Dynetek Industries Ltd. Announces Second Quarter 2008 Results



    CALGARY, Aug. 14 /CNW/ - Dynetek Industries Ltd. (TSX:DNK), a leader in
the design, manufacturing and marketing of proprietary fuel storage cylinders
and systems for compressed natural gas (CNG) and hydrogen, today reported
results for the three months and six months ended June 30, 2008. The full
unaudited consolidated financial statements and MD&A have been filed on SEDAR
at www.sedar.com and on Dynetek's website at www.dynetek.com.

    
    Financial Highlights
    (tabular amounts in thousands of Canadian dollars,
    except share capital and per share data)
    (unaudited)                       Three months                Six months
                                             ended                     ended
                                           June 30                   June 30
                                 2008         2007         2008         2007
                          ---------------------------------------------------
    Total Revenue               5,015        8,135        9,464       18,645
    Net income (loss)
     before taxes              (1,480)         (34)      (2,540)         213
    Net income (loss)
     before taxes per
     common share (basic
     and fully diluted)         (0.07)         nil        (0.12)        0.01
    Net income (loss)          (1,480)      (2,309)      (2,540)      (2,142)
    Net income (loss)
     per common share
     (basic and fully
     diluted)                   (0.07)       (0.11)       (0.12)       (0.10)
    EBITDA(1)                    (795)         784       (1,494)       1,694
    Capital expenditures           70          443          148          731
    Cash and cash
     equivalents                4,154        1,600        4,154        1,600
    Non-cash working
     capital(1)                11,146       11,003       11,146       11,003
    Working capital(1)         15,300       12,603       15,300       12,603
    Cash flow
     (deficiency)
     from operations           (1,713)      (1,126)      (2,365)         993
    Total assets               41,417       44,500       41,417       44,500
    Long-term debt and
     capital leases             7,259        1,544        7,259        1,544
    Common shares
     outstanding           20,936,500   20,940,576   20,936,500   20,940,576
    Weighted average
     common shares
     outstanding           20,936,500   20,940,576   20,936,500   20,940,576
    -------------------------------------------------------------------------

    (1) EBITDA, non-cash working capital and working capital are non-GAAP
        financial measures. Dynetek defines EBITDA as earnings before
        interest, taxes, stock based compensation, non-cash foreign exchange,
        depreciation, and amortization. Dynetek defines non-cash working
        capital as current assets less cash and current liabilities. Dynetek
        defines working capital as current assets less current liabilities.
        Dynetek believes that these non-GAAP financial measures provide
        investors and analysts with useful information so that they can
        better understand the financial results and perform a better analysis
        of Dynetek's growth and profitability potential.
    

    OPERATIONAL HIGHLIGHTS

    In the Outlook section of the MD&A for the year ended December 31, 2007,
Dynetek indicated that it expected to incur a loss and negative EBITDA(1) in
Q1 and Q2 2008, due to the slowdown in the demand for its products resulting
from the postponement of public bus manufacturing in Europe.
    In the first six months of 2008, Dynetek achieved total revenues of
$9.5 million, a decrease of 49% compared to $18.6 million for the same period
of 2007. Cylinder and system sales for the six months ended June 30, 2008 were
$6.8 million, a decrease of 55% compared to $15.2 million for the same period
of 2007. For the six months ended June 30, 2008 the Company achieved research
and development revenue of $2.6 million, a decrease of 19% compared to
$3.2 million for the same period of 2007. In the second quarter of 2008,
Dynetek achieved total revenues of $5.0 million (2007 - $8.1 million) with
cylinder and system sales of $3.5 million (2007 - $5.8 million) and research
and development revenue of $1.4 million (2007 - $2.3 million). The Company
recorded cash flow deficiency from operations of ($2.4) million for the six
months ended June 30, 2008, compared to cash flow from operations of
$1.0 million for the same period of 2007. Cash flow deficiency from operations
for the three months ended June 30, 2008 was ($1.7) million compared to cash
flow deficiency of ($1.1) million for the same period of 2007. The Company had
negative EBITDA(1) of ($1.5) million for the six months ended June 30, 2008,
compared to positive EBITDA(1) of $1.7 million for the six months ended
June 30, 2007. The Company had negative EBITDA(1) of ($0.8) million for the
second quarter ended June 30, 2008, compared to positive EBITDA(1) of
$0.8 million for same period of 2007. Dynetek reported a loss of
($2.6) million for the six months ended June 30, 2008, compared to a net loss
of ($2.1) million for the comparable period of 2007. The Company had a loss of
($1.5) million for the second quarter ended June 30, 2008 compared to a loss
of ($2.3) million for the same period of 2007. As at July 30, 2008 the Company
had a confirmed revenue backlog of $21.2 CAD for cylinder and system sales and
research and development projects for delivery within the next twelve months.
    The Company continues to focus its compressed natural gas cylinder and
system sales in areas such as California and Europe. Dynetek's proprietary
technology provides advantages such as less weight, more compressed natural
gas on board and less operating costs, being the value proposition we offer
our customers that our competitors cannot provide. In the first six months of
2008, Dynetek's European operations achieved cylinder and system sales of
$4.5 million (2007 - $9.1 million). In the three months ended June 30, 2008,
Dynetek's European operations achieved cylinder and system sales of
$2.1 million (2007 - $3.3 million). The cylinder and system sales from the
Canadian operations for the six months ended June 30, 2008 were $2.3 million
(2007 - $6.1 million). The cylinder and system sales from the Canadian
operations for the three months ended June 30, 2008 were $1.5 million (2007 -
$2.5 million).
    Dynetek's research and development team continues to focus its efforts on
compressed hydrogen and related storage requirements. During the first six
months of 2008 the Company continued to work with NRCan and 9 different OEMs,
including Ford, Hyundai, Volkswagen, Daimler and Nissan, to design,
manufacture and deliver the hydrogen storage solution on 13 confidential
development programs.
    In May 2008, the Company received approval from U.S. Department of
Transportation (DOT) of their 450 Bar ( 6527 PSI) cylinder for use in Dynetek
"BT450" Tube Trailer Systems. The traditional method of bulk gas hauling is
with steel tube trailers with typical operating pressure of 3000psi. Dynetek's
new high-pressure cylinders and systems which will operate at 6500psi, will
enable direct refueling of Hydrogen vehicles from our specially designed
"BT450" modules. Dynetek has received an order from Air Liquide to provide
cylinders for the construction of a "BT450" Tube Trailer system, which will be
used to refuel the Hydrogen bus fleet being deployed by BC Transit for the
2010 Winter Games in Whistler, British Columbia.
    In June 2008, Dynetek Europe GmbH received a CNG complete system order
from a major bus manufacturer in Europe. These systems, which are to be
delivered from June 2008 until February 2009, represent revenue of
approximately $10 million (CDN). Dynetek will provide a complete system
solution offering a lower overall system weight with increased fuel on board
the vehicle than our competitors.
    In the first six months of 2008 Dynetek continued to provide deliverables
under the milestones for the contract with Magna Steyr in connection with
Daimler's automotive fuel cell program. The program involves the development,
certification and supply of 700bar compressed hydrogen fuel storage systems,
including related engineering, to Magna Steyr in connection with Daimler's
fuel cell program.

    OUTLOOK

    The Company remains committed to continuing to grow its CNG and Hydrogen
revenue streams globally through targeted marketing initiatives.
    In 2008, the Company expects to increase its focus on revenue growth
opportunities worldwide in the CNG market for bus and heavy-duty truck
applications and for bulk hauling of larger quantities of compressed gas.
Major economic and environmental factors worldwide are contributing to
high-growth in natural gas demand for vehicles as follows:

    
    -   The high growth rate in demand for natural gas stems from the
        comparative advantages of natural gas compared to diesel, gasoline
        and bio-fuels;
    -   Natural gas is cleaner with less toxic emissions than diesel or
        gasoline and is currently less costly;
    -   A growing natural gas infrastructure. Continuing investment in
        infrastructure is adding to the number of compressed natural gas
        refueling centers; and
    -   CNG will continue to develop as a transportation fuel as it currently
        is less costly than oil based fuels which are also becoming supply
        constrained in developing economies.
    

    The above trends and related market opportunities are expected to create
a positive intermediate and longer-term outlook for Dynetek. The largest
demand for CNG vehicles is in countries where low cost solutions are required.
The Company is currently reviewing strategies to grow the compressed gas
system revenue and is evaluating additional product development and sales in
order to penetrate price sensitive markets that are actively developing CNG as
a transportation fuel. To accomplish this product development and market
penetration, the Company will also be evaluating strategic alliances, new
joint ventures, new partners and customers, licensing arrangements, new
manufacturing techniques and additional product offerings. The Company is
committed to change where appropriate to attain its goals of revenue growth
and net income.
    In the area of bulk hauling, the Company's prime focus will be in markets
with access to an abundance of natural gas, where storage technology and
pipeline infrastructure are lacking. The Company has already obtained
US Department of Transportation (DOT) and Transport Canada (TC) certification
for its 223bar bulk hauling system and in 2008, the Company has received DOT
approval to sell its 450 bar bulk systems in the US which should help it with
penetrating the mobile bulk hauling storage market in 2008 and beyond.
    Dynetek expects to incur a loss and negative EBITDA in Q3 of 2008 due to
a slowdown in the demand for its products, specifically a postponement of
public transit bus manufacturing in Europe. In June 2008 the Company announced
Dynetek Europe GmbH has received a CNG complete system order from a major bus
manufacturer in Europe and the systems are to be delivered from June 2008
until February 2009, representing revenue of approximately $10 million (CDN).
Currently Dynetek is seeing an increase in customer enquiries and expects to
see an increase in bid submissions in Q3 2008. The Company will continue to
manage its costs responsibly and improve production efficiencies where
possible. During the second quarter, the Company reduced production and
research and development staff to core levels, reduced executive compensation
and continues to review supplier alternatives.
    The Company will continue to develop its hydrogen storage technologies to
assist in commercializing the hydrogen economy. This includes working with
OEMs to implement their hydrogen vehicle strategies and sales to
energy-related companies that require mobile refueling units, stationary
storage for refueling, and bulk hauling of hydrogen.
    In 2008 Dynetek expects to substantially complete the contract with
Magna Steyr in connection with Daimler's automotive fuel cell program. In 2007
Dynetek saw an increase in activity in the hydrogen vehicle market and
continues to work with Natural Resources Canada (NRCan) and 9 different
Original Equipment Manufacturers (OEMs), including Ford, Hyundai, Daimler,
Volkswagen and Nissan, to design, manufacture and deliver hydrogen storage
solutions on 13 different confidential development programs.

    ABOUT DYNETEK

    Dynetek Industries Ltd. 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 news release contains
forward-looking statements and should be read in conjunction with the
financial statements and related notes for the year ended December 31, 2007
and quarterly interim financial statements for 2008. Forward-looking
statements are based upon current assumptions, expectations and estimates that
involve a number of risks and uncertainties and actual results could differ
materially from those discussed in the forward-looking statements. Readers are
encouraged to review the section in the 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 based upon management's assumptions,
expectations and estimates at the time the statements are made. Dynetek does
not update forward-looking statements should circumstances or management's
assumptions, expectations or estimates change, except where required by
securities laws.





For further information:

For further information: Christian Rasche, President and Chief Executive
Officer; or Michael Portmann, Vice President Business Development, Dynetek
Industries Ltd., 4410 46th Avenue SE Calgary, Alberta, T2B 3N7, Tel Calgary:
(403) 720-0262, Tel Germany: + 44 2102 30963-20, Toll free: 1-888-396-3835,
Fax Calgary: (403) 720-0263, Fax Germany: +442102 30963-10, Web:
www.dynetek.com

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Dynetek Industries Ltd.

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