Wellington Drive brushes off recession, motoring to profit in second half of year

Friday 18th June 2010

Wellington Drive, the manufacturer and marketer of highly efficient electric motors for the commercial refrigeration and ventilation markets, says it will become earnings positive in the second half of the trading year following an outstanding 2009.

The North Shore-based company last year built, sold and delivered over 600,000 motors made in China and Singapore, as sales revenue jumped 54% to $22.4 million.

Though the past 18 months of global recession have been among the most challenging times that businesses have faced in many years “we have been able to weather the worst of this storm, and, more importantly, the year we are reporting on today also marked a real turning point for our company,” chairman Rick Boven told shareholders at their annual meeting today.

While sales were up, delayed or cancelled orders, constrained supplies for electronic components and a lower-than-desired gross margin resulted in an EBITDA loss for 2009 of $12.7 million. This year’s outlook is more promising Boven said. Wellington Drive has increased production to 20,000 motors a week from 13,000 a week last year.

Part of the production increase is due to customers committing to Wellington Drive’s motors as part of their strategic thinking, with repeat orders often for several hundred thousand units every year. Wellington’s development of three new sizes of motor is helping create new sales, Boven said, “while the process of product development and research is on-going to preserve and extend our market lead.”

A number of factors are pushing the worldwide adoption of Wellington Drive’s brushless electronically commutated motors whose direct current technology uses only one third the power of the AC induction motors commonly used in refrigeration and ventilation. Companies such as Coca-Cola looking for the electricity and cost savings of Wellington Drive’s motor, said Boven, and regulatory authorities in the U.S. and Europe are setting increasingly tough efficiency targets.

“The sector we are selling into is itself growing as customers, consumers and government authorities all move towards more efficient power-use options,” he said. “In fact, we are only at the beginning of an industry-wide shift that is being driven by new energy imperatives.”

He said the industry’s switch to electronically commutated motors appears to be gathering pace and that Wellington Drive is seen as the market leader.

“We have established some excellent and strategically important customer relationships and our product line is unequalled by any competitor,” Boven said. “Our profit position is, frankly speaking, far from where we need it to be and we are not satisfied with it. Nevertheless, the business is trending in the direction we need: we are seeing strong sales growth, improving margins and reducing losses."

"Even though every year will throw up its own challenges the track to profitability for Wellington is new very clear," Our products are at the forefront of the market, and our order flow is strong and growing.”

The shares fell 1% to 9 cents today and have advanced 26% in the past month.

Businesswire.co.nz

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