Dynex Power Reports Third Quarter Improvement in Revenues and Profits

Chinese IGBT Market Continues To Offer Attractive Growth

Listing:  TSX Venture Exchange
Symbol:    DNX


LINCOLN, England, Nov. 17, 2011 /CNW/ - Dynex Power Inc., a leading specialist high power semiconductor company, today announced its results for the third quarter of 2011.

Summary financial information in Canadian dollars for the three and nine months ended September 30th, 2011 is as follows:

  Sept 30, 2011
Sept 30, 2010
YTD 2011
YTD 2010
Revenue 9,860 8,116 26,449 27,782
Gross Profit 2,976 1,392 6,407 5,833
Other Income, Expenses and Costs (1,311) (1,028) (3,678) (3,834)
Profit before Tax 1,665 364 2,729 1,999
Income Tax (436) (114) (744) (636)
Profit for the Period 1,229 250 1,985 1,363
Common Shares outstanding 1 - diluted 80,576,081 80,574,586 80,579,756 80,511,860
Earnings per Share - diluted $0.02 $0.00 $0.02 $0.02

1 Weighted average for the period

Revenue in the third quarter of 2011 was 21% higher than the corresponding quarter of last year. Revenue from the Power Modules Group was again at an all time record as a result of the new lines now supplying die to CSR Times Electric. Strong revenue was also experienced by the Integrated Circuits product group. Revenue from the Bipolar Discrete and the Power Electronic Assemblies groups reflected the continuing soft market for high power bipolar products.

Year-to-date revenue was 5% lower than in the same nine-month period last year. As with the third quarter's figures, results from the Power Modules and Integrated Circuits product groups were good, but offset by soft demand for the products of the Bipolar Discrete and Power Electronic Assemblies product groups.

The gross profit margin for the third quarter of 2011 was 30.2% compared to 17.1% in the corresponding quarter of 2010. Gross profit in the third quarter benefitted from a one-off credit of approximately $580,000. Without this one-off credit, the gross profit margin would have been 24.3% which better reflects the underlying profitability of the business. The gross profit margin for the year-to-date is unaffected by the one-off credit referred to above. The increase from the corresponding quarter of last year arises from the strong growth in revenue and a favourable product mix. The year-to-date gross profit margin was 24.2% compared to 21.0% last year. The gross profit margin for the year-to-date in 2010 was negatively impacted by the costs of bringing the new fabrication lines into operation.

Dynex reported profit before tax of $1.7 million in the quarter compared to $0.4 million for the third quarter of 2010. The net impact of the one-off credit referred to above on profit before tax was approximately $500,000. Without that one-off credit, profit before tax would have been approximately $1.2 million, still a significant improvement over the corresponding quarter of last year. On a year-to-date basis, profit before tax was $2.7 million compared to $2.0 million for the corresponding period in 2010.

Management expects that revenue in the fourth quarter of 2011 will approximate the level attained in the third quarter.

The book-to-bill ratio was 0.8 during the third quarter and 1.1 for the year-to-date. A level of 1.1 for the year-to-date suggests slow but positive growth in demand for the Company's products. The order book stood at $21.6 million at the end of September, $0.4 million lower than it had been at the end of the second quarter but $4.8 million higher than it had been at the end of 2010.

Following the exhaustion of UK tax losses last year, tax has been provided on UK earnings at the statutory tax rate of 26%. However, the Company will be able to defer most of this tax charge. As a result, no major tax payments are expected to be made in the UK this year.

Dr Paul Taylor, President and Chief Executive Officer said, "Management is happy with the improvement in our results, which were better than our expectations. This has been a particularly busy quarter for Dynex. We purchased the site we occupy in Lincoln from our landlord, thus reversing an action taken in 2003 when the premises were sold and leased back to enable us to repay long term debts and reduce the amount owed to suppliers. We believe this strengthens our balance sheet and worth. Following this purchase, we started the construction of a new Research and Development Centre and office building on the site. The additional space is required in order to carry out our planned research and development work which is the foundation for our future profitability. We have recently announced a temporary slowdown in investment in the Chinese railway system following an accident involving high speed trains in July 2011. This has not affected our third quarter results and is not expected to affect fourth quarter results either, but we may see some slowing in growth of our IGBT business in the early part of 2012. Many market commentators have suggested that this slowdown will only be for the short term. So it should not affect our longer term prospects. Nonetheless, even if those opportunities do not return as robustly as we originally planned, we expect that any negative impact on revenues will be offset by growing opportunities in other sectors."

Bob Lockwood, Chief Financial Officer, added, "We were pleased with the continuing improvement in our results, particularly the gross profit margin in the third quarter. We continue to keep overhead costs under control and, as a result, our underlying profit before tax in the quarter has shown strong growth. Looking forward, revenue in the fourth quarter is expected to be at a similar level to that seen in the third quarter. The early indications are for a small reduction in the first half of 2012, followed by a pick-up in the second half of 2012. Overall, we expect 2012 to show good growth over 2011."

Li Donglin, Chairman of Dynex and General Manager of CSR Times Electric, said, "The development of the Dynex business to be a major supplier to CSR Times Electric is progressing well. Following the rail accident in China in July, the market situation has changed a little bit and we may see some slow down in Chinese rail investment in the short term. However, we remain confident in the long term demand from the rail sector and in the meantime we see other areas of the Chinese power electronics market growing more strongly. Through our joint funding of the R&D Centre, we expect Dynex to accelerate the development of both power module and bipolar products, which will give the business access to these wider market opportunities in electric vehicle, renewable energy and electric grid markets.  I am pleased with the improvements made in the third quarter and look forward to this progress being maintained in the coming quarters."

Forward-looking Statements

In commenting on its expectations, the Company cautioned existing and potential shareholders about relying on the Company's expectations in that the Company's expectations contain forward looking statements and assumptions which are subject to the risks and uncertainties of the markets and the future, which could cause actual results to differ materially from expectations, and which are each difficult and subjective to forecast. Certain of those risks and uncertainties are discussed in the Management's Discussion and Analysis for the quarter ended September 30th, 2011 and include, among other things, risks and uncertainties relating to: the level of worldwide demand for power semiconductors and power semiconductor assemblies; the level of investment in power electronic equipment, electrification of transport systems, alternative power generation and high quality power transmission and distribution; the worldwide demand for and supply of silicon; and fluctuations in exchange rates between Canadian Dollars, Sterling, US Dollars and Euros. As a consequence of these and other risks and uncertainties, shareholders and potential investors must make their own independent judgments about the accuracy and reliability of the Company's expectations. Dynex disclaims any intention or obligation to update or revise any forward looking statement whether as a result of new information, future events or otherwise.

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.


Condensed Consolidated Statement of Comprehensive Income (unaudited) in Canadian Dollars

Quarter Ended September 30th 2011
      3 months   3 months   YTD   YTD
      Sept 30th   Sept 30th   Sept 30th   Sept 30th
      2011   2010   2011   2010
      $   $   $   $
Revenue     9,859,538   8,116,243   26,448,856   27,781,610
Cost of sales     (6,883,060)   (6,724,364)   (20,042,294)   (21,948,188)
Gross profit     2,976,478   1,391,879   6,406,562   5,833,422
Other income     19,708   48,339   63,450   116,488
Sales and marketing expenses     (224,986)   (205,544)   (666,708)   (656,243)
Administration expenses     (524,298)   (680,620)   (1,933,757)   (2,327,940)
Research and development expenses     (495,608)   (259,845)   (939,661)   (821,275)
Finance costs     (110,920)   (26,839)   (149,464)   (95,790)
Other gains and (losses)     24,562   96,079   (51,045)   (49,545)
Profit before Tax     1,664,936   363,449   2,729,377   1,999,117
Income tax expense     (435,648)   (113,934)   (744,263)   (635,771)
Profit for the period attributable to owners of the Company     1,229,288   249,515   1,985,114   1,363,346
Other Comprehensive Income (Loss)                  
Exchange differences on translation of foreign operations     1,474,646   500,004   1,342,870   (1,270,990)
Other Comprehensive Income (Loss) for the period (net of tax of $nil)     1,474,646   500,004   1,342,870   (1,270,990)
Total Comprehensive Income (Loss) for the period     2,703,934   749,519   3,327,984   92,356


Condensed Consolidated Statement of Financial Position (unaudited) in Canadian Dollars

As at September 30th, 2011
        Sept 30th   Dec 31st   Jan 1st
        2011   2010   2010
        $   $   $
NON-CURRENT ASSETS                
Property, plant and equipment       31,214,980   22,492,575   17,420,677
CURRENT ASSETS                
Inventories       10,445,927   7,619,442   8,872,155
Trade receivables       4,565,866   4,294,432   5,908,226
Prepayments, deposits and other receivables       2,045,282   1,301,630   1,325,144
Cash       1,058,012   3,094,626   22,942,550
Amounts owing from parent company       1,750,747   79,938   218,568
Tax recoverable       -   51,598   96,413
Total current assets       19,865,834   16,441,666   39,363,056
Trade payables       1,611,882   1,134,690   2,101,178
Other payables and accruals       1,989,149   4,010,324   3,338,090
Provisions       283,441   471,276   531,861
Borrowings       4,996,495   111,857   16,412,255
Tax payable       269,468   -   -
Amounts owing to parent company       516,938   224,629   955,026
Total current liabilities       9,667,373   5,952,776   23,338,410
NET CURRENT ASSETS       10,198,461   10,488,890   16,024,646
TOTAL ASSETS LESS CURRENT LIABILITIES       41,413,441   32,981,465   33,445,323
Borrowings       5,038,282   353,217   513,877
Provisions       223,459   213,291   88,392
Deferred tax liabilities       1,381,072   972,313   380,756
Total non-current liabilities       6,642,813   1,538,821   983,025
NET ASSETS       34,770,628   31,442,644   32,462,298
Share capital       37,096,192   37,096,192   37,041,524
Accumulated deficit       (1,249,047)   (3,234,161)   (4,579,226)
Exchange fluctuation reserve       (1,076,517)   (2,419,387)   -
TOTAL EQUITY       34,770,628   31,442,644   32,462,298


Condensed Consolidated Statement of Changes in Equity (unaudited) in Canadian Dollars

Quarter Ended September 30th, 2011

    $ $ $ $
At January 1st, 2011   37,096,192 (3,234,161) (2,419,387) 31,442,644
Total comprehensive income   - 1,985,114 1,342,870 3,327,984
At September 30th, 2011   37,096,192 (1,249,047) (1,076,517) 34,770,628
At January 1st, 2010   37,041,524 (4,579,226) - 32,462,298
Shares issued for cash   9,410 - - 9,410
Total comprehensive income (loss)   - 1,363,346 (1,270,990) 92,356
At September 30th, 2010   37,050,934 (3,215,880) (1,270,990) 32,564,064
Release of overprovision of costs relating to the 2009 rights issue   45,258 - - 45,258
Total comprehensive income   - (18,281) (1,148,397) (1,166,678)
At December 31st, 2010   37,096,192 (3,234,161) (2,419,387) 31,442,644


Condensed Consolidated Statement of Cash Flows (unaudited) in Canadian Dollars

Quarter Ended September 30th, 2011

        YTD   YTD
        Sept 30th   Sept 30th
        2011   2010
        $   $


Profit before tax       2,729,377   1,999,117
Finance costs recognised in profit or loss       149,464   168,588
Investment income recognised in profit or loss       (682)   (2,435)
Depreciation of property, plant and equipment       1,706,464   1,076,108
Gain on disposal of property, plant and equipment       (25,460)   (2,610)
Provision for slow moving and obsolete inventory       (486,605)   122,669
Movements in working capital       (5,635,838)   (2,200,584)
Cash (used in)/generated by operating activities       (1,563,280)   1,160,853
Income taxes paid       (74,938)   (2,371)
Net cash (used in)/generated by operating activities       (1,638,218)   1,158,482


Payments for property, plant and equipment       (9,563,705)   (6,072,405)
Proceeds on disposal of property, plant and equipment       25,460   16,377
Interest received       682   2,435
Net cash used in investing activities       (9,537,563)   (6,053,593)


Proceeds from issue of equity shares       -   9,409
Payment for share issue costs       -   (308,069)
Proceeds from borrowings       10,032,524   1,541,100
Repayments of borrowings       (741,017)   (15,898,196)
Interest paid       (55,026)   (105,282)
Payment for other finance costs       (71,744)   (75,687)
Net cash generated by/(used in) financing activities       9,164,737   (14,836,725)
NET DECREASE IN CASH       (2,011,044)   (19,731,836)
Cash at beginning of period       3,094,626   22,942,550
Effect of foreign currency translation on cash       (25,570)   (417,048)


      1,058,012   2,793,666








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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