Business News

Delphax Technologies Announces Results for Fiscal 2008 Second Quarter

Thursday 08. May 2008 - Delphax Technologies Inc., a global provider of high-speed digital printing systems, today reported net sales of $9.9 million for the second quarter ended March 31, 2008, compared with $11.3 million in the same period a year earlier.

The fiscal 2008 second-quarter net loss was $1.1 million, or $0.17 per share, compared with a net loss of $62,000, or $0.01 per share, for the second quarter of fiscal 2007.

For the six months ended March 31, 2008, net sales were $19.8 million, compared with $23.0 million for the same period of 2007. The net loss was $2.2 million, or $0.33 per share, compared with $15,000, or $0.00 per share, a year earlier.

“This year’s second quarter was our fifth consecutive quarter without a major system sale, a central consideration in the decision announced yesterday to reduce our investment in the sales, marketing and product development efforts for our CR Series roll-fed press and initiate a related workforce reduction,” said Dieter Schilling, president and chief executive officer. “The difference between profit and loss in recent quarters has been the cost of trying to build a growth strategy around the CR Series, a product line that offers significant productivity advantages, but has so far found only a limited following among commercial printers.”

The workforce reduction is expected to result in a charge of approximately $2 million in the third fiscal quarter ending June 30, 2008. Along with other spending cuts the company expects to make, the workforce reduction is expected to reduce annual cash costs by approximately $4 million. The action is not expected to significantly affect the security printing side of Delphax’s business.

“We will continue to provide full service and engineering support to current and prospective CR Series customers,” Schilling said. “But our overriding objective is to return Delphax to profitability by focusing on the core of our business — providing equipment, service and supplies to the security printing industry, supplemented by a stable combination of legal/financial, transactional, direct mail and other publishing applications where we have an established customer base. We currently have a sales backlog of approximately $1.5 million, primarily for equipment related to the security printing industry, which we expect to bring us to profitability in the fourth quarter of this fiscal year.”

Service-related revenues — sales of maintenance, spares and supplies — were $9.8 million in the fiscal 2008 second quarter, down from $11.0 million in the second quarter of fiscal 2007. The decline reflected the diminishing contribution of the mature and legacy portion of the company’s installed base. As previously disclosed, customers of this older printing equipment are replacing it with alternative technology, which results in less service-related revenues for Delphax.

Gross margin for the second quarter of fiscal 2008 was $2.5 million, or 26 percent of net sales, down from $3.4 million, or 30 percent of net sales, for the second quarter a year earlier. For the six months ended March 31, 2008, gross margin was $5.1 million, compared with $6.5 million for the first six months of fiscal 2007. The gross margin rate for the first six months of fiscal 2008 was 26 percent, compared with 28 percent for the same period last year.

Fiscal 2008 second-quarter operating expenses held even with the second quarter of fiscal 2007 at $3.2 million. For the six months ended March 31, 2008, operating expenses were $6.5 million, up 6 percent from $6.1 million for the six months ended March 31, 2007.