Capacity Expansion Nears Completion, Output Aimed at China
TSX Venture Exchange
LINCOLN, England, Feb. 23 /CNW/ - Dynex Power Inc. (TSXV: DNX), a
leading specialist high power semiconductor company, today provided
investors with a status report on the capital expenditure program to
upgrade and expand its fabrication facility for silicon chips to be
used in insulated gate bipolar transistor (IGBT) modules.
The Company announced that the program is nearing completion, on-time
and on-budget. The first of Dynex's two new 6-inch IGBT lines has been
completed and is in the ramp-up phase of production. The construction
of the second line will be completed in the current quarter and will
begin its ramp-up thereafter. The Company expects positive impact on
its financial performance from the capital expenditure program starting
at the end of the second quarter of 2011.
For the past 18 months, Dynex has been replacing its existing production
line, which processed 4-inch diameter silicon, by two 6-inch lines. The
expansion increases production capacity approximately tenfold. The
largest portion of the project output is expected to be sold to Dynex's
majority shareholder, Zhuzhou CSR Times Electric Co., Ltd., to take
advantage of the significant opportunities in China. The expansion was
fully funded by a rights issue completed in December 2009.
China's publicly disclosed, long-term growth plans for rail expansion
are dramatic and unprecedented, coming on top of an existing organic
growth rate of 8.0% per annum. According to a research report prepared recently by Standard Chartered
Bank, China is adding 35,000 kilometres of new railway network, as from
2009. They are also adding 1,733 kilometres of mass transit rail lines
and substantial volumes of new rolling stock by 2020, with an
additional 3,600 kilometres of mass transit rail lines in the planning
stage. The Standard Chartered Bank research report also suggests that
China's expenditure programs may continue well beyond 2020.
Dynex's majority owner, CSR Times Electric, is part of a robust Chinese
enterprise that supplies nearly half of the railway trains in China,
which positions Dynex well to take advantage of the Chinese rail
opportunity. CSR Times Electric's total demand for IGBT products is
expected to exceed Dynex's production capability even after the current
capital expenditure project is complete.
The transformational program was well designed and has been well
executed, and positions Dynex very well for the future. However, as
management had anticipated, the construction disrupted operations,
which had a negative impact on recent financial performance. The
anticipated combination of production disruption and a softening order
book, led Dynex to announce its expectation for weaker revenues in Q3
and Q4 of 2010 and in Q1 and Q2 2011. The revenue weakness precedes the
full benefits Dynex expects from its opportunities in China.
While other sectors of the semiconductor markets have shown improvement,
global high power semiconductor markets remain soft. For three quarters
in a row, Dynex's order book declined. However, the Company believes
its order book may be beginning to stabilize. Certainly, the Company
believes its future opportunities remain very attractive.
Dr. Paul Taylor, President & Chief Executive Officer, explained, "I
remain pleased with the progress of the expansion program. Dynex has
carefully managed the program. As a consequence, costs remain on plan
and the construction work is being completed as planned. We intend to
take as much advantage as we can of the massive Chinese rail expansion.
Our prospects should be exciting over the medium term, at least."
Dr. Taylor continued, "The formation of the Research and Development
Centre described in our press releases of September 9, 2010 goes hand
in hand with the expansion program. Working together with CSR Times
Electric's own semiconductor business, we aim to be a global top-3 high
power semiconductor company. The R&D Centre and our Chinese revenue
opportunity position Dynex very well for consistent, longer term
Bob Lockwood, Finance Director and Chief Financial Officer, added, "We
announced that the soft high power market would have a negative impact
on Dynex's revenue. That impact has continued, along with the
disruption from the construction, impairing our revenue and our margins
in 2010. We expect that impairment to continue until the capital
expansion project is completed, with the overall impact in line with
Mr. Lockwood continued, "We remain pleased with our expansion project.
We continue to anticipate that improved performance will be evident
starting in towards the end of the second quarter of 2011."
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. Its 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.dynexsemi.com.
Further information on CSR Times Electric can be found at www.timeselectric.cn/en
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
SOURCE DYNEX POWER INC.
For further information:
Dr. Paul Taylor
President and Chief Executive Officer
Finance Director and Chief Financial Officer
Dynex Power Inc.
Tel: +44 1522 500 500