ABOVE: A clean tech wipeout. Chart courtesy NZX.UPDATED Wellington Drive Technologies (NZX: WDT) shares dropped 60% this morning on news that the energy-efficient motor maker intends to raise up to $8.4 million through a discounted rights issue.
ABOVE: A clean tech wipeout. Chart courtesy NZX.
UPDATED Wellington Drive Technologies (NZX: WDT) shares dropped 60% this morning on news that the energy-efficient motor maker intends to raise up to $8.4 million through a discounted rights issue.
The company, which has had repeated rounds of capital raising, has previously stated it would not undertake another major rights issue until its long-awaited move into profitability.
The proceeds will be used to fund working capital needed as sales expand, expected operating losses, and meet capital expenditure requirements.
WDT has experienced delays in some product shipments, managing director Dr Ross Green said in a release today, with one major customer for its ‘ECR’ commercial refrigeration motors deferring the bulk of its fourth quarter deliveries.
This has been partially offset by increased sales elsewhere but “in the short term we will be holding stocks above normal or desirable levels.”
Higher-than-expected air freight costs and the decline in the value of the Euro (used for historic pricing within WDT’s ventilation business) have also caused problems.
Dr Green said the company expected increase in demand in 2011.
Rather than sharply cut production and risk WDT's market position, the company's directors have opted to prepare for increased production and sales, then work towards reducing working capital through the first half of 2011.
“This requires more capital and has given rise to the decision to undertake a rights offering.”
Dr Green said that the company has programmes to reduce product cost and that a move to US dollar prices for most ventilation products will improve margins. The company also expects far less requirement for air freight in 2011.
“Directors expect 2011 to demonstrate the substantial improvement in financial performance that has been sought for some time,” he said.
Dr Green told NBR that it would be rash for him to estimate a time when the company will break even, as much depends on continued sales growth.
"Let's be clear - you use the word setbacks, we have had some setbacks but after all what we are doing is preparing for substantial growth in 2011."
"The difficulty is we have to do that now right at the time when we are carrying higher than normal stock levels, and all these things absorb cash."
WDT raised $7.67m in capital in September through a share purchase plan at 7.038c per share. The rights offer announced today, at 1.25 cents per share, is expected to open in early January 2011.
WDT shares closed yesterday at 7.5c per share and last traded down 60% to 3c per share.
