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Zoltek have issued complete operating results for second quarter of its 2005 fiscal year, with carbon fibre sales accounting for most of the increased sales for the past six months.
The report had been delayed because Zoltek needed additional time to address unexpected financial accounting and reporting issues related to the issuance of convertible debt in January, March and October of 2004 and February 2005.
For the quarter ended March 31, 2005, Zoltek reported that net sales increased 37% to $15.8 million, from net sales of $11.5 million in the second quarter of fiscal 2004. For the first six months of fiscal 2005, Zoltek’s net sales increased 48% to $29.3 million compared to $19.7 million of sales in the corresponding period of the prior fiscal year.
However, for the three months ending March 31, 2005, Zoltek reported an operating loss from continuing operations of $2.0 million, compared to an operating loss from continuing operations of $1.3 million in the second quarter of fiscal 2004. For the six months ended March 31, 2005, Zoltek’s operating loss from continuing operations was $3.6 million, compared to an operating loss from continuing operations of $4.0 million in the first six months of fiscal 2004. Zoltek’s operating losses from continuing operations during the first six months of fiscal 2005 resulted in large measure from its capacity growth initiatives.
The Company incurred start-up costs and production inefficiencies associated with the restart of its Abilene, Texas carbon fibres manufacturing facility, which had been idled for four years, and the expansion of its acrylic precursor production capacity at its plant in Hungary. For example, management estimates that approximately $1.3 million and $3.2 million of the operating losses reported from continuing operations for the three and six months ended March 31, 2005, respectively, were attributable to the start- up and post start-up operating inefficiency of the installed carbon fibre lines in its Abilene facility.
“”We are working our way through some start-up problems. We remain confident that we can meet the rising demand for our carbon fibres and reach break-even and, ultimately, begin to make a profit with our existing production facilities when we are fully operational,”” Rumy said. “”The demand for our fibres continues to be strong and, for the foreseeable future, the only practical limitation on our sales is our ability to produce. Along with the restart of the Abilene facility, we continue to implement our program to increase carbon fibres capacity in Hungary by 1,000 tons per year.””
As a result of the delay in filing Zoltek’s Form 10-Q for the fiscal quarter ended March 31, 2005, on May 18, 2005 Zoltek received a notification from Nasdaq that it is not in compliance with the filing requirements for continued listing on Nasdaq, and that its common stock is therefore subject to delisting from the Nasdaq National Market. The matter is still ongoing.
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