Wellington Drive posts wider loss as costs surge more than sales
By Jason Krupp
Aug. 26 (BusinessDesk) - Wellington Drive Technologies, the maker of energy efficient refrigeration motors, reported a first-half loss as cost of sales and the restructuring of its ventilation unit offset a gain in revenue.
The net loss was $7.8 million in the six months ended June 30, a deterioration from the $5.9 million loss reported in the same period a year earlier, according to a statement from the Auckland-based company.
The results included restructuring costs of $1.9 million, and foreign exchange losses of $372,000. Revenue rose 48% in period to $18.1 million in the period, but was outstripped by a 53.8% spike in the cost of sales to $17.6 million.
The restructuring is part of the company's strategic shift away from the less profitable Asia Pacific region, where revenues declined 20.8% to $1.9 million in the six month period, to the Latin American market, where revenues rose 36.3% to $8.6 million, and European market where sales gained 97% to $7.6 million.
"The restructuring changes are designed to allow the company to focus its resources on those markets where we believe a satisfactory level of profitability can be achieved in the quickest possible time," said chairman Tony Nowell. "Strong efforts are therefore being made to reduce the operating expenditures and working capital requirements so that the company can be appropriately positioned."
Wellington Drive's earnings loss comes after the manufacturer raised $32.2 million over the past year through various capital raisings in order to keep the business afloat as it struggles to achieve profitability.
The company has $5.1 million in cash reserves, down from $5.9 million a year ago.
On a divisional basis, the company's commercial refrigeration business continued to show strong growth in the six months period, with revenues increasing 62% as demand for energy efficient motor picked up in South America.
Wellington Drive's ventilation unit experienced a difficult first half performance, with rising component and material costs nullifying a 61% increase in sales in U.S. dollar terms.
Under the new structure, the unit has reduced its manufacturing facilities in Singapore and will use contract manufacturer going forward. It also transferred some manufacturing capability to partner Ziehl-Abegg for various motors that it manufactures under contract for the German company.
Wellington Drive said it's still searching for a replacement for former chief executive Ross Green, who shifted into an advisory role in June.
The shares were unchanged at 23 cents on the NZX this morning, and have declined 40% so far this year.