do that. I talked about CNH. We have here a quote that it is just from October 27, from FPT Industrial, that belongs to the CNH Group.
They say that, I will read, "One common innovation FPT chose for the XC13," which is the name of the new engine, "regardless of fuel type, was to migrate from standard casting for the cylinder block and head to compacted graphite iron. This enables us to lighter, but also to more rigid," they said, "so that aids emissions and also the amount of cylinder pressure that we can maintain." So they get a higher pressure inside of the engine.
The improvements FPT made reduce weight about 10%, the weight of the engine, both on the diesel and natural gas versions compared to the Cursor 13, which was the previous version. They continue to say that, "Compared to the previous version, this and other improvements in the XC13 have resulted in more than 2% increase in power and over 12% increase in torque in the diesel version, with a corresponding 7% decrease in fuel consumption." This compares to the 8% that Scania was able to achieve in their new engine. "Natural gas models saw an increase in power and torque of more than 9% and over 10%, respectively, with a fuel efficiency improvement about 8%." This is the potential and the benefit of adopting CGI for a new OEM.
Looking into the future, and before entering in the future of SinterCast, let's see what the automotive industry says about the path forward from now on. I have here a couple of quotes from some executives from the automotive industry, and I will start with Toyota in a meeting that was held by the CEO of Toyota with some shareholders. He says that, "No matter how much battery electric vehicles progress, I think that they will have a market share of around 30%. The remainder will be hybrids, fuel cells, and hydrogen combustion. I have no doubt that engine vehicles will survive." Toyota is the biggest passenger vehicle manufacturer in the world. From the start, they have this vision that electrification is not the solution for the problem of the environment.
They put a lot of effort on hybrid vehicles, and they also made a lot of investment in hydrogen combustion vehicles. Going forward, I have another quote from Ford CEO, Jim Farley. Ford, it's our biggest customer and user of our technology. We do eight engines for Ford. Jim said, when asked about the possibility that 2035 EV mandate will effectively kill ICE models in the recent interview with Autocar, Farley said, "Are you sure? I don't think that we know. When you need a transit for your work or you need a ranch with a pickup in the U.S., electric power, it's a terrible solution." He then continues to say, "Maybe the solution will be hydrogen or the sustainable fuel things it's coming along. Whenever someone starts telling me that they know the future, I hear a warning buzzer in my ears.
There are no certainties in our industry. I've heard this stuff a thousand times." We see that they are struggling also to put their electrical vehicles to play. If we go to Volvo. Volvo also made a big push for their electrification, and we see now from the CEO of Volvo that they are pushing back in that strategy. They think that indeed, hybrid vehicles will be the ones doing the bridge between electric and some other new technology in the future for combustion engines. Also, for Volvo Trucks, we see here the Chief Technology Officer from Volvo Trucks saying that he thinks that will be a need of different solutions. There is no silver bullet in order to decarbonize all road transport across the globe. We will need to have a little bit broader palette.
He said that, "I have 15,000 engineers, and they will develop the best technology to meet what you want to achieve, but don't ban technology." Lars Stenqvist stated this year, in 2024, Volvo Trucks will spend more money in internal combustion engine development than ever before. Volvo is not making this investment in new engines to be in the market only until 2030. They are doing this investment so that internal combustion engines will be used way up to 2050. In this path, the first versions will be diesel, then they will be renewable fuels, and then they will probably be hydrogen. CGI will also play here, in this example, a critical role in this evolution for Volvo. Just to finish it, also example from Deutz, also an automotive manufacturer for engines in Germany.
In this plot, they showed the evolution of the different fuels that they predict they will use in their vehicles. We see green, we see the fuel cells, electrification, and others. Then by 2050, they predict it will be a mix of diesel, renewable fuels, and hydrogen. The funny thing is that if we plot a horizontal line in this graphic, we see that from the starting point now till 2050, they plan that they will produce the exact same amount of engines. They will just migrate from 100% diesel to a mix between diesel, renewable fuels, and hydrogen. They will keep continue doing the same amount of internal combustion engines. Where is the industry going? We see that there is a change from euphoria to reality.
Electrification euphoria, it's coming down, and we are seeing that we need other technologies also to come into play, which are closer to the needs of the end user. The discussion going from engines to energy, yeah. Energy, it's what will dictate if a given engine will pollute or not. Decarbonization to defossilization, so going into renewable fuels and let us recycle the carbon that we already have out and use new fuels that have zero impact for the environment. The long-term solution will be a mix. This chart shows that, this table. On the left, we see different vehicle types of different sizes, and then we see what will be the most probable use of fuel in that vehicle. We see that it will be a mix. This is from the Department of Energy from U.S. And it will be a mix.
For the big vehicles, that mix will be between hydrogen and renewable fuels, and that's a real opportunity for CGI because those engines will need CGI to improve their operation. Then last slide, where is then SinterCast going? I showed how the industry is going. Now, where are we heading as a company? We see a strong installation outlook for 2024 and 2025. Our average is SEK 8 million of new installations, and we will have an average in these two years higher than that. That's a good indicator of the further adoption of our technology. We see a stronger commercial vehicle growth, so continued double-digit growth to 2030. If there is this migration, and it will be this migration for clean fuels, then it's SinterCast for perpetuity, as we say, because then we will have an opportunity long into the future.
We will increase our revenue and maintain the fixed costs. We expect by 2028 to be at 40% operating margin and then continue growth. 100 million tons of CO2 savings by 2028 also and growing. We just last week announced that we started our second campaign for a share buyback. Still with this buyback, we are aiming to have our 15th consecutive year of increasing ordinary dividends. Our target is to go all the way to 25 years of increasing dividends. That's all from my part. Thank you so much for listening.
All right. Thank you very much for that. Just to quickly follow up on one of the last slides you showed here on the fuel types of the future. Could you just clarify the difference between hydrogen combustion and fuel cells and the SinterCast opportunity there?
Yeah. Fuel cells also work with hydrogen. They use the hydrogen to produce electric energy for the engine. In the case of internal combustion engines, that is used like the traditional fuel. It's injected in the chamber, it's squeezed, and it works like a diesel fuel. The differences are internal combustion engine can work with hydrogen with a lower purity. Fuel cells, they tend to work only with hydrogen with 99% or above of purity. Internal combustion engines are not so demanding to have a good operation. Indeed, a study that we did with one of our customers showed that using an internal combustion engine fueled with hydrogen, you can reach a higher efficiency than with a common diesel fuel. There is a big potential on the use of hydrogen in internal combustion engines.
The other advantage is it's a technology that we know, and it's proven and has evolved for more than 100 years. Everybody knows how to operate an internal combustion engine, and this is a carryover. The technological adaption, it's much smaller. In fuel cell vehicles, you will still need a lot of expensive and rare materials in order to do batteries and to do other components that you don't need for internal combustion engines. Internal combustion engines made of iron, they can be entirely done with recyclable material. You don't have to get more raw material to produce more engines.
Okay, and finally, one last question. How should we, as investors, view the coming 12 months here? You have one production program shutting down here during the autumn. We are getting some weaker signals from the automotive industry. At the same time, your installation pipeline seems to be record high at the moment.
Yeah.
How should we piece this together?
Yeah. This year, with the stoppage of that program, we went from an average of 3.8 million Engine Equivalents to 3.3. That is how we will end this year. Although we will have growth next year, that growth will pull us back to where we were before we lost the program. We estimate that we will need this 12 months to recover from that loss. From then on, then we will continue to increase our volume above that 3.8 million mark. The good installation outlook, it is a reassurance that there is investment from the foundries in the technology, and they are doing this investment for the upcoming years. That is a good indicator of increasing volumes. Also from the market perspective, the input that we get from the industry is that during next year, the market will recover.
We are not expecting a long-lasting situation of lower volumes like we are seeing this year. During next year, things will normalize, and then we will continue the growth as we forecast.
All right. Thank you very much for that, Vítor. That's all we have time for today.
You're welcome. Thank you so much. Thank you.