Dynex Power Announces First Quarter Loss
Return to Profitability Expected in Third Quarter
Lincoln, England, May 30th, 2014 - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the first quarter ended March 31st, 2014.
Summary financial information for the three months ended March 31st, 2014 is as follows:
First quarter revenue of $11.4 million was 66% higher than the corresponding quarter of last year. Approximately one-third of this increase was as a result of the weakening of the Canadian Dollar against Sterling. The rest of the change comprised a major increase in the sales of power modules and die and bipolar devices partially offset by small reductions in sales of power assemblies and services.
A gross profit of $1.0 million was made in the quarter. A small gross loss of $249,000 was made in the corresponding quarter of last year. The gross margin of 8.8% was significantly below the range targeted by management.
Other income, expenses and costs increased by $496,000 to $1.7 million. Approximately half this increase was as a result of the weakening of the Canadian Dollar against Sterling. The rest of the change related to an increase in research and development activity and some staff increases in the areas of administration and health and safety. Because of the large increase in revenue in the period, other income, expenses and costs represented 16.4% of revenue in the 2014 period compared with 16.8% in the corresponding quarter of last year.
As a consequence of these changes, the Company recorded a loss before tax of $516,000, compared to a loss before tax of $1.4 million in the corresponding quarter of last year. The loss was primarily due to continuing problems with the yield on new products. A $118,000 recovery of UK tax resulted in a net loss for the period of $516,000 or $0.01 per share, compared with a net loss of $1.4 million, or $0.01 per share, in the corresponding period of last year.
Unfortunately, the yield issue referred to above will continue to depress revenue in the second quarter. Second quarter revenue is now forecast to be slightly below that reported in the first quarter and a further loss is anticipated. New equipment which is currently being installed is expected to enable yields to recover early in the third quarter and the level of demand from CSR Times Electric is sufficient to return Dynex to profitability for the remainder of the year.
Dr. Paul Taylor, President and Chief Executive Officer commented, “Although revenue showed a significant increase over the corresponding quarter of last year, we were unable to return to profitability. The problem with yields on new products that had affected our results for the fourth quarter of 2013 will continue until the new equipment is operational. We have ordered and are currently installing this equipment. The cost of the new equipment is $5.1 million. We are fortunate that CSR Times Electric is lending us the money to purchase this equipment.”
Dr. Paul Taylor continued, “Despite this poor start to the year, management still expects to show revenue growth and a return to profitability in 2014. The most important comment I would make is that no one is happy with the current results and we are committed to significant improvement.”
Bob Lockwood, Chief Financial Officer commented, “Whilst revenue and the operating result both improved in the first quarter of 2014 compared to the corresponding quarter of 2013, the change from the results reported in the last quarter of 2013 is more complex. As expected, revenue did show a decline but nevertheless there was a significant reduction in the net loss for the quarter. A further loss is expected in the second quarter. Whilst this is disappointing, the order book for the third quarter and the demand for die from CSR Times Electric are sufficient for us to return to profitability for the second half of the year and to give us confidence that we will be able to report revenue growth for 2014 overall.”
Li Donglin, the Chairman of Dynex said, “Whilst there has been some improvement in performance in the first quarter of 2014, further improvement is required. The recovery in most of Dynex’s markets is slower than expected but there are significant opportunities for Dynex in the Chinese railway and urban mass transit sectors. We do, therefore, expect to see growth and a return to profitability in 2014.”