Ballard Power Systems Inc (NASDAQ:BLDP) has an established portfolio of proven fuel cell products based on its patented technology that have been shipping in commercial volumes for several years. Management is focusing on sectors where fuel cell deployment offers significant advantages to other portable propulsion sources, for example with regards to emission of pollutants and where development of an associated refuelling infrastructure is not a limitation.
Q116 results show strong growth
Ballard started FY16 with orders for delivery during the year totalling a record US$58m. This supported a 76% y-o-y rise in revenues to US$16.3m. Technology Solutions revenues increased by 38% to US$6.1m, boosted by new engineering services work on bus and tram projects in China. Revenues from the Heavy Duty Motive business almost doubled to US$3.3m, primarily attributable to demand from customers in China for deployment in buses. Materials Handling revenues grew by 59% to US$4.1m as a result of significantly higher stack shipments to Plug Power. Protonex (Portable Power), acquired in October 2015, contributed US$2.6m revenues. Revenues from Telecoms Backup Power, which is no longer core, halved to US$0.3m. The changing product mix drove a 9pp improvement in gross margin to 20%. After stripping out exceptional items totalling US$3.0m, which included US$2.2m restructuring costs, EBITDA losses narrowed by US$0.9m to US$4.2m.
Platform for sustained growth
Ballard has picked sectors capable of sustained revenue growth. The Chinese authorities are subsidising fuel cell introduction on a grand scale in an attempt to combat urban air pollution. Orders from China during FY15 for Heavy Duty Motive applications totalled US$48m, including support for 300 buses. A further order worth US$12m, for delivery during FY16 and FY17, was received during Q116. Ballard’s fuel cell stacks provide a cost-effective alternative to batteries for materials handling. Joint activity with OEMs to design purpose-built fuel cell forklift trucks broadens the potential customer base. The pilot project using Protonex’s low power fuel cell technology to power a military drone opens a new potential market.
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