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Delphax Technologies Inc. Reports First Quarter Results: Sales Down

Press release from the issuing company

MINNEAPOLIS, Feb. 10 -- Delphax Technologies Inc. today reported sales of $13.0 million for the first fiscal quarter of fiscal 2005 ended December 31, 2004, a decrease of 9 percent from $14.2 million for the same period a year ago. The first-quarter net loss was $519,000, or $0.08 per share, compared with net income of $360,000, or $0.06 per share, for the first quarter of fiscal 2004. Both equipment sales and service-related revenues were up sequentially from the fourth quarter of fiscal 2004, helped by the sale of Delphax's newly introduced CR2000 high-speed digital web press to a major French commercial printer, the second such sale to this industry leader. "We expect the CR Series printing systems to be an important contributor to our equipment sales in fiscal 2005, even though the market for high-end printing equipment continues to be very lethargic," said Jay Herman, Delphax chairman and chief executive officer. "While the level of system sales in the first quarter continues to be very soft, the CR2000 is beginning to win recognition as the world's fastest roll-fed digital press. As a newcomer to the commercial printing market, we face formidable brand-building challenges. However, as we continue to place our systems with leading companies in this market, we expect to establish a solid platform on which to expand our penetration. "We are pleased that the first-quarter sale of a CR2000 was to a key strategic customer, one of France's largest commercial printers. This major producer of books, directories, catalogs and magazines now has two CR2000s, having upgraded a CR1300 during the fourth quarter of fiscal 2004. Several additional CR Series printing systems are currently undergoing on-site trials with prospective buyers." Gross margins decreased slightly from a year ago and compared to the preceding quarter due to reduced overhead absorption from lower equipment production levels. The company expects production levels to remain below normal into at least the second half of fiscal 2005 until more of the finished printers are sold. The company said that due to the unusually slow recovery in industry demand for big-ticket printing equipment, it has initiated additional expense reduction measures that should help results in subsequent quarters. In addition to reducing or eliminating certain discretionary expenses, the company reduced its work force slightly and reduced the work week for certain other employees. The impact of these actions will begin to be realized in the second quarter of fiscal 2005, and fully realized in the third quarter.