Dynex Power Inc. announced its financial results for the second quarter and six months ended June 30th, 2016. Revenue in the second quarter of 2016 was $2.9 million or 24.1% lower than in the corresponding quarter of last year. The reduction reflected lower sales of bipolar, IGBT die and modules and power assemblies. For the year to date, revenue was $2.1 million or 10% lower than in the first half of 2015. The reduction reflected a significant drop in bipolar sales with much smaller reductions in sales of IGBT modules and dies and power assemblies.
The negative gross margin of 1.3% in the second quarter of 2016 compared to a gross margin of 6.3% in the second quarter of 2015. The negative gross margin reflected a lower volume of revenue for the quarter and the high level of fixed costs inherent in manufacturing semiconductors. For the year to date, the gross margin was 5.5% compared to a negative gross margin for the corresponding period of last year of 3.6%. The gross margin in 2016, though substantially improved compared to 2015, is still below the level targeted by management and again reflects the lower level of revenue for the period.
Sales and marketing and administration expenses represented 14.4% of revenue in the second quarter and 13.9% of revenue for the year to date compared to 13.9% and 12.4% in the corresponding periods in 2015. The absolute level of such expenditure had fallen in the quarter but not sufficiently enough to offset the decline in revenue. The absolute level had risen by just over 1% for the year to date.
The net expenditure on research and development for the second quarter of 2016 was $483,000. In the corresponding quarter of last year, there had been a small surplus from research and development. For the year to date, net expenditure was $783,000 compared to $98,000 in the corresponding period of last year. The increase reflected a significant increase in research and development expenditure and a reduction in the funding being accounted for from the UK government.
As a consequence of these changes, Dynex reported a loss before tax in the quarter of $2.1 million compared to a loss before tax of $520,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $2.6 million was recorded compared to a loss before tax of $3.9 million in the corresponding period of last year.
At the end of the second quarter, the Company's order book stood at $14.1 million, approximately 6% higher than at the end of the first quarter. At the end of 2015, the order book had stood at $15.2 million but the reduction since then is more than accounted for by the strengthening of the Canadian Dollar against Sterling.
Revenue is expected to be higher in the second half of the year compared to the first half and the management expects to return to profit in the second half of the year.
Dr. Paul Taylor, President and Chief Executive Officer commented, "Market conditions for our IGBT and bipolar products have remained weak. Global uncertainty has meant that our customers are being cautious and this has affected our order book for the first half of this year, resulting in low sales revenue. Our current outlook for the third quarter is for increased revenue and a return to profitability.â€
Dr Taylor also took the opportunity to thank Li Donglin for his wise counsel and support over the last six years as Chairman of the company. Li Donglin resigned from this role at the recent Annual General Meeting following his promotion in China. Liu Ke'an, who has also been a director of the Company for the last six years, has now replaced Li Donglin as Chairman.
Bob Lockwood, Chief Financial Officer commented, "Second quarter results are disappointing, but we look forward to a return to profitability in the third quarter and are still hopeful of reporting a small profit for the full year".
Liu Ke'an, the new Chairman of Dynex said, "I am delighted to become Chairman of Dynex. It is disappointing to be reporting a loss in my first quarter as Chairman of the Company. CRRC Times Electric remains strongly supportive of Dynex and we will work closely with management to help the Company return to profitability."
