Tuesday 16th March 2010
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Anticipated mismatches between production and receipts, as well as the impact of financial difficulties at wind turbine maker Windflow Technologies sole customer is revealed in the company's results for the six months to December 31, with negative cashflow dominating the accounts.
The company recorded a loss for the first-half of $1.63 million for the period, up from a loss of $1.1 million for the same period a year earlier, largely reflecting a rise in operational expenses to $3.6 million from $3 million.
Negative earnings per share of 0.9 cents were unchanged from the prior period, although the company continued to record a gross profit on turbine manufacturing, with revenue of $13.6 million exceeding cost of sales by $903,000. Year-earlier sales of $11.8 million were $903,000 more than cost of sales.
A gross profit and net loss are in prospect for the full financial year, directors said.
However, actual cash received during the six months was down dramatically, largely because receipts from the sale of turbines was $5.6 million, compared with $15.4 million in the prior period, pushing Windflow to a net cashflow deficit of $9.5 million from positive cash flow in the prior period of $711,000. As a result, current assets fell to $19.4 million from $32.2 million.
"The reduction in cash held is attributable to an anticipated cash outflow during the latter stages of production, the dispute with NZ Windfarms, and some production-related timing impacts," the NZAX-listed company said in a statement today. "Windflow expects to generate a cashflow surplus from operations over the coming period with a corresponding improvement in its cash position.
The short-term cash situation was "dependent on that of its customer NZ Windfarms Ltd, which has released various statements about its need to raise additional funding to complete the Te Rere Hau wind farm".
Windfarms had stopped withholding payment on invoices issued, following progress on a dispute about turbine specification changes, but "if NZ Windfarms is not successful in raising sufficient additional funding or if it were to again withhold significant payments, then Windflow would have major cashflow issues".
Windflow was presenting its results on a "going concern" basis because Windfarms was also trading on the assumption that it remains a going concern.
Windflow shares last traded on March 8 at $1.30, up 3.2% on the week, but down 46% over the last year.
The company continues to manufacture turbines for the remainder of the Te Rere Hau windfarm, and achieved 93.3% availability for its Windflow 500 turbines over the six months, just below the 95% warranty level, triggering payments to Windfarms of $41,453, within provisioning.
Negotiations are continuing between Windfarms and one appellant against a resource consent granted to extend the Te Rere Hau site, while MightyRiverPower is negotiating with two appealing parties who are trying to block the 25 turbine Long Gully wind farm proposed for hills behind Wellington's suburb of Brooklyn.
The company reported no further sales prospects.
While reduced global demand for wind turbines in 2009 had caused an oversupply, Windflow said it remained in a "slightly positive" competitive position against European manufacturers.
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