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Delphax Technologies Inc. Sales Drop 10%

Press release from the issuing company

MINNEAPOLIS, Dec. 16 -- Delphax Technologies Inc. today reported sales of $12.1 million for its fourth fiscal quarter ended September 30, 2004, a decrease of 10 percent from $13.5 million for the same period a year ago. The fourth-quarter net loss was $678,000, or $0.11 per share, compared with a net loss of $584,000, or $0.09 per share, for the fourth quarter of fiscal 2003. For the fiscal year ended September 30, 2004, net sales were $53.6 million, a decrease of 8 percent from the record $58.0 million in fiscal 2003. The company's net loss was $389,000, or $0.06 per share, in fiscal 2004, compared with a net loss of $1.8 million, or $0.30 per share, in the prior year. A restructuring charge reduced fiscal 2003 by approximately $0.18 per share. "While we expect to reverse our equipment sales trend in fiscal 2005 on the strength of our newly released CR2000 high-speed digital web press, the capital equipment market for printing equipment remained extremely tight through the fourth quarter of 2004," said Jay Herman, chairman and chief executive officer. "With equipment sales at their lowest level in more than a decade, our service-related revenues decreased 6 percent in the fourth quarter, reflecting a fall-off of legacy business that was only partially offset by revenues generated through new equipment installations." The CR2000 -- the world's fastest roll-fed digital press -- became available commercially just at the close of the fourth quarter and is expected to be an important contributor to Delphax revenues in fiscal 2005. "Delphax is a relatively new entry in mainstream commercial printing markets, having previously built its reputation on the digital check printing market," Herman said. "We have therefore taken on significant marketing and brand-building challenges. This is a slow and relatively costly process, and we are making progress. We believe that the CR2000 gives us a clear competitive edge in speed, versatility and performance that we are now able to bring to the market. Our plan is to focus marketing the CR2000 on emerging print markets such as on-demand publishing, digitally printed direct mail and variable data printing. We are pleased by our initial successes and believe that the business relationships being forged offer significant market leverage going forward. "We continue to make investments in R&D -- currently at the expense of profitability -- working toward adding additional product capability and performance attributes which will expand our addressable market. While this creates some short-term challenges, we believe doing so will best position Delphax for long-term growth and success."