3rd Nov 2005 07:00
Torotrak PLC03 November 2005 Torotrak announces agreement to form Joint Venture for high-volume manufacture of IVT technology in a new market sector Torotrak plc ('Torotrak') today announces the signing of an agreement inprinciple to form Infinitrak LLC, a joint venture with MTD Holdings Inc ('MTD')of Cleveland, Ohio. The venture will exploit Torotrak's Infinitely Variable Transmission ('IVT')technology in conjunction with MTD's high-volume manufacturing and distributionexpertise within the Outdoor Power Equipment ('OPE') market. MTD's wholly owned subsidiary, MTD Products, Inc. is a global market leader inthe $12 billion OPE market. The OPE Market includes annual sales of more than 2million powered ride-on products in the United States alone. MTD and Torotrak anticipate that IVT units in this market will be sold under thebrand name InfinitrakTM. Infinitrak is expected to maximize Torotrak's ability to generate earnings inthis major new market. The key elements of the proposed joint venture are asfollows: • Torotrak will vest in Infinitrak exclusive global rights to IVT technology in the 0-25kw power range, and exclusive North American rights in the 25-45kW power range for certain products. • These rights, valued at $5million, will be matched by cash and other contributions from MTD into Infinitrak to fund initial investment and working capital. • Infinitrak expects to commence manufacture of IVT units in 2006. Production in the first full year of manufacture is expected to exceed 100,000 units. • Initially, Infinitrak will supply products exclusively to MTD Products Inc for incorporation in vehicles and products it manufactures and distributes. Infinitrak plans to commence sales of IVT units to third parties by 2008. • Infinitrak will contract with Torotrak for engineering consultancy, planned to be approximately $2 million per annum for the next three years. • Infinitrak LLC will be owned jointly by Torotrak and MTD, with each company holding 50% of the membership interest. The Board of Managers will comprise 6 members, 3 from each company. Torotrak and MTD anticipate that Infinitrak will be formed and the joint venturewill commence on or before November 14, 2005. Dick Elsy, Chief Executive of Torotrak, said: "The creation of Infinitrak with MTD is a significant breakthrough for thecommercialisation of our IVT technology and represents the next stage inTorotrak's strategic development. This agreement opens up a third major marketfor IVT, Outdoor Power Equipment, in addition to existing target markets inautomotive and off-highway. The initial captive market of MTD's own products provides a strong entry to theOPE market with excellent potential for growth; the financial contribution fromthis will provide an ideal platform for the early development of the jointventure. In the medium term, there is an intention for Infinitrak to produce IVT unitsfor the wider Outdoor Power Equipment market. With a proven capability toproduce low-cost transmissions, we anticipate that Infinitrak will then have thepotential to exploit the entire 0-45kW product market." Dieter Kaesgen, President and Vice Chairman of MTD, said: "We believe that Infinitrak will launch Torotrak's cutting edge IVT technologyin a new and growing market and drive MTD's on-going commitment to marketleading product innovation." UK business update The creation of Infinitrak, coupled with Torotrak's substantial engagement withits existing customer base in both the automotive and off-highway vehicle marketsectors, means that much of the next stage of Torotrak's IVT development andcommercialisation strategy will be focused on working in partnership withcustomers to adapt Torotrak's proven technology to specific target vehicles andproducts. To reflect this Torotrak is restructuring its operations in the UK andis reducing the number of employees involved in internal activities. Torotrak will retain all of the specialist engineering, commercial and businessdevelopment skills necessary to continue the development of its IVT technologyand to support new and existing customers. Correspondingly, a reduction in thenumber of employees engaged on tasks that have now been completed successfully,mainly in the areas of build, detailed component design, workshop andadministration, is planned. It is anticipated that around 40 Torotrak employeeswill be affected by this restructuring. Rebecca Joyce, Finance Director, Torotrak, said: "This reduction in the company's cost base, combined with Infinitrak'scontribution to engineering costs, will significantly improve the cash profileof Torotrak towards our primary business objective of attaining a cash neutralposition. Revenues continue to grow in line with previously reportedexpectations, bolstered by the cash inflow of £3.5 million from the sale of thefreehold land and buildings announced in May." ends Enquiries: Dick Elsy/Rebecca Joyce +44 (0) 1772 900900Torotrak www.torotrak.comSteffan Williams/Mary Clark / Peter Curtain +44 (0) 20 7307 5330Capital MS&L www.capitalmsl.com James Milinski +1 330-558- 7567 www.mtdproducts.com MTD Holdings Notes to editors: Torotrak Torotrak is the world leader in the design and development of traction driveInfinitely Variable Transmission (IVT) systems with competitive benefits for theautomotive and off-highway industries and now Outdoor Power Equipment. Inautomotive, IVT offers significant improvements in fuel economy, performance andsmoothness combined with innovative driving control features. In off-highway,IVT offers a cost effective and mechanically efficient technology that can beused across product ranges. Torotrak's principal commercial strategy is togenerate royalty income from high-volume manufacture of IVT technology by ourlicensed customers. MTD MTD Holdings Inc is a privately owned holding company headquartered nearCleveland, Ohio, with interests in manufacturing and other businesses. MTDHoldings Inc's wholly-owned subsidiary, MTD Products Inc, is a full linemanufacturer and distributor of outdoor power equipment on a world-wide basisunder the Cub Cadet, Troy-Bilt, Yardman, Bolens, Gutbrot, MTD, and Yard Machinesbrands. MTD's products are distributed globally through thousands of independentdealers and key mass merchant retailers. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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