Specialist brake manufacturer Surface Transforms (SCE) announced on Tuesday it had won a contract from an unnamed German car company to become a sole supplier for its carbon ceramic brake discs.
The automotive firm, previously described by the AIM-listed company as “OEM 5”, will use the ceramic discs specifically on one axle of a new edition of an existing car model.
The lifetime revenue on this specific car model contract is estimated at approximately €11.8m commencing in October 2021, with annual revenue estimated at around €2.0m per year before tapering off during 2026.
Kevin Johnson, Chief Executive of SCE commented: "This award is the culmination of fifteen years of technical innovation and shareholder support.”
Whilst the terms of the deal are fully laid out, both parties must wait a period of four to eight weeks before the master agreement is officially signed off, Surface Transforms has explained.
Shares in Surface Transforms soared 25% higher following the news.
Following entry into the agreement, the brake disc will be included under OEM 5’s approved product list and whilst remaining there, it will be subject to tests on new models to assess size and system integration specifically.
The commercial understanding supports the company’s long-term strategy in that it embraces further opportunity to be selected again in the customer’s portfolio. If successful, it is said that any further rewards would generate revenues of “many times the value” of the first contract.
Additionally, the customer has stated that any further model-by-model awards received would accurately reflect their experience of Surface Transforms' supply chain and quality performance.
In response, Mr Johnson acknowledged the decision under the agreement, commenting: “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.”
He added further, "This is a very good day for Surface Transforms and we look forward to further extending our relationship with this major new customer."
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