Dynex Power Announces Weaker than Expected Second Quarter Results for 2012

Medium and Long Term Prospects Strengthen but Market Remains Challenging in 2012

Listing:	TSX Venture Exchange
Symbol:	DNX

 

LINCOLN, England, Aug. 14, 2012 /CNW/ - Dynex Power Inc., a leading, high power semiconductor company, today announced its financial results for the second quarter and six months ended June 30th, 2012.

Summary financial information for the three and six months ended June 30th, 2012 is as follows:

Canadian Dollars (000's)	June 30, 2012	June 30, 2011	YTD 2012	YTD 2011
Revenue	9,856	9,018	20,378	16,589
Gross Profit	1,569	1,938	4,202	3,430
Other Income, Expenses and Costs	(1,343)	(1,183)	(2,944)	(2,366)
Profit before Tax	226	755	1,258	1,064
Income Tax Expense	(84)	(215)	(357)	(308)
Net Profit	142	540	901	756
Common shares outstanding ¹ - diluted	80,542,859	80,580,148	80,533,826	80,581,427
Earnings per share  - diluted	$0.00	$0.01	$0.01	$0.01

¹  Weighted average for the period

In the Company's May 16, 2012 announcement of its first quarter results, management indicated its expectation of a strong second quarter followed by a challenging second half. However, the expected Q2 results did not materialize, primarily because of the delay in one expected shipment, which was pushed into the third quarter. Looking now at the remainder of 2012, management still expects markets to remain challenging. However, Dynex also commented on its enhanced medium to long term outlook, highlighted by its improved order book for 2013.

Second quarter revenue of $9.9 million was, nonetheless, 9% higher than the corresponding quarter of last year. The increase was the result of significantly higher sales of power modules and die from the new fabrication lines and smaller increases in revenue from the sale of bipolar devices and services, partially offset by reductions in revenues from integrated circuits and power electronic assemblies.

Year to date revenue of $20.4 million was 23% higher than in the same six-month period last year. Here again, there was growth in revenue of power modules, die, bipolar devices and services with reductions in revenue from integrated circuits and power electronic assemblies.

The gross margin of 15.9% was lower than the 21.5% reported in the corresponding quarter of last year. The reduction in margin reflected a change in product mix. For the year to date, the gross margin was 20.6% compared to 20.7% in the corresponding period last year.

Other income, expenses and costs represented 13.6% of revenue in the second quarter of 2012 and 14.4% for the year to date compared with 13.2% and 14.3% in the corresponding periods of last year.

As a consequence of these changes, the Company generated profit before tax in the quarter of $226,000, compared to $755,000 in the corresponding quarter of last year and net profit in the quarter of $142,000 compared with $540,000 in the corresponding quarter of last year. For the year to date, gross profit increased by 18% to $1.3 million with net profit rising by 19% to $901,000. Earnings per share for the year to date of $0.01 were the same as in the first six months of last year.

At the end of the second quarter, the Company's order book stood at $20.1 million, approximately 25% higher than at the end of the first quarter. The increase reverses a decline seen during the first quarter and leaves the order book approximately 2% higher than it was at the end of 2011. Management remains confident of strong growth in 2013 but remains cautious about the outlook for the second half of 2012.

Dr. Paul Taylor, President and Chief Executive Officer commented, "Our second quarter results reflect three significant, negative factors. First, because of a discrepant letter of credit, we were unable to ship to an Indian customer, the results of which would have made our second quarter results nearly comparable to the first. Second, we are operating in a very troubled and uncertain economic environment. While we expect our 2013 order book to be strong, the current quarter was difficult and the third and fourth quarters of 2012 remain uncertain. Third, expenses were elevated by increased staff levels in contemplation of our 2013 order book and the return of the China rail market opportunities. While this is negatively impacting the current year, our medium term outlook is stronger than the market in general and we are very pleased with our competitive positioning."

Dr. Taylor continued, "We recently celebrated the formal opening of our impressive Research and Development Centre in Lincoln. For many reasons, it is symbol of the turn-around and aspirations of the fortunes of Dynex. It helps position us for the realization of our joint goal with the Power Electronic Business Unit of CSR Times Electric to become one of the top three high power semiconductor firms. It is also the capstone of the strong synergies between Dynex and its controlling shareholder."

Bob Lockwood, Chief Financial Officer commented, "The current marketplace remains challenging for Dynex and this is reflected in the results for the second quarter. We remain cautious about the rest of this year. We are unlikely to see revenue growth in the next two quarters and our efforts will be directed towards controlling our costs whilst ensuring we are ready for future growth which we now expect to see in 2013. We remain positive on the medium and longer term prospects for the Company."

Li Donglin, the Chairman of Dynex said, "These results reflect the difficult marketplace in which Dynex is operating and our expectations for the second half of 2012 have to be seen in the context of the current world economic environment. Nevertheless, we believe Dynex is well positioned for future growth and, once the current difficulties in world markets are overcome, the future of Dynex remains very attractive."

About the Company

Dynex designs and manufactures high power bipolar semiconductors, high power insulated gate bipolar transistor (IGBT) modules, high power electronic assemblies and radiation hard silicon-on-sapphire integrated circuits (SOS IC's). The company's power products are used worldwide in power electronic applications including electric power transmission and distribution, renewable and distributed energy, marine and rail traction motor drives, aerospace, electric vehicles, industrial automation and controls and power supplies. Our IC products are used in demanding applications in the aerospace industry. Dynex Semiconductor Ltd is its only operating business and is based in Lincoln, England in a facility housing the fully integrated silicon fabrication, assembly and test, sales, design and development operations.  Dynex is majority owned by Zhuzhou CSR Times Electric Co., Ltd.

Zhuzhou CSR Times Electric Co., Ltd. is based in Hunan Province in the People's Republic of China. It is listed on the Hong Kong stock exchange. CSR Times Electric is mainly engaged in the research, development, manufacture and sales of locomotive train power converters, control systems and other train-borne electrical systems, as well as the development, manufacturing and sales of urban railway train electrical systems. In addition, CSR Times Electric is also engaged in the design, manufacturing and sales of electric components including power semiconductor devices for the railway industry, urban railway industry and non-railway purposes.

Press announcements and other information about Dynex are available at www.dynexsemi.com.

Further information on CSR Times Electric can be found at www.timeselectric.cn/en

All monetary values expressed in this release are in Canadian Dollars unless stated otherwise.

The TSX Venture Exchange has neither approved nor disapproved of the information in this press release.

DYNEX POWER INC.
Condensed Consolidated Statement of Comprehensive Income (unaudited) in Canadian Dollars
Quarter Ended June 30th, 2012

		3 months	3 months	YTD	YTD
		Jun 30th	Jun 30th	Jun 30th	Jun 30th
		2012	2011	2012	2011
		$	$	$	$
Revenue		9,855,892	9,018,086	20,377,982	16,589,318
Cost of sales		(8,286,754)	(7,080,437)	(16,175,601)	(13,159,234)
Gross profit		1,569,138	1,937,649	4,202,381	3,430,084
Other income		9,280	25,033	31,692	43,742
Sales and marketing expenses		(205,628)	(235,065)	(435,669)	(441,722)
Administration expenses		(738,153)	(726,224)	(1,688,459)	(1,409,459)
Research and development expenses		(321,269)	(222,318)	(608,328)	(444,053)
Finance costs		(68,844)	(18,285)	(173,438)	(38,544)
Other losses		(18,942)	(6,045)	(70,084)	(75,607)
Profit before Tax		225,582	754,745	1,258,095	1,064,441
Income tax expense		(83,799)	(214,834)	(357,214)	(308,615)
Net Profit		141,783	539,911	900,881	755,826
Other Comprehensive Income
Exchange differences on translation of foreign operations (net of tax of $nil)		284,675	(198,805)	439,304	(131,776)
Total Comprehensive Income for the year		426,458	341,106	1,340,185	624,050

 

DYNEX POWER INC.
Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars
Quarter ended June 30th, 2012

		Jun 30th	Dec 31st
		2012	2011
		$	$
NON-CURRENT ASSETS
Property, plant & equipment		32,464,904	30,623,600
CURRENT ASSETS
Inventories		10,913,534	10,890,917
Trade receivables		4,110,137	4,275,915
Amounts owing from parent company		3,186,608	2,369,749
Prepayments, deposits & other receivables		1,242,122	458,665
Tax recoverable		-	298,301
Cash		1,427,934	3,028,599
Total  current assets		20,880,335	21,322,146
CURRENT LIABILITIES
Trade payables		1,371,232	1,142,246
Amounts owing to parent company		418,439	312,284
Other payables and accruals		2,540,961	3,946,048
Borrowings		6,540,632	514,102
Provisions		252,591	186,077
Tax payable		129,241	-
Total current liabilities		11,253,096	6,100,757
NET CURRENT ASSETS		9,627,239	15,221,389
TOTAL ASSETS LESS CURRENT LIABILITIES		42,092,143	45,844,989

 

DYNEX POWER INC.
Condensed Consolidated Statement of Financial Position in Canadian Dollars (unaudited) (continued)
Quarter Ended June 30th, 2012

		Jun 30th	Dec 31st
		2012	2011
		$	$
NON-CURRENT LIABILITIES
Borrowings		3,891,453	9,238,920
Provisions		208,659	212,704
Deferred tax liabilities		1,997,648	1,739,167
Total non-current liabilities		6,097,760	11,190,791
NET ASSETS		35,994,383	34,654,198
EQUITY
Share capital		37,096,192	37,096,192
Retained profit/(accumulated deficit)		376,266	(524,615)
Exchange fluctuation reserve		(1,478,075)	(1,917,379)
		35,994,383	34,654,198

 

DYNEX POWER INC.
Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars
Quarter Ended June 30th, 2012

	Share Capital	Retained Profit/ (Deficit)	Foreign Currency Translation Reserve	Total Equity
	$	$	$	$
At January 1st, 2011	37,096,192	(3,234,161)	(2,419,387)	31,442,644
Total comprehensive income for the period	-	755,826	(131,776)	624,050
At June 30th, 2011	37,096,192	(2,478,335)	(2,551,163)	32,066,694
Total comprehensive income for the period	-	1,953,720	633,784	2,587,504
At December 31st, 2011	37,096,192	(524,615)	(1,917,379)	34,654,198
Total comprehensive income for the period	-	900,881	439,304	1,340,185
At June 30th, 2012	37,096,192	376,266	(1,478,075)	35,994,383

 

DYNEX POWER INC.
Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars
Quarter Ended June 30th, 2012

		YTD Jun 30th	YTD Jun 30th
		2012	2011
		$	$
CASH FLOW FROM OPERATING ACTIVITIES
Profit before tax		1,258,095	1,064,441
Finance costs recognised in profit or loss		173,438	38,544
Investment income recognised in profit or loss		(341)	(649)
Depreciation of property, plant & equipment		1,412,365	1,078,824
Gain on disposal of property, plant & equipment		-	(25,460)
Provision for slow moving and obsolete inventory		(357,958)	284,125
Movements in working capital		(2,061,141)	(4,770,599)
Cash generated by/(used in) operating activities before income taxes		424,458	(2,330,774)
Income taxes received		300,512	51,893
Net cash generated by/(used in) operating activities		724,970	(2,278,881)
CASH FLOW FROM INVESTING ACTIVITIES
Payments for property, plant and equipment		(2,693,358)	(2,452,120)
Proceeds on disposal of property, plant and equipment		-	25,460
Interest received		341	649
Net cash used in investing activities		(2,693,017)	(2,426,011)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from borrowings		614,189	2,227,225
Repayments of borrowings		(61,917)	(55,122)
Interest paid		(146,122)	(24,687)
Payment for other finance costs		(27,754)	(13,947)
Net cash generated by financing activities		378,396	2,133,469
NET DECREASE IN CASH		(1,589,651)	(2,571,423)
Cash at beginning of period		3,028,599	3,094,626
Effect of foreign currency translation on cash		(11,014)	22,434
CASH AT END OF PERIOD		1,427,934	545,637

 

 

SOURCE: DYNEX POWER INC.

Dr. Paul Taylor
President and Chief Executive Officer
or
Bob Lockwood
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: [phone]
Email: [email protected]