24 August 2006

ORBITAL RESULTS FOR THE YEAR ENDED
30 JUNE 2006

Perth, Australia: Orbital Corporation Limited today reports results for the year ended 30 June 2006.

In commenting on the results Orbital's Chief Executive Officer, Dr. Rod Houston said the 2006 financial year has seen a return to profits with a particularly strong 2nd half operating result.

Key Features

• Net profit after tax of $0.5 million compared to a loss of $1.7 million last year
• Net profit after tax of $1.9 million in the 2nd half year
• Contribution from Synerject joint venture up 41% to $4.1 million
• Annualised cost savings in excess of $1.5 million
• Polaris enters into a licence to manufacture products utilising Orbital's DI fuel injection technology
• First production commitment for an Orbital DI 4-stroke production application
• At 1 July 2006 Orbital had engineering orders on hand in excess of $8 million, a 100% improvement compared to this time last year.
• Synerject purchases electronic components manufacturing facility in Delavan USA in March 2006.
• Synerject negotiates stand alone long term financing arrangements, supported by additional capital from its shareholders Orbital and Siemens.

"As indicated in February 2006 Orbital has been operating at near capacity in the 2nd half year and Synerject has typically generated a particularly strong 2nd half" said Dr Houston "We have also achieved several strategic goals during this period putting in place firm foundations for future growth, both organically and through acquisition."

"We were disappointed in our 1st half result which reflected a particularly tough powertrain engineering services market, however our commitment to targeting sales and marketing to specific customers and markets including the emerging Indian and Chinese markets has contributed to a significant increase in engineering activity in the last 6 months." added Dr Houston.

FINANCIAL SUMMARY

The headline financial results for Orbital for the year ended 30 June 2006 are as follows:

Total revenue for the year ended 30 June 2006 increased by 3% to $11.9 million, due to increased engineering services revenue of $0.4 million and licence and royalty income of $0.2 million offset by a reduction in interest income of $0.2 million.

Total expenses fell by 6% to $15.3 million with continued savings across most expense categories. Finance costs have increased by $0.6 million due to the introduction of international accounting standards with effect from 1 July 2005. This requires the write down of long term borrowings to fair value and a notional interest charge (non cash) in each accounting period. Management personnel expenses have decreased by approximately $1.0 million due to staff reductions early in the financial year. Depreciation and amortisation expense decreased by $0.3 million as a result of the rationalisation of operations in recent years.

Orbital's share of profits of its joint venture with Siemens, Synerject LLC increased by 41% to $4.1 million. Synerject's revenue increased by 37% to US$57.5 million mainly as a result of its acquisition of Delavan in March 2006. Synerject generated net cash during the year of US$1.6 million notwithstanding the Delavan investment and product development costs totalling approximately US$6 million.

Synerject negotiated stand alone long term finance arrangements to replace the existing Siemens loan which was due to expire in September 2006. At 30 June 2006 Synerject had a 4 year loan facility of US$8 million, a standby facility of US$3 million and cash at bank of US$4.7 million. Unlike the previous loan parent company guarantees are not required for the new arrangements.

Operating cash outflow in the 1st half was $2.0 million with operating cash inflow in the 2nd half of $0.2 million reflecting the improvement in the engineering services business. During the 2nd half Orbital invested a further $2.7 million (US$2.0 million) in Synerject as part of Synerject's long term financing arrangements. Orbital had cash on hand of $3.3 million at 30 June 2006 sufficient for existing operating requirements in the 2007 financial year.

Detailed comments on Orbital's three revenue streams are as follows:

Powertrain Engineering Services (PES)

Orbital's PES business provides professional engineering consultancy services to engine manufacturers, OEMs, suppliers and governments on a global basis. The provision of these services creates a significant revenue stream while allowing Orbital to work closely with its customers on advanced powertrain applications and developments, some of which also involve the application and development of Orbital proprietary technology.

The priority of the PES marketing activities at the beginning of the year was to increase our efforts in the emerging markets in China and India while also exploiting the continued interest in the unique capabilities of Orbital's proprietary technology. This process has started to deliver good results with the improvement in the forward order book which stands at $8 million as of July 1st, 2006, almost double the order book value at the same time last year.

The current order book shows a significant proportion of the services relate to the application and development of Orbital technology (greater than 50%). In particular this relates to new programs in the area of spark ignited heavy fuel, new engine development and applications for direct injection gasoline as well as new gaseous applications covering both LPG and CNG DI applications.

The increased level of Orbital technology programs is a result of the continued commitment to technical innovation and internal R&D expenditure at Orbital over the last 2-3 years. Consequently Orbital has been able to continue to build on it's intellectual property portfolio in key areas for the future. An example of the outcomes from this committed expenditure is the development of a new gaseous DI injector suitable for both LPG and CNG applications in automotive and non-automotive markets. Over the year we have had 27 new patents granted and 7 new patent applications as a result of a sustained effort to capture the value from our R&D and engineering services activities.

Orbital continued to provide a range of product development services to Australian OEM's and vehicle studies for the Australian Government.

During the year PES successfully extended the level of services offered in the Asian region and built on its success in North America. This has resulted in improvements in the number of target customers in these regions and has provided significant revenues relating to the delivery of engine design and development programs for both automotive and non-automotive applications.

Royalties and Licenses

Orbital licenses its patented direct injection technology to OEMs and suppliers. Royalties and license fees are derived from a wide range of customers in the marine, motorscooter and motorcycle sectors.

Licensing and royalty revenue increased by 8% compared to the prior year. This increase relates primarily to increased royalties from the marine sector which has shown a 20% increase in engine volumes year on year. The 2-stroke DI market has held up well in this sector despite the aggressive marketing of 4-stroke engines, due to the inherent 2-stroke benefits in performance, light weight and lower maintenance.

In contrast the European DI scooter market has continued to struggle in an environment of lenient emissions regulations which have enabled the continued sale of low cost carburettor solutions. New initiatives to re-invigorate this market with the development of a new prototype low cost DI fuel system with improved functionality are about to be introduced to the customer although the impact of these initiatives will take at least 12 months to emerge.

Bajaj are progressing well with the DI autorickshaw program. Production launch will follow an extensive pilot vehicle release which is currently in progress. Based on the positive feedback from the market place, prospects for further gasoline and gaseous DI applications in the Indian market are expected to be strong.

Envirofit are making continued progress with the launch of their retro-fit Orbital DI system for the Philippines 2-stroke taxi fleet. Positive results from their first 3,000 vehicle taxi fleet could lead to further growth in sales of these kits across Asia.

Synerject

Orbital's 50% owned joint venture with Siemens-VDO Automotive Corporation, Synerject LLC, is a supplier and manufacturer of engine management systems (EMS) and electronic fuel injection systems for the non-automotive OEMs.

Orbital's overall share of Synerject's profit rose 41% to $4.1 million. As foreshadowed at Orbital's AGM one of Synerject's major customers introduced "just in time" deliveries to run down it's inventories, which has impacted Synerject's current year reported profit. Synerject has however increased sales to other customers. Significant expenditure on new electronic control unit (ECU) product development has been capitalised in Orbital's equity accounted results in accordance with Australian accounting standards.

Synerject has had a good year in regard to the growth of annual turnover from A$55 million in 2005 to over $77 million this year (37% increase), primarily as a result of the Delavan acquisition in March this year. Delavan contributed a small profit during the year but will reach its real potential as cost reductions and operating efficiencies are introduced during the next year.

Synerject has established new financing arrangements to replace the existing Siemens loan. As part of this arrangement Orbital and Siemens have agreed that the present 50:50 ownership will continue unchanged. This results in the re-calculation of ownership percentage being delayed by two years. These arrangements are important steps to prepare for the next growth phase for Synerject including establishing a manufacturing base and applications centre in China. These stand alone financing arrangements will also enable Synerject to start paying dividends to its shareholders starting in the second half of 2007.

Outlook

The turnaround in PES demonstrated in the 2nd half year is expected to continue based on the current strong order book going into the new financial year. The turnaround has been particularly strong in the area of Orbital technology applications which is encouraging for the long term revenue streams for Orbital and Synerject.

At this stage the pipeline of opportunities demonstrates a good mix of contracts from a broader customer base. The continuing pressure on oil supply and hence fuel prices are creating unprecedented demand for technical innovation in the area of improved fuel efficiency. This in turn also creates major opportunities in the area of biofuels such as ethanol and biodiesel as well as gaseous fuels such as LPG, CNG and LNG all of which become much more compelling as the oil price escalates and supply issues create market uncertainty. Orbital already has a number of new contracts in the above areas and through our continued commitment to R&D have developed technology and knowledge which is expected to open up more opportunities going forward. As a result Orbital expects continued growth in our engineering services revenue in the 2007 financial year.

Further opportunities to enhance our engineering and intellectual property earnings through additional strategic alliances with key customers in the Asian region will also be targeted this year. Orbital's track record in the area of turning technology innovation into market ready products and services makes it an ideal partner for customers and suppliers who need to span the gap between research/innovation and manufacturing.

Royalty revenue is expected to continue to grow for 2007 as we anticipate the launch of the autorickshaw in India. On-going production validation programs for new Orbital DI applications will continue throughout 2007 in the area of spark ignited heavy fuels and gasoline applications for a number of new applications. The royalties from these programs are expected to come on line in the 2008 financial year.

Synerject has good prospects for revenue growth, both through acquisition and organically as the non-automotive market moves towards wider adoption of engine management systems. Synerject has made important strategic steps to build it's product portfolio and is moving quickly to create a low cost manufacturing base in China during 2007. Overall revenue of this JV is expected to grow as a result of increased sales to existing DI and port injection customers together with increased sales for the Delavan acquisition.

The continuing world wide energy crisis is resulting in greater attention in government and consumers in seeking improved fuel efficiency and increased demand for alternative fuels. Orbital is well positioned with its existing technology and expertise to participate. The multiple income streams from Synerject, PES and licensing and royalties provide diversification and cover the entire value chain of advanced powertrain system development and supply.

Forward Looking Statements

This release includes forward-looking statements that involve risks and uncertainties. These forward-looking statements are based upon management's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements. Actual results and events may differ significantly from those projected in the forward-looking statements as a result of a number of factors including, but not limited to, those detailed from time to time in the Company's Form 20-F filings with the US Securities and Exchange Commission. Orbital makes no undertaking to subsequently update or revise the forward-looking statements made in this release to reflect events or circumstances after the date of this release.

Orbital Corporation Limited, 4 Whipple Street, Balcatta, Western Australia 6021.
Phone: +618 9441 2311    Fax: +618 9441 2133    Email: info@orbitalcorp.com.au