Dynex Power Announces Significant First Quarter Loss
Return to Profitability Expected in the Second Quarter
Dynex Power Announces Significant First Quarter Loss
Return to Profitability Expected in Second Quarter
Lincoln, England, May 28th, 2015 - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the first quarter ended March 31st, 2015.
First quarter revenue of $9.5 million was 17% lower than the corresponding quarter of last year. The change was accounted for by a reduction in sales of IGBT die to the Group’s parent company in China. Deliveries to China were put on hold in February, March and April whilst a technical issue was being resolved. Deliveries recommenced in May.
The Group has previously reported the cancellation of a major contract that was expected to be delivered in 2015. In response to this cancellation, the Group carried out a redundancy exercise in the first quarter which resulted in 27 employees leaving the Group. This was the first such redundancy exercise in over 10 years. The cost of these redundancies amounted to nearly $500,000 and this together with the weak revenue in the first quarter resulted in a gross loss of $1.5 million compared with a gross profit of $1 million in the corresponding quarter of last year.
The combination of other income, expenses and costs increased by $204,000 to $1.9 million. The increase reflected foreign exchange losses in the quarter. The total cost of sales and marketing, administration, research and development and finance costs fell by $186,000 compared to the corresponding quarter of last year. Because of the foreign exchange loss and the lower revenue figure in the period, other income, expenses and costs represented 19.4% of revenue in the 2015 period compared with 16.4% in the corresponding quarter of last year.
As a consequence of these results, the Company recorded a loss before tax of $3.4 million, compared to a loss before tax of $634,000 in the corresponding quarter of last year. A $597,000 recovery of UK tax reduced the net loss for the period to $2.8 million or $0.03 per share, compared with a net loss of $516,000, or $0.01 per share, in the corresponding period of last year.
Revenue for the second quarter is forecast to increase substantially and Management expects the business to return to profitability in the second quarter, although these expectations are unlikely to make the Group profitable for the first half of 2015 overall. At the present time, it is difficult to forecast performance in the second half of the year.
Dr. Paul Taylor, President and Chief Executive Officer commented, “These are poor results. At the beginning of the fourth quarter of last year, we expected very attractive financial results in Q1 of 2015. The cancellation of a major bipolar contract earlier in the year meant we have had to undertake a redundancy exercise which, of course, has resulted in extra costs in the short term, and the stop on deliveries to our parent company, which has now been lifted, meant that our revenue was lower than we would have hoped and our costs higher. The result is a very large loss for the quarter. The whole team at Dynex is working hard to overcome these setbacks and we expect a much stronger second quarter and a return to profitability. However, at the moment, the outlook for the second half of 2015 remains uncertain and continues to be affected by the bipolar cancellation. Orders have slowed and although we can see good demand it is not clear whether those orders will arrive in time to deliver products in 2015 or whether it will be 2016 before that demand turns into revenue.”
Bob Lockwood, Chief Financial Officer commented, “Dynex is experiencing very difficult times at the moment. The contract cancellation and product return at the end of 2014 as well as the stop on deliveries to China earlier this yearreduced revenues. High power semiconductor manufacturing is a high fixed cost business, so a reduction in revenue always has a big impact on profitability. We have taken action to reduce costs, but such action always involves a cost to the business which increases our losses in the short term. The good news is that the second quarter should be much better, but as Paul said, it is difficult to be confident about the second half of the year at the moment.”
Li Donglin, the Chairman of Dynex said, “Like all the other shareholders, we are not happy with the current performance of Dynex. But we do see improvements in terms of shipments and quality of product delivered to CSR Times Electric and this now matches our expectation. We are continuing to work with management to explore opportunities so that Dynex can achieve a return to profitability as soon as possible.”
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 March 31st, 2015 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.