Third Quarter Results Remain in Line with Expectations
Lincoln, England, November 17th, 2009 – Dynex Power Inc., a leading specialist high power semiconductor company, today announced results for the third quarter of 2009.
Revenue remained strong in the third quarter matching that reported in the corresponding quarter of last year. Once again, there were particularly good sales of Bipolar Discrete and Power Electronic Assembly products, while revenue from Power Modules and Integrated Circuit products both declined. Overall, revenue remains in line with expectations.
Year to date revenue was 11% ahead of the same nine-month period last year. Here again, the strong performing product groups were Bipolar Discrete and Power Electronic Assemblies. There was a small decrease in Power Modules revenue and a significant decrease in Integrated Circuit revenue. Overall, management remained pleased with the Company’s revenue performance in the challenging economic environment.
Dynex’s product mix in the quarter was slightly less favourable than in 2008, resulting in a gross profit margin for the third quarter of 20.3% compared to 23.0% in 2008. The year to date gross profit margin was 24.0% compared to 31.7% last year. The Company indicated last year that the gross profit margin in the first half of 2008 was exceptionally high and could not be maintained.
Dynex reported earnings before income tax of $823,000 in the quarter, significantly ahead of the $395,000 reported in the corresponding period of 2008. For the year to date, earnings before income tax was $3.0 million compared to $3.9 million in the corresponding period of last year. Earnings in the first half of last year had been exceptionally high. Brought forward tax losses in the UK will be exhausted during 2009 and the Company is now providing for tax on its earnings. The average tax rate is estimated to be 14% of UK earnings (15% of consolidated earnings) for this year. The Company expects the rate to rise to nearer to the statutory UK rate of 28% in future years.
The book to bill ratio (a measure of whether new orders are being received as fast as existing orders are being completed) fell to 0.9 to 1 during the quarter indicating a weaker marketplace and a more competitive environment. However, to date Dynex has not experienced the revenue contraction described by some semiconductor analysts. In fact, Dynex’s order book remains strong with backlog equivalent to approximately eleven months’ billings. The strength of the order book gives management some confidence that revenue can be maintained at the current level for at least the next two quarters.
Dr Paul Taylor, President and Chief Executive Officer commented that “The order book remains strong and we still expect revenue overall in 2009 to be well ahead of last year and to continue at this level at least into the early part of next year. The Bipolar Discrete business is performing particularly strongly. Our outlook is for continuing growth in the Bipolar Discrete and Power Electronic Assemblies businesses, but sales in Power Modules and Integrated Circuits will remain depressed for the time being. However, we are working together with CSR Times Electric to qualify our IGBT parts for use in their power converter systems and it is our objective that this will lead to significant sales of IGBT die to them in future. We have announced a major expansion of our IGBT capacity to meet this expected demand and completion of this expansion and qualification of the parts with CSR Times Electric is our major priority at the moment”.
Bob Lockwood, Chief Financial Officer, stated that “the third quarter earnings remained strong. Looking forward, revenue is expected to continue at levels similar to those seen in the last two quarters. This should enable the business to continue reporting quarterly profits albeit that the net earnings for the year will be lower than in 2008 as a result of a less favourable product mix and the Company having to provide for tax on its earnings. The expansion of our IGBT facility is a major project and it will limit the growth we can achieve next year, but should lead to exciting new opportunities for the Company thereafter”.
Mr Lu, Chairman of Dynex and President and Executive Director of CSR Times Electric, commented again on how well he thought Dynex was performing in the current economic conditions. In addition, he said “I am pleased with the progress that has taken place on the expansion of Dynex’s facilities and the qualification of die for use by CSR Times Electric. Mr Lu confirmed that CSR Times Electric was providing every assistance it could to Dynex with these two vital projects”.
The Company announced that it had filed a preliminary prospectus for a rights issue on 26th October 2009 to raise the finance required for the expansion of its IGBT fabrication facility. The Company expects to file a final prospectus in the next few days setting out full details of the issue. In the meantime, the Company has borrowed money to finance the initial work on the project. The loan was guaranteed by CSR Times Electric.
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, 2009 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.