Dynex Power Inc. today announced its financial results for the third quarter and nine months ended September 30th, 2015. Revenue in the third quarter of 2015 was $1.8 million or 17.7% higher than in the corresponding quarter of last year. Two thirds of this increase was a result of an 11% weakening of the Canadian Dollar against Sterling over the last twelve months. The rest of the increase reflected stronger revenue from sales of IGBT products and technical services. For the year to date, revenue was $1.8 million or 5% higher than in the first nine months of 2014. The increase matched the 5% weakening in the average rate of the Canadian Dollar against Sterling over the intervening year.
As a consequence of revenue growth combined with controlled expenses, Dynex reported a profit before tax in the quarter of $603,000, compared to a loss before tax of $261,000 in the corresponding quarter of last year. For the year to date, a loss before tax of $3.3 million was recorded compared to a loss before tax of $1.3 million in the corresponding period of last year. The decline in year to date performance reflects the weaker than expected revenue and additional manufacturing costs due to unexpected technical issues that had been experienced in the first half of 2015.
At the end of the third quarter, the Company's order book stood at $17.0 million, approximately 17% higher than at the end of the second quarter. Revenue is expected to be at a similar level in the fourth quarter to that reported in the third quarter and the Company expects to record another profit in the fourth quarter.
Dr. Paul Taylor, President and Chief Executive Officer commented, "We are delighted to be able to report our first quarterly profit for over two years. Our manufacturing performance was much improved in the quarter with greater efficiency and fewer technical issues. These improvements reflected the on-going continuous improvement activities taking place in our manufacturing areas. It is also pleasing to report a further increase in our gross R&D investment, based on the increasing support we are receiving from our parent company and our governments."
The gross margin of 7.6% in the third quarter of 2015 was lower than the 11.3% reported in the corresponding quarter of last year. The gross margin was below the range targeted by management and reflected the competitive marketplace currently being faced by the Group. For the year to date, the gross margin was 0.5% compared to 11.3% in the corresponding period last year. This is significantly below the range being targeted by management and again reflects the lower level of revenue being reported compared to management's expectations and additional manufacturing costs due to unexpected technical issues as well as the cost of redundancies in the first quarter.
Sales and marketing and administration expenses represented 10.9% of revenue in the third quarter and 11.8% of revenue for the year to date compared to 12.0% and 11.6% in the corresponding 2014 periods. These costs have been on a steadily reducing percentage for a number of years. The small increases in the year to date figure reflected the poor level of revenue reported in the first half of 2015. Dynex continues to expect these ratios to improve in the longer term.
There was no net cost to R&D expenditure in the quarter or the year to date. There had been no net cost in the corresponding quarter of the preceding year but there had been a cost equivalent to 1.6% of revenue in the first nine months of 2014. However, gross expenditure on research and development (which is calculated before taking account of the contribution received from CSR Times Electric and the grants from Government bodies) is higher than last year both in the current quarter and the year to date and the reduction in net expenditure reflects the Group's success in attracting grants and funding for this work together with additional tax relief available to the Group for research and development which, following changes in the way this relief operates, is now accounted for as a reduction in R&D costs rather than as part of the tax charge. Gross expenditure is currently running at 18.0% of revenue in the year to date.
Bob Lockwood, Chief Financial Officer commented, "Whilst it is pleasing to be able to report a return to profitability, we still need to see a significant improvement in the profitability of the business. However, we are moving in the right direction".
Li Donglin, the Chairman of Dynex said, "Whilst being pleased to see the improvement in Dynex's results, we, like all shareholders, need to see this improvement being repeated in forthcoming quarters. We remain pleased that through these difficult last few quarters, the Group has continued to invest heavily in the development of new products and improved production processes."
