Dynex Power Announces First Quarter Results for 2010
Lincoln, England, May 17th, 2010 – Dynex Power Inc., a leading, high power semiconductor company, today announced results for the quarter ended March 31st, 2010.
First quarter revenue of $10.4 million was 6% higher than the previous quarter but 5% lower than in the corresponding quarter of last year. The decline was caused by an 8% fall in the Sterling Dollar exchange rate. In Sterling terms, Dynex’s first quarter revenue was the highest it had been for eight years. The growth reflected continued strong demand in the market place for Dynex bipolar discrete products and power electronic assemblies, offset in part by a weaker market for power modules and integrated circuits.
The gross margin of 24.5% was above the 23.73% reported in the previous quarter but below the 29.8% reported in the corresponding quarter of last year. The gross margin of the corresponding quarter of last year had been boosted by a particularly favourable product mix which had not been expected to be repeated.
Expenses of $1.6 million were 3% higher than the previous quarter but 1% lower than in the corresponding quarter of last year. The expense ratio of 15.3% reflects the continuing tight control being exercised in this area.
As a consequence of these changes, the Company generated earnings before other income (expenses) and income taxes of $1.0 million, 23% higher than in the previous quarter but 43% lower than the corresponding quarter of last year. A favourable foreign exchange gain resulted in earnings before tax being 45% higher than the previous quarter and 30% lower than in the corresponding quarter of last year.
An income tax charge at the statutory tax rate of 28% on UK earnings resulted in net earnings of $786,000. There had been a release of tax in the UK in the previous quarter following a reassessment of the UK tax charge for 2009. Tax had been provided at 28% on UK earnings in the corresponding quarter of last year.
Weaker economic markets saw order in-take decline to $5.8 million for the quarter giving a book to bill ratio of 0.60. Nevertheless, the Company still had a strong order book at the end of March 2010 of $25.0 million, with approximately 83% of this order book due for delivery in 2010. The strength of the order book enables management to remain confident that revenue will be maintained in the second quarter of 2010, but it is expected to decline in the second half of the year.
As has previously been reported, Dynex is currently undertaking a major expansion of its facilities to enable it to benefit from the strong demand for power modules in China. The project will continue throughout 2010. As has also been reported, the dislocation caused by this expansion, together with the impact of the additional costs of establishing the line before it can generate revenue, means that net earnings are expected to decline in the second half of 2010. However, strong growth in both revenue and net earnings is expected to result from the expansion, beginning in early 2011.
Dr. Paul Taylor, President and Chief Executive Officer commented, “The Company’s results were, once again, much as expected. It is pleasing to be able to report that earnings before other income (expenses) and income taxes and earnings before income taxes were both higher than in the previous quarter, although the application of a full tax charge compared to a tax release in the previous quarter meant that net earnings was slightly lower. We were pleased that the effort shown by all the members of our workforce in improving the performance of the business over the last few years was recognise in Dynex Semiconductor Limited receiving a Queen’s Award for Enterprise in April 2010. This is the most prestigious award available to UK businesses and recognises the successful turnaround of the business since 2005.”
Bob Lockwood, Chief Financial Officer commented, “We were delighted to be able to report another good set of results against the background of the current, difficult economic situation. We expect to be able to repeat this performance in the next quarter, although we now expect a reduction in revenue and this together with the cost of preparing for growth in 2011 means that earnings are expected to decline in the second half of the year. The expansion of our fabrication facility and our relationship with CSR Times Electric all point to an exciting future and we expect to see growth in revenue and earnings in 2011. ”
Following recent changes in their roles within the China South Locomotive and Rolling Stock group, Lu Penghu resigned as Chairman and as a Director of Dynex Power Inc. and Feng JiangHua announced his resignation as a Director as of 12th May 2010. At a meeting of the Board of Directors held on the following day, the Board elected Li Donglin to be a Director and Chairman of the Company and also elected Liu Ke’an to be a director of the Company. Li Donglin was recently appointed the General Manager of Zhuzhou CSR Times Electric Co. Ltd, the owner of 75% of the shares of the Company. Liu Ke’an has recently been appointed as Chief Technology Officer of Zhuzhou CSR Times Electric.
Dr. Paul Taylor, commented, “While we are delighted with Lu Penghu’s and feng JiangHua’s promotions within the CSR group and wish them well, we will miss them and the management must extend our thanks to both of them for making the working relationships between Dynex and TEG so effective. At the same time, we welcome Li Donglin and Liu Ke’an. We look forward to closer working relations with them in their new roles. They bring a wealth of experience and a very effective perspective to our business in Lincoln.”
Li Donglin, the new Chairman of Dynex said, “These are another good set of results for Dynex and we are pleased with the progress Dynex is making. I would to take this opportunity of thanking Lu Penghu and Feng JiangHua for the excellent work they have done as directors of Dynex over the last year and a half and I know that my fellow directors will wish to join me in thanking them and wishing them well in their new roles”.