Dynetek Industries Ltd. Reports Second Quarter 2012 Results
CALGARY, Aug. 13, 2012 /CNW/ - Dynetek Industries Ltd. ("Dynetek" or "Company") reported today its results for the three and six months ended June 30, 2012. The unaudited condensed consolidated financial statements and Management's Discussion and Analysis have been filed on SEDAR at www.sedar.com and on Dynetek's website at www.dynetek.com.
|(thousands of Canadian dollars, except share capital and per share data)||Three months||Six months|
|ended June 30||ended June 30|
|Cylinder and system sales||7,543||4,145||11,864||7,229|
|Research and development income||676||1,579||2,524||2,830|
|Net loss per common share (basic and fully diluted)||(0.31)||(0.06)||(0.35)||(0.10)|
|Impairment and inventory write-down||4,854||-||4,854||-|
|Net loss excluding impairment and inventory write-down||(1,630)||(1,230)||(2,503)||(2,108)|
|Net loss per common share (basic and fully diluted) excluding impairment and inventory write-down||(0.08)||(0.06)||(0.12)||(0.10)|
|Non-cash working capital1||1,199||6,933||1,199||6,933|
|Long-term borrowings and finance leases||117||4,795||117||4,795|
|Non-current assets expenditure||114||171||222||384|
|Cash flow deficiency from operations||(1,395)||(447)||(3,385)||(1,637)|
|Weighted average common shares outstanding||20,964,250||20,959,500||20,964,250||20,959,500|
Cylinder and system sales for the six months ended June 30, 2012 were $11.9 million, an increase of 64% from $7.2 million for the same period of 2011 with sales for the second quarter of 2012 increasing by 82%, compared to the same quarter of 2011.
|(thousands of Canadian dollars)||Three months||Six months|
|ended June 30||ended June 30|
|Cylinder and system sales|
|North American operations||2,777||1,709||4,257||3,556|
1 EBITDA, non-cash working capital and working capital are non-GAAP financial measures. Dynetek defines EBITDA as earnings before finance costs, income taxes, share based compensation, impairment of assets, write-down of inventory, gain or loss on equipment disposal, foreign exchange gain or loss, depreciation, and amortization. Dynetek defines non-cash working capital as current assets less cash, restricted cash and current liabilities and working capital as current assets less current liabilities. Since non-GAAP financial measures do not have a standardized definition, they may differ from the non-GAAP financial measures used by other companies. Dynetek strongly encourages investors to review its financial statements and other publicly filed reports in their entirety and not rely on a single non-GAAP financial measure.
North American operations increased its cylinder revenue for the first six months of 2012 by 20% compared to 2011, from $3.6 million to $4.3 million and sales increased by 64% from $1.7 million to $2.8 million comparing the second quarter of 2012 against 2011. The North American operations have experienced increased demand for compressed natural gas ("CNG") products as a result of its strategic alliances with key customers. Current North American order activity levels indicate that North American cylinder and system sales for 2012 may exceed 2011 sales.
The European operations increased its cylinder sales by 107% for the first six months of 2012, to $7.6 million from $3.7 million, compared to the same period of 2011 and an increase of 96% comparing the second quarter of 2012 against 2011. Like the North American operations, current European order activity levels indicate that 2012 CNG cylinder sales may exceed 2011 sales.
Research and development income for the six months ended June 30, 2012 was $2.5 million, a decrease of 11%, from $2.8 million for the same six months of 2011. Research and development income for the second quarter of 2012 was $0.7 million compared to $1.6 million for 2011. Major projects were completed at the end of the first quarter of 2012 reducing revenue in the second quarter of 2012. Dynetek continues to experience strong demand for its hydrogen valves as sales of the product have increased by 21% in 2012 compared to 2011.
Gross profit was $0.5 million for the six month period ended June 30, 2012 and $0.6 million higher compared to the first six months of 2011 with the second quarters of 2012 and 2011 being the same. Gross margin for 2012 was negatively impacted by the $1.0 million write-down of inventory at June 30, 2012. When the write-down of inventory is excluded, gross profit as a percentage of sales for first six months of 2012 was 11%.
EBITDA for the three and six months ended 2012 was ($0.8 million) and ($1.4 million) respectively, compared to EBITDA of ($0.7) million and ($1.1) million for the same periods of 2011. Net loss for the three and six months ended June 30, 2012 was ($6.5) million or ($0.31) per common share and ($7.4 million) or ($0.35) per common share respectively, compared to net loss of ($1.2) million or ($0.06) per common share and ($2.1 million) or ($0.10) per common share for the same periods of 2011. The decrease in EBITDA was the result of costs incurred in the previously announced unsuccessful business combination with S.V. Greentech Private Limited and continuing efforts to evaluate strategic alternatives for the Company and higher general and administrative expenses. The increase in net loss for the three and six months ended June 30, 2012 is the result of recognizing a $1.0 million write-down of inventory, a $3.8 million impairment of non-current assets during the second quarter of 2012, higher general and administrative expenses and higher finance costs in 2012.
Dynetek continues to maintain sufficient levels of liquidity. At June 30, 2012, surplus working capital was $2.0 million and the Company had additional availability of $1.1 million under its operating line of credit.
Dynetek is focused on generating increased worldwide sales from its commercialized CNG products and continuing to develop opportunities in the long-term hydrogen market through research and development activities with the global Original Equipment Manufacturers. Dynetek also continues to develop applications for its cylinders in the bulk transportation and stationary storage segments.
Geographic expansion will be the main driver of worldwide sales growth. While Europe and North America continue to provide the majority of near term sales, Dynetek is actively expanding its presence in the Asia-Pacific market through its expanding joint venture relationships.
On July 31, 2012, as a result of the Company's review of strategic alternatives, the Company executed an Arrangement Agreement with Luxfer Holdings PLC ("Luxfer") and Luxfer Canada Limited ("AcquisitionCo") pursuant to which Luxfer, through its indirect wholly-owned subsidiary AcquisitionCo, will acquire all of the issued and outstanding common shares of the Company ("Dynetek Shares"), including any shares of the Company issued upon the exercise of outstanding options, for a cash consideration of $0.24 per each common share (the "Arrangement"). The Arrangement is expected to be completed by way of a plan of arrangement under the Business Corporations Act (Alberta) ("ABCA"). The completion of the proposed acquisition will be subject to the approval of the Alberta Court of Queen's bench under the ABCA, the affirmative vote of 66⅔% of the votes to be cast by shareholders, present in person or by proxy, at the meeting of shareholders to be held to approve the Arrangement Agreement, the receipt of all necessary regulatory and stock exchange approvals, and certain other closing conditions that are customary for a transaction of this nature. Under certain circumstances, the Company will pay a non-completion fee of $0.5 million to Luxfer if the transaction is not completed. An information circular regarding the Arrangement is expected to be mailed to shareholders in mid August 2012, with the Meeting scheduled to be held in mid September 2012 and closing shortly thereafter. It is anticipated that following the successful completion of the Arrangement, the Dynetek Shares will be delisted from the TSX.
Dynetek Industries Ltd. is a world-leading participant in the global clean technology space and a leader in the design and manufacture of proprietary fuel storage systems. Dynetek designs, produces and markets one of the lightest and most advanced fuel storage and refueling systems for compressed natural gas, low emission vehicles and compressed hydrogen, zero-emission fuel cell vehicles. Dynetek is recognized around the world for its solutions-of-choice to the alternate fuel vehicle sector, evidenced by strategic relationships with major manufacturers around the globe. Dynetek is listed on the Toronto Stock Exchange, symbol: DNK.
FORWARD LOOKING STATEMENTS
In addition to historical information, this press release contains forward-looking statements or information collectively "forward looking statements" as defined under applicable Canadian securities legislation and should be read in conjunction with the financial statements and related notes for the quarterly interim financial statement for the period ended June 30, 2012, quarterly interim financial statements for 2012 and the year ended December 31, 2011. Readers are encouraged to review the section in the annual Management's Discussion and Analysis titled "Principal Risks and Uncertainties" for a discussion of factors that could affect Dynetek's future operations and financial results.
Forward-looking statements are not based on historical facts, but rather reflect management's expectations regarding future plans and intentions, growth, results of operations, performance and business prospects and opportunities. The use of any of the words "plan", "expect", "project", "intend", "believe", "should", "anticipate", "estimate" or other similar words, or statements that certain events or conditions "may" or "will" occur are typically intended to identify forward-looking statements. Forward- looking statements contained in this document include, without limitation, statements regarding: management's growth and development strategies; geographic expansion; future sales for cylinders and systems in 2012; demand for CNG and hydrogen cylinders; foreign market trends; the proposed acquisition of Dynetek by Luxfer pursuant to a plan or arrangement; the anticipated benefits of the Arrangement; the timing of the Meeting; the mailing of the information circular; the closing of the Arrangement; and the delisting of Dynetek Shares.
Forward-looking statements are based on a number of factors and assumptions which have been used to develop such statements but which may prove to be incorrect. Although Dynetek believes that the expectations and assumptions reflected in such forward-looking statements are reasonable, undue reliance should not be placed on forward-looking statements because Dynetek can give no assurance that such expectations and assumptions will prove to be correct. With respect to the forward-looking statements contained in this document, assumptions have been made regarding, among other things: (i) industry demand; (ii) expectations regarding technology adoption rates for certain countries; (iii) the impact of governmental regulatory regimes and tax, environmental and other laws; (iv) prices of commodities; (v) the economic condition in certain countries, including, without limitation, Canada, the United States, India, Korea, China and Germany; and (vi) the receipt of required approvals for the Arrangement. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements including, without limitation: (i) changes in general economic, market and business conditions of certain countries, including, without limitation, Canada, the United States, India, Korea, China and Germany; (ii) volatility in commodity prices and exchange rates; (iii) access to capital; (iv) competition for, among other things, capital and skilled personnel; (v) actions by governmental or regulatory authorities including changes in environmental and tax legislation; (vi) changes in the level of government funding for clean technology initiatives; (vii) a failure to recognize the benefits of joint ventures; (viii) changes in the demand for fuel storage systems; (ix) customer cancelation of existing orders; * a failure to obtain the required regulatory, court and shareholder approvals for the Arrangement; and, (xi) a failure to obtain required approvals or satisfy any of the conditions to completing the Arrangement.
The Company cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. Additional information on these and other factors that could affect operations or financial results can be found in the Company's Annual Information Form available on SEDAR at www.sedar.com. The Company does not undertake any obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities law.
SOURCE: Dynetek Industries Ltd.For further information:
Douglas Pigot, Executive Chairman
Dynetek Industries Ltd.
4410 - 46th Avenue SE
Calgary, Alberta T2B 3N7
Tel Calgary: 403-720-0262
Toll free: 1-888-396-3835