Dynex Power Inc. - Second Quarter Results in Line with Expectations
Company Prepares for Growth in 2011
Listing: TSX Venture Exchange Symbol: DNX
LINCOLN, England, Aug. 11 /CNW Telbec/ - Dynex Power Inc., a leading specialist high power semiconductor company, today announced results for the second quarter of 2010.
Summary financial information in Canadian dollars for the three and six months ended June 30th, 2010 is as follows:
------------------------------------------------------------------------- June 30, June 30, YTD YTD 2010 2009 2010 2009 $'000 $'000 $'000 $'000 ------------------------------------------------------------------------- Revenue 9,233 9,722 19,665 20,725 Gross Margin 1,893 2,035 4,444 5,314 Earnings before Tax 549 568 1,697 2,213 Net Earnings 389 725 1,175 1,890 No. of Common Shares- average 80,418,571 40,194,834 80,405,074 40,194,834 Earnings per Share in Dollars-diluted 0.00 0.02 0.01 0.05 -------------------------------------------------------------------------
Sales remained robust in the second quarter, but reported revenue was 5% lower than the corresponding quarter of last year as a result of a 15% decline in the value of Sterling against the Dollar. Measured in Sterling terms, sales increased 12% over the corresponding quarter of 2009. Revenues from the Power Electronic Assemblies Group and the Power Modules Group were higher than the corresponding quarter of last year despite the currency movement. Revenue from the Bipolar Discrete Group was lower in Dollar terms but was higher than last year when measured in Sterling. The Integrated Circuit Group experienced an anticipated decline, reflecting the fact that this is no longer a core business. Overall, revenue was in line with expectations.
Year to date revenue was 5% lower than in the same six-month period last year, more than accounted for by the 15% decline in the value of Sterling. The Power Electronic Assemblies Group was the strongest performer, reporting growth even when measured in Dollars. There was a 6% decrease in revenue reported by the Bipolar Discrete Group, although growth had been achieved in Sterling revenue. Significant decreases were reported in Power Modules and Integrated Circuit revenues. Nevertheless, management was pleased with the Company's revenue performance in the challenging economic environment.
The gross profit margin for the second quarter of 2010 was 20.5% compared to 20.9% in the corresponding quarter of 2009. The year to date gross profit margin was 22.6% compared to 25.6% last year. The decline in gross margins was caused by the additional depreciation relating to the first new 6 inch IGBT line and the costs of running test batches through the new line. Similar costs will arise in the next two quarters, temporarily depressing the gross margin. It is expected that the line will begin producing revenue early in 2011.
Dynex reported earnings before income taxes of $549,000 in the quarter and $1.7 million for the year to date.,compared to $568,000 for the second quarter and $2.2 million for the year to date in 2009. Given the weakness of Sterling, the additional costs related to the new 6 inch IGBT line and the tougher market environment currently being encountered, management was pleased with this level of earnings.
Dynex's order book contracted during the quarter reflecting the tougher market conditions now being encountered. However, the order book at the end of June remains strong with an equivalent to just over 6 months revenue at current levels.
Following the exhaustion of UK tax losses last year, tax has been provided for on UK earnings at the statutory tax rate of 28%. The Company will be able to defer this tax charge and so there will be no tax payments being made in the UK this year.
Dr Paul Taylor, President and Chief Executive Officer said, "Management is focussed on the installation and commissioning of the new IGBT lines and on qualifying our products for use in CSR Times Electric applications. This initiative, in concert with the softer market for our products, is currently affecting our performance. However, we are making good progress and are well prepared to respond with a strong growth in earnings once our expansion and product qualification programmes are completed and the high power semiconductor market returns to growth."
Bob Lockwood, Chief Financial Officer, added, "The level of earnings in the second quarter was pleasing, given the weaker market and the disruptions and additional costs being experienced in the business. A foreign exchange loss and a full tax charge also impacted on earnings. We remain committed to controlling our costs through this difficult period, as reflected in our expense ratio of 12.3%. This was the second lowest quarterly ratio ever reported by the Company and is testimony to the effort we are putting into cost control. Looking forward, revenue is expected to continue at levels similar to or just below those seen in the second quarter. This should enable the business to continue reporting quarterly profits for the balance of the year despite the impact of the work being done to position the company for growth in 2011 and beyond."
Li Donglin, Chairman of Dynex and General Manager of CSR Times Electric, said, "These are challenging times for Dynex, with the disruption caused by expansion, the need to qualify their products for use by CSR Times Electric and the softer market conditions. However, I am pleased with the way Dynex is performing during this time. Balancing these different demands will remain difficult for the rest of 2010 but I look forward to seeing improved performance in 2011."
Forward-looking Statements
In commenting on its expectations, the Company cautioned existing and potential shareholders about relying on the Company's expectations in that the Company's expectations contain forward looking statements and assumptions which are subject to the risks and uncertainties of the markets and the future, which could cause actual results to differ materially from expectations, and which are each difficult and subjective to forecast. Certain of those risks and uncertainties are discussed in the Management's Discussion and Analysis for the quarter ended June 30th, 2010 and include, among other things, risks and uncertainties relating to: the level of worldwide demand for power semiconductors and power semiconductor assemblies; the level of investment in power electronic equipment, electrification of transport systems, alternative power generation and high quality power transmission and distribution; the worldwide demand for and supply of silicon; and fluctuations in exchange rates between Canadian Dollars, Sterling, US dollars and Euros. As a consequence of these and other risks and uncertainties, shareholders and potential investors must make their own independent judgments about the accuracy and reliability of the Company's expectations. Dynex disclaims any intention or obligation to update or revise any forward looking statement whether as a result of new information, future events or otherwise.
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. Its 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
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
DYNEX POWER INC. Consolidated Statements of Earnings and Deficit (Unaudited) ----------------------------------------------------------- Quarters Ended June 30th, 2010 and 2009 ------------------------------------------------------------------------- 3 months 3 months YTD YTD Jun 30th Jun 30th Jun 30th Jun 30th 2010 2009 2010 2009 ---------------------------------------------------- Revenue $ 9,232,568 $ 9,722,367 $19,665,367 $20,725,091 Cost of sales 7,339,515 7,687,471 15,221,365 15,410,635 ------------------------------------------------------------------------- Gross margin 1,893,053 2,034,896 4,444,002 5,314,456 ------------------------------------------------------------------------- Expenses General and admin- istration 646,025 725,963 1,647,320 1,650,138 Sales and marketing 238,354 225,804 450,699 518,557 Research and development 229,371 234,385 561,359 490,304 Interest expense 20,848 125,336 68,951 261,932 ------------------------------------------------------------------------- 1,134,598 1,311,488 2,728,329 2,920,931 ------------------------------------------------------------------------- Earnings before other income (expenses) and income taxes 758,455 723,408 1,715,673 2,393,525 ------------------------------------------------------------------------- Other income (expenses) Interest and other income 69,968 80,765 129,709 119,387 Foreign exchange loss (279,066) (235,936) (148,155) (300,169) ------------------------------------------------------------------------- (209,098) (155,171) (18,446) (180,782) ------------------------------------------------------------------------- Earnings before income taxes 549,357 568,237 1,697,227 2,212,743 Income taxes (160,208) 156,997 (521,837) (322,821) ------------------------------------------------------------------------- NET EARNINGS 389,149 725,234 1,175,390 1,889,922 DEFICIT, BEGINNING OF PERIOD (2,969,230) (6,004,456) (3,755,471) (7,169,144) ------------------------------------------------------------------------- DEFICIT, END OF PERIOD $(2,580,081) $(5,279,222) $(2,580,081) $(5,279,222) ------------------------------------------------------------------------- ------------------------------------------------------------------------- DYNEX POWER INC. Consolidated Statements of Comprehensive Income (Loss) (Unaudited) ------------------------------------------------------------------ Quarters Ended June 30th, 2010 and 2009 ------------------------------------------------------------------------- 3 months 3 months YTD YTD Jun 30th Jun 30th Jun 30th Jun 30th 2010 2009 2010 2009 ------------------------------------------------------------------------- Net earnings $ 389,149 $ 725,234 $ 1,175,390 $ 1,889,922 ------------------------------------------------------------------------- Other Comprehensive income (loss), net of tax: Unrealized foreign exchange gain (loss) on translating financial statements of self-sustaining foreign operations 917,876 541,355 (1,708,325) 670,789 ------------------------------------------------------------------------- OTHER COMPREHENSIVE INCOME (LOSS) 917,876 541,355 (1,708,325) 670,789 ------------------------------------------------------------------------- COMPREHENSIVE INCOME (LOSS) $ 1,307,025 $ 1,266,589 $ (532,935) $ 2,560,711 ------------------------------------------------------------------------- ------------------------------------------------------------------------- DYNEX POWER INC. Consolidated Statements of Accumulated Other Comprehensive Loss and Deficit (Unaudited) ------------------------------------------------------------------- As at June 30th, 2010 and December 31st, 2009 ------------------------------------------------------------------------- Jun 30th Dec 31st 2010 2009 -------------------------- Accumulated other comprehensive loss, beginning of period $(1,853,191) $(1,380,101) Other comprehensive loss (1,708,325) (473,090) ------------------------------------------------------------------------- Accumulated other comprehensive loss (3,561,516) (1,853,191) Deficit (2,580,081) (3,755,471) ------------------------------------------------------------------------- TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSS AND DEFICIT $(6,141,597) $(5,608,662) ------------------------------------------------------------------------- ------------------------------------------------------------------------- DYNEX POWER INC. Consolidated Balance Sheets (Unaudited) --------------------------------------- As At June 30th, 2010 and December 31st, 2009 ------------------------------------------------------------------------- Jun 30th Dec 31st 2010 2009 -------------------------- CURRENT ASSETS Cash $ 3,246,561 $22,942,550 Accounts receivable 6,035,016 6,439,200 Inventories 8,385,658 8,872,155 Amounts owing from parent company 1,011,292 218,568 Income tax recoverable 56,040 96,413 Prepaid expenses and deposits 521,316 794,170 ------------------------------------------------------------------------- 19,255,883 39,363,056 PROPERTY, PLANT & EQUIPMENT 19,772,483 17,420,677 ------------------------------------------------------------------------- $39,028,366 $56,783,733 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CURRENT LIABILITIES Accounts payable and accrued liabilities $ 3,606,001 $ 4,964,864 Short-term loan 1,589,800 16,273,732 Amounts owing to parent company 218,225 955,026 Current portion of long-term debt 7,453 24,921 Current portion of obligation under capital leases 108,210 113,602 Current portion of deferred revenue 469,535 1,174,803 ------------------------------------------------------------------------- 5,999,224 23,506,948 LONG-TERM DEBT - 942 OBLIGATION UNDER CAPITAL LEASES 419,431 512,935 LONG-TERM DEFERRED REVENUE 829,947 949,290 FUTURE INCOME TAXES 870,428 380,756 ------------------------------------------------------------------------- 8,119,030 25,350,871 SHAREHOLDERS' EQUITY Share capital 37,050,933 37,041,524 Deficit (2,580,081) (3,755,471) Accumulated other comprehensive loss (3,561,516) (1,853,191) ------------------------------------------------------------------------- 30,909,336 31,432,862 ------------------------------------------------------------------------- $39,028,366 $56,783,733 ------------------------------------------------------------------------- ------------------------------------------------------------------------- DYNEX POWER INC. Consolidated Statements of Cash Flows (Unaudited) ------------------------------------------------- Quarters Ended June 30th, 2010 and 2009 ------------------------------------------------------------------------- 3 months 3 months YTD YTD Jun 30th Jun 30th Jun 30th Jun 30th 2010 2009 2010 2009 --------------------------------------------------- OPERATING Net earnings $ 389,149 $ 725,234 $ 1,175,390 $ 1,889,922 Items not affecting cash Amortization 363,797 149,407 641,826 270,417 Gain on disposal of property, plant and equipment (29,797) (35,219) (62,071) (69,829) Future income taxes 159,008 - 519,466 - Non-cash interest 270 1,771 901 3,825 Provision for inventory obsolescence (196,643) 422,577 143,628 478,558 Changes in non-cash operating working capital 900,965 1,124,949 (699,507) (410,671) ------------------------------------------------------------------------- 1,586,749 2,388,719 1,719,633 2,162,222 ------------------------------------------------------------------------- FINANCING Shares issued for cash 9,409 - 9,409 - Cost of share issue (42) - (308,069) - Increase in amounts owing to parent company - - - 2,521,141 Decrease in amounts owing to parent company (920,356) (779,425) (1,473,358) (1,064,030) Increase in short-term loans 1,541,100 6,375,250 1,541,100 6,375,250 Decrease in short-term loans - (1,123,314) (15,790,230) (2,198,850) Payments on capital leases (23,587) (9,761) (61,170) (36,734) Decrease in long-term debt (5,936) (1,197,265) (17,921) (1,210,245) ------------------------------------------------------------------------- 600,588 3,265,485 (16,100,239) 4,386,532 ------------------------------------------------------------------------- INVESTING Proceeds of disposal of property, plant and equipment - - 14,280 263 Purchase of property, plant and equipment (2,580,379) (2,496,530) (4,764,580) (2,931,153) ------------------------------------------------------------------------- (2,580,379) (2,496,530) (4,750,300) (2,930,890) ------------------------------------------------------------------------- Effect of foreign currency translation on cash 27,726 (97,945) (565,083) (78,712) ------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH (365,316) 3,059,729 (19,695,989) 3,539,152 Cash, beginning of period 3,611,877 884,061 22,942,550 404,638 ------------------------------------------------------------------------- CASH, END OF PERIOD $ 3,246,561 $ 3,943,790 $ 3,246,561 $ 3,943,790 -------------------------------------------------------------------------
%SEDAR: 00010667E
For further information: Dr. Paul Taylor, President and Chief Executive Officer, or Bob Lockwood, Finance Director and Chief Financial Officer, Dynex Power Inc., Tel: +44 1522 500 500, Email: [email protected]
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