Dynex Power Reports Third Quarter Improvement in Revenues and Profits
Lincoln, England, November 17th, 2011 – Dynex Power Inc., a leading specialist high power semiconductor company, today announced its results for the third quarter of 2011.
Summary financial information in Canadian dollars for the three and nine months ended September 30th, 2011 is as follows:
Revenue in the third quarter of 2011 was 21% higher than the corresponding quarter of last year. Revenue from the Power Modules Group was again at an all-time record as a result of the new lines now supplying die to CSR Times Electric. Strong revenue was also experienced by the Integrated Circuits product group. Revenue from the Bipolar Discrete and the Power Electronic Assemblies groups reflected the continuing soft market for high power bipolar products.
Year-to-date revenue was 5% lower than in the same nine-month period last year. As with the third quarter’s figures, results from the Power Modules and Integrated Circuits product groups were good but offset by soft demand for the products of the Bipolar Discrete and Power Electronic Assemblies product groups.
The gross profit margin for the third quarter of 2011 was 30.2% compared to 17.1% in the corresponding quarter of 2010. Gross profit in the third quarter benefitted from a one-off credit of approximately $580,000. Without this one-off credit, the gross profit margin would have been 24.3% which better reflects the underlying profitability of the business. The gross profit margin for the year-to-date is unaffected by the one-off credit referred to above. The increase from the corresponding quarter of last year arises from the strong growth in revenue and a favourable product mix. The year-to-date gross profit margin was 24.2% compared to 21.0% last year. The gross profit margin for the year-to-date in 2010 was negatively impacted by the costs of bringing the new fabrication lines into operation.
Dynex reported profit before tax of $1.7 million in the quarter compared to $0.4 million for the third quarter of 2010. The net impact of the one-off credit referred to above on profit before tax was approximately $500,000. Without that one-off credit, profit before tax would have been approximately $1.2 million, still a significant improvement over the corresponding quarter of last year. On a year-to-date basis, profit before tax was $2.7 million compared to $2.0 million for the corresponding period in 2010.
Management expects that revenue in the fourth quarter of 2011 will approximate the level attained in the third quarter.
The book-to-bill ratio was 0.8 during the third quarter and 1.1 for the year-to-date. A level of 1.1 for the year-to-date suggests slow but positive growth in demand for the Company’s products. The order book stood at $21.6 million at the end of September, $0.4 million lower than it had been at the end of the second quarter but $4.8 million higher than it had been at the end of 2010.
Following the exhaustion of UK tax losses last year, the tax has been provided on UK earnings at the statutory tax rate of 26%. However, the Company will be able to defer most of this tax charge. As a result, no major tax payments are expected to be made in the UK this year.
Dr Paul Taylor, President and Chief Executive Officer said, “Management is happy with the improvement in our results, which were better than our expectations. This has been a particularly busy quarter for Dynex. We purchased the site we occupy in Lincoln from our landlord, thus reversing an action taken in 2003 when the premises were sold and leased back to enable us to repay long-term debts and reduce the amount owed to suppliers. We believe this strengthens our balance sheet and worth. Following this purchase, we started the construction of a new Research and Development Centre and office building on the site. The additional space is required in order to carry out our planned research and development work which is the foundation for our future profitability. We have recently announced a temporary slowdown in investment in the Chinese railway system following an accident involving high-speed trains in July 2011. This has not affected our third quarter results and is not expected to affect fourth-quarter results either, but we may see some slowing in the growth of our IGBT business in the early part of 2012. Many market commentators have suggested that this slowdown will only be for the short term so it should not affect our longer-term prospects. Nonetheless, even if those opportunities do not return as robustly as we originally planned, we expect that any negative impact on revenues will be offset by growing opportunities in other sectors.”
Bob Lockwood, Chief Financial Officer, added, “We were pleased with the continuing improvement in our results, particularly the gross profit margin in the third quarter. We continue to keep overhead costs under control and, as a result, our underlying profit before tax in the quarter has shown strong growth. Looking forward, revenue in the fourth quarter is expected to be at a similar level to that seen in the third quarter. The early indications are for a small reduction in the first half of 2012, followed by a pick-up in the second half of 2012. Overall, we expect 2012 to show good growth over 2011.”
Li Donglin, Chairman of Dynex and General Manager of CSR Times Electric, said, “The development of the Dynex business to be a major supplier to CSR Times Electric is progressing well. Following the rail accident in China in July, the market situation has changed a little bit and we may see some slow down in Chinese rail investment in the short term. However, we remain confident in the long-term demand from the rail sector and in the meantime we see other areas of the Chinese power electronics market growing more strongly. Through our joint funding of the R&D Centre, we expect Dynex to accelerate the development of both power module and bipolar products, which will give the business access to these wider market opportunities in an electric vehicle, renewable energy and electric grid markets. I am pleased with the improvements made in the third quarter and look forward to this progress being maintained in the coming quarters.”
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 September 30th, 2011 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.
For more information:
Dr. Paul Taylor
President and Chief Executive Officer
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: UK +44 1522 500 500