Dynex Power Announces Third Quarter Results

Q3 Disappointing but Strong Order Book Gives Confidence in an Early Recovery

Listing: TSX Venture Exchange
Symbol: DNX

LINCOLN, England, Nov. 22, 2013 /CNW/ - Dynex Power Inc., a leading, high power semiconductor company, today announced its financial results for the third quarter and nine months ended September 30th, 2013.

Summary financial information for the three and nine months ended September 30th, 2013 is as follows:

Canadian Dollars (000's) Sept 30, 2013 Sept 30, 2012 YTD 2013 YTD 2012
Revenue 9,523 9,307 26,359 29,685
Gross Profit 114 1,462 1,799 5,665
Other Income, Expenses and Costs (1,388) (1,296) (3,869) (4,240)
Profit before Tax (1,274) 166 (2,070) 1,425
Income Tax Recovery/(Expense) 434 (57) 653 (415)
Net (Loss)/Profit (840) 109 (1,417) 1,010
Common shares outstanding 1 - diluted 80,509,047 80,509,047 80,509,047 80,509,047
Earnings per share  - diluted $(0.01) $0.00 $(0.02) $0.01
1 Weighted average for the period

Third quarter revenue of $9.5 million was 2% higher than the corresponding quarter of last year. The increase was the result of significantly higher sales of power assemblies and services, which was partially offset by a reduction in sales of power modules and die and bipolar products.

As a consequence of the weak sales in the first quarter, year to date revenue of $26.4 million was 11% lower than in the same nine-month period last year. The reduction reflected a significant decline in sales of power modules and die and a smaller decrease in bipolar sales, partially offset by increased sales of power assemblies, integrated circuits and services.

The gross margin of 1.2% in the third quarter of 2013 was significantly lower than the 15.7% reported in the corresponding quarter of last year. This reduction in margin reflected a product mix with a disproportionate contribution from power assemblies, which typically carry lower margins, and the very competitive market being faced at the current time. For the year to date, the gross margin was 6.8% compared to 19.1% in the corresponding period last year. The year-over-year reduction reflects the decline in revenue and recent unfavourable product mix.

Other income, expenses and costs represented 14.6% of revenue in the third quarter of 2013 and 14.7% for the year to date compared with 13.9% and 14.3% in the corresponding periods of last year.

As a result, Dynex generated a loss before tax in the quarter of $1.3 million and a net loss of $840,000 compared to a profit before tax of $166,000 and a net profit of $109,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $2.1 million was recorded, with a net loss of $1.4 million. This compares with a profit before tax of $1.4 million and a net profit of $1.0 million in the corresponding period of last year. The Company had a loss per share in the third quarter of 2013 of $0.01 and for the year to date a loss per share of $0.02, compared with earnings per share of $0.01 in the first nine months of last year.

At the end of the third quarter, the Company's order book stood at $30.5 million, approximately 36% higher than at the end of the second quarter, and approximately 50% higher than it was at the end of last year. The strength of the order book gives management confidence in forecasting a better revenue figure for the fourth quarter and growth in revenue in 2014. Accordingly, management believes the business should return to profitability in 2014, though gross and net profit margins are expected to be below normalized levels.

Dr. Paul Taylor, President and Chief Executive Officer commented, "Dynex's financial results for the third quarter failed to deliver an acceptable level of gross profit resulting in a net loss. The disappointing performance was due to the combination of an unfavourable product mix with the balance toward assemblies and away from power semiconductors, coupled with market pressures to reduce assembly prices. This, together with the re-scheduling of orders from one of our major customers and delays in demand from the rail market in China, resulted in the loss now being reported. Customer re-scheduling issues have always been an unpredictable aspect of our industry sector, but they have been particularly troubling in the post-2008 market. At the same time, however, our order book remains strong and this gives management confidence in the medium and longer term success of the business. We have seen a continuing increase in the confidence level of our customers."

Bob Lockwood, Chief Financial Officer commented, "The strength of our order book and our confidence in the future of the business means that we have to continue building in preparation for the expected upturn in demand and pricing. This preparation for growth means our fixed costs have increased and impacted current results. We remain cautious and careful as far as possible but we have to be prepared for the improving times that we remain confident lie ahead."

Li Donglin, the Chairman of Dynex said, "The third quarter results, and indeed the year to date results, are disappointing. Whilst we do not underestimate the difficulties currently being faced, we remain confident in the medium to long-term dynamics of the market and in management's ability to capitalize on an opportunity for sustained business growth."

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 Power Inc are available at www.dynexpower.com.

Information about Dynex Semiconductor Ltd and its products can be found at www.dynexsemi.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.

Condensed Consolidated Statement of Comprehensive Income (unaudited) in Canadian Dollars
Quarter Ended September 30th, 2013

   3 months  3 months  YTD  YTD
   Sept 30th  Sept 30th  Sept 30th  Sept 30th
   2013  2012  2013  2012
   $  $  $  $
Revenue 9,522,616 9,306,519 26,358,766 29,684,501
Cost of sales (9,408,468) (7,844,341)  (24,559,706) (24,019,942)
Gross profit 114,148 1,462,178 1,799,060 5,664,559
Other income 11,602 28,320 69,236 60,012
Sales and marketing expenses (226,885) (218,153) (679,343) (653,822)
Administration expenses (682,873) (677,611) (2,065,246) (2,366,070)
Research and development expenses (362,957) (206,158) (913,934) (814,486)
Finance costs (99,463) (80,055) (379,328) (253,493)
Other gains and (losses) (27,562) (142,046) 99,186 (212,130)
(Loss)/profit before tax (1,273,990) 166,475 (2,070,369) 1,424,570
Income tax (expense)/recovery 433,699 (57,299) 653,576 (414,513)
Net(Loss)/profit (840,291) 109,176 (1,416,793) 1,010,057
Other Comprehensive Income/(Loss)        
Exchange differences on translation of foreign operations (net of tax of $nil) 1,227,483 (203,786) 933,365 235,518
Total Comprehensive Income/(Loss) for the year 387,192 (94,610) (483,428) 1,245,575
Earnings/(Loss) per share        
Basic (0.01) - (0.02) 0.01
Diluted (0.01) - (0.02) 0.01


Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars
As at September 30th, 2013

   Sept 30th  Dec 31st
  2013 2012
   $  $
Property, plant & equipment 33,740,962 33,706,294
Derivative financial instruments 11,932 2,228
Total non-current assets 33,752,894 33,708,522
Inventories 13,392,707 10,954,012
Trade receivables 7,427,190 5,297,728
Amounts owing from parent company 2,226,412 2,776,110
Prepayments, deposits & other receivables 756,358 255,847
Tax recoverable 130,795 124,292
Cash  568,765 2,206,430
Total  current assets 24,502,227 21,614,419
Trade payables 2,814,755 1,151,054
Amounts owing to parent company 564,687 267,349
Other payables and accruals 1,962,058 3,171,809
Borrowings 5,633,593 6,547,631
Provisions 86,298 237,548
Total current liabilities 11,061,391 11,375,391
NET CURRENT ASSETS 13,440,836 10,239,028
Borrowings 9,853,889 5,512,391
Provisions 223,703 212,804
Deferred tax liabilities 1,317,062 1,939,851
Total non-current liabilities 11,394,654 7,665,046
NET ASSETS 35,799,076 36,282,504
Share capital 37,096,192 37,096,192
(Accumulated deficit)/retained profit   (875,872) 540,921
Exchange fluctuation reserve (421,244) (1,354,609)
  35,799,076 36,282,504


Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars
Quarter Ended September 30th, 2013

     Retained  Foreign  
     Profit/  Currency  
   Share  (Accumulated  Translation Total
  Capital  Deficit)  Reserve Equity
   $  $   $  $
At January 1st, 2012 37,096,192 (524,615)  (1,917,379) 34,654,198
Total comprehensive income for the period - 1,010,057 235,518 1,245,575
At September 30th, 2012 37,096,192 485,442 (1,681,861)  35,899,773
Total comprehensive income for the period - 55,479 327,252 382,731
At December 31st, 2012 37,096,192 540,921 (1,354,609) 36,282,504
Total comprehensive income for the period - (1,416,793) 933,365 (483,428)
At September 30th, 2013 37,096,192 (875,872) (421,244) 35,799,076


Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars
Quarter Ended September 30th, 2013

    Sept 30th  Sept 30th
  2013 2012
  $ $
(Loss)/Profit before tax  (2,070,369) 1,424,570
Finance costs recognised in (loss)/profit before tax 379,328 253,493
Investment income recognised in (loss)/profit before tax (174) (373)
Depreciation of property, plant & equipment  2,565,540 2,157,369
Loss on disposal of property, plant & equipment  1,506 24,070
Provision for slow moving and obsolete inventory 321,774 (350,143)
Movements in working capital  (3,563,622) (2,903,101)
Cash used in operating activities before income taxes (2,366,017) 605,885
Income taxes (paid)/received  (3,919) 174,868
Net cash (used in)/generated by operating activities (2,369,936) 780,753
Payments for property, plant & equipment  (1,842,064) (4,822,781)
Interest received  174 373
Net cash used in investing activities  (1,841,890) (4,822,408)
Proceeds from borrowings  9,214,438 2,858,323
Repayments of borrowings  (6,257,514) (665,316)
Interest paid  (257,133) (222,455)
Payments for other finance costs  (94,167) (30,359)
Net cash generated by financing activities  2,605,624 1,940,193
NET DECREASE IN CASH  (1,606,202) (2,101,462)
Cash at beginning of period  2,206,430 3,028,599
Effect of foreign currency translation on cash   (31,463) (11,523)
CASH AT END OF PERIOD  568,765 915,614




For further information:

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

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