Dynex Power Announces Second Quarter Results for 2010
Lincoln, England, August 11th, 2010 – Dynex Power Inc., a leading, high power semiconductor company, today announced results for the second quarter of 2010
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 decreaexses 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.”
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.