Dynex Power Announces First Quarter Results for 2013

A Difficult Quarter which Management Believes Marks a Turning Point for the Company

Listing: TSX Venture Exchange
Symbol:   DNX

LINCOLN, England, May 21, 2013 /CNW/ - Dynex Power Inc. (TSXV: DNX), a leading, high power semiconductor company, today announced its financial results for the first quarter ended March 31st, 2013.

Summary financial information for the three months ended March 31st, 2013 is as follows:

     
Canadian Dollars (000's) March 31, 2013 March 31, 2012
Revenue
Gross (Loss)/Profit
Other Income, Expenses and Costs
(Loss)/Profit before Tax
Income Tax Recovery/(Expense)
Net (Loss)/ Profit
Common shares outstanding ¹ - diluted
(Loss)/Earnings per share  - diluted
6,877
(249)
(1,155)
(1,404)
301
(1,103)
80,542,859
$(0.01)
10,522
2,633
(1,600)
1,033
(274)
759
80,542,859
$0.01

¹  Weighted average for the period

First quarter revenue of $6.9 million was 35% lower than the corresponding quarter of last year. The decrease was the result of reductions in sales of power modules and die, as well as bipolar products and power assemblies. The Company experienced a significant increase in service revenues and revenues from the sale of CSR Times Electric products, partially offset by a reduction in integrated circuit revenue, but these are smaller product group sales and hence less significant to the overall reduction in revenue. The year-over-year decline in first quarter revenue was forecast by management in its news release dated April 26, 2013, and reflected delays to high speed rail projects in China and a weak economic environment in Europe.

A small gross loss was recorded in the quarter compared to a positive gross margin of 25%, or $2.6 million, in the corresponding quarter of last year. The reduction was a direct result of the year-over-year decline in revenue, in addition to a decision by management to maintain engineering and production capacity in anticipation of a near-term recovery in demand.

Other income, expenses and costs were reduced by $445,000 to $1.2 million; however, because of the reduced revenue in the period, this represented 16.8% of revenue in the 2013 period compared with 15.2% in the corresponding quarter of last year. As revenue returns to normalized levels over the balance of the year, this ratio is expected to improve.

As a consequence of these changes, the Company recorded a loss before tax of $1.4 million, compared to a profit before tax of $1.0 million in the corresponding quarter of last year. A $301,000 recovery of UK tax resulted in a net loss for the period of $1.1 million or $0.01 per share, compared with a net profit of $759,000, or $0.01 per share, in the corresponding period of last year.

At the end of the first quarter, Dynex's order book stood at $25.0 million, approximately 23% higher than at the end of last year. The increase reflects strong order intake during the first quarter, which reinforces management confidence that, after a long period of difficult conditions, growth in demand is returning to the market. As a consequence of the significant growth in orders, management is confident that revenue in the second quarter of 2013 will show significant growth over the first quarter and should remain strong for the rest of the year. For the year as a whole, management expects revenue in 2013 to exceed the 2012 level, notwithstanding the weak performance in the first quarter.

Dr. Paul Taylor, President and Chief Executive Officer commented, "We previously indicated that we expected a significant reduction in revenue in the first quarter of 2013. This reduction reflected a temporary slowdown in orders from Chinese railways, the impact of overstocking at our parent company in China and continuing delays to the start of major projects by our European customers. When informing shareholders about the expected decline in revenue in the first quarter, we indicated that we expected this to be the turning point and that revenue would recover in the second and subsequent quarters. We continue to hold that view. In the first quarter of 2013, we took $11.7 million in new orders from our customers which has strengthened our view that revenue will recover in the coming quarters. We believe that despite the very disappointing results we are reporting in the first quarter, revenue for 2013 will exceed that reported in 2012."

Bob Lockwood, Chief Financial Officer commented, "The decline in revenue combined with the high fixed cost nature of our business resulted in a small loss at the gross profit level. Whilst this was disappointing, it was not unexpected given the cost structure of the business. We could, of course, have taken action to reduce operating costs, but any such cost cutting would negatively impact on our ability to capitalize on demand when the market recovers. Given our confidence in the recovery now taking place and our commitment to customers in challenging times as well as good times, we opted to maintain our existing operating structure. The strong order intake during the first quarter vindicates that decision. We have kept tight control on overhead costs and been cautious on capital expenditure to conserve cash. Ironically, having had our lowest quarterly revenue for several years, the next quarter could see one of our highest ever quarterly revenues."

Li Donglin, the Chairman of Dynex said, "The first quarter of 2013 has been very difficult for Dynex given the current, global economic difficulties. However, we are beginning to see a recovery in our markets, especially the Chinese railway and urban mass transit sectors. We, therefore, do see this quarter as a turning point and expect to be able to report much better results to our shareholders, in the second quarter and thereafter."

About the Company

Dynex designs and manufactures high power bipolar semiconductors, high power insulated gate bipolar transistor (IGBT) modules, high power electronic assemblies and radiation hard silicon-on-sapphire integrated circuits (SOS IC's). The company's power products are used worldwide in power electronic applications including electric power transmission and distribution, renewable and distributed energy, marine and rail traction motor drives, aerospace, electric vehicles, industrial automation and controls and power supplies. Our IC products are used in demanding applications in the aerospace industry. Dynex Semiconductor Ltd is its only operating business and is based in Lincoln, England in a facility housing the fully integrated silicon fabrication, assembly and test, sales, design and development operations.  Dynex is majority owned by Zhuzhou CSR Times Electric Co., Ltd.

Zhuzhou CSR Times Electric Co., Ltd. is based in Hunan Province in the People's Republic of China. It is listed on the Hong Kong stock exchange. CSR Times Electric is mainly engaged in the research, development, manufacture and sales of locomotive train power converters, control systems and other train-borne electrical systems, as well as the development, manufacturing and sales of urban railway train electrical systems. In addition, CSR Times Electric is also engaged in the design, manufacturing and sales of electric components including power semiconductor devices for the railway industry, urban railway industry and non-railway purposes.

Press announcements and other information about Dynex are available at www.dynexpower.com.

Further information on CSR Times Electric can be found at www.timeselectric.cn/en

All monetary values expressed in this release are in Canadian Dollars unless stated otherwise.

The TSX Venture Exchange has neither approved nor disapproved of the information in this press release.

DYNEX POWER INC.
Consolidated Statement of Comprehensive Income in Canadian Dollars
Quarter Ended March 31st, 2013 

      3 months 3 months
      Mar 31st Mar 31st
      2013 2012
      $ $
         
Revenue     6,877,099 10,522,090
         
Cost of sales     (7,125,912) (7,888,847)
         
Gross (loss)/profit     (248,813) 2,633,243
         
Other income     25,618 22,412
Sales and marketing expenses     (208,329) (230,041)
Administration expenses     (709,449) (950,306)
Research and development expenses     (257,332) (287,059)
Finance costs     (102,532) (104,594)
Other gains and (losses)     96,517 (51,142)
         
(Loss)/Profit before Tax     (1,404,320) 1,032,513
         
Income tax expense     300,868 (273,415)
         
Net (Loss)/Profit     (1,103,452) 759,098
         
         
Other Comprehensive (Loss)/Income        
         
Exchange differences on translation of foreign operations (net of tax of $nil)     (1,530,711) 154,629
         
         
Total Comprehensive (Loss)/Income for the year     (2,634,163) 913,727
         
         
Loss per share        
Basic     (0.01) -
Diluted     (0.01) -


DYNEX POWER INC.
Consolidated Statement of Financial Position in Canadian Dollars
Quarter Ended March 31st, 2013

      Mar 31st Dec 31st
      2013 2012
      $ $
         
NON-CURRENT ASSETS        
         
Property, plant & equipment     31,685,848 33,706,294
Derivative financial instruments     68,223 2,228
         
Total non-current assets     31,754,071 33,708,522
         
CURRENT ASSETS        
         
Inventories     11,112,556 10,954,012
Trade receivables     5,063,218 5,297,728
Amounts owing from parent company     3,401,209 2,776,110
Prepayments, deposits & other receivables     903,996 255,847
Tax recoverable     120,654 124,292
Cash     597,752 2,206,430
         
Total  current assets     21,199,385 21,614,419
         
CURRENT LIABILITIES        
         
Trade payables     1,659,605 1,151,054
Amounts owing to parent company     553,211 267,349
Other payables and accruals     2,267,541 3,171,809
Borrowings     8,040,523 6,547,631
Provisions     80,222 237,548
         
Total current liabilities     12,601,102 11,375,391
         
NET CURRENT ASSETS     8,598,283 10,239,028
         
TOTAL ASSETS LESS CURRENT LIABILITIES     40,352,354 43,947,550
         
NON-CURRENT LIABILITIES        
         
Borrowings     4,936,202 5,512,391
Provisions     208,583 212,804
Deferred tax liabilities     1,559,228 1,939,851
         
Total non-current liabilities     6,704,013 7,665,046
         
NET ASSETS     33,648,341 36,282,504
         
         
EQUITY        
         
Share capital     37,096,192 37,096,192
(Accumulated deficit)/retained profit     (562,531) 540,921
Exchange fluctuation reserve     (2,885,320) (1,354,609)
         
      33,648,341 36,282,504


DYNEX POWER INC.
Consolidated Statement of Changes in Equity in Canadian Dollars
Quarter Ended March 31st, 2013

      Foreign  
  Share Retained Currency Total
  Capital Profit/ Translation Equity
    (Deficit) Reserve  
  $ $ $ $
         
         
         
At January 1st, 2012 37,096,192 (524,615) (1,917,379) 34,654,198
         
Total comprehensive income for the period - 759,098 154,629 913,727
         
         
At March 31st, 2012 37,096,192 234,483 (1,762,750) 35,567,925
         
Total comprehensive income for the period - 306,438 408,141 714,579
         
         
At December 31st, 2012 37,096,192 540,921 (1,354,609) 36,282,504
         
Total comprehensive income for the period - (1,103,452) (1,530,711) (2,634,163)
         
         
At March 31st, 2013 37,096,192 (562,531) (2,885,320) 33,648,341


DYNEX POWER INC.
Consolidated Statement of Cash Flows in Canadian Dollars
Quarter Ended March 31st, 2013

      3 months 3 months
      Mar 31st Mar 31st
      2013 2012
      $ $
CASH FLOW FROM OPERATING ACTIVITIES        
         
(Loss)/profit before tax     (1,404,320) 1,032,513
Finance costs recognised in (loss)/profit before tax     102,532 104,594
Investment income recognised in (loss)/profit before tax     (91) (215)
Depreciation of property, plant & equipment     834,279 691,083
Provision for slow moving and obsolete inventory     68,137 (179,525)
Movements in working capital     (2,049,198) (2,686,366)
         
Cash used in operating activities before income taxes     (2,448,661) (1,037,916)
         
Income taxes (paid)/received     (1,929) 300,512
         
Net cash used in operating activities     (2,450,590) (737,404)
         
CASH FLOW FROM INVESTING ACTIVITIES        
         
Payments for property, plant & equipment     (477,418) (939,219)
Interest received     91 215
         
Net cash used in investing activities     (477,327) (939,004)
         
CASH FLOW FROM FINANCING ACTIVITIES        
         
Proceeds from borrowings     1,837,077 -
Repayments of borrowings     (419,889) (30,306)
Interest paid     (79,467) (81,722)
Payments for other finance costs     (15,747) (23,053)
         
Net cash generated by/(used in) financing activities     1,321,974 (135,081)
         
NET DECREASE IN CASH     (1,605,943) (1,811,489)
         
Cash at beginning of period     2,206,430 3,028,599
         
Effect of foreign currency translation on cash     (2,735) (8,085)
         
CASH AT END OF PERIOD     597,752 1,209,025

 

 

SOURCE: DYNEX POWER INC.

For further information:

Dr. Paul Taylor     
President and Chief Executive Officer
or
Bob Lockwood
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: +44 1522 500 500
Email: investorrelations@dynexsemi.com

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DYNEX POWER INC.

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