Former TSX star hydrogen firm blames economy as sales fall

·3 min read
Despite the near-term headwinds, Ballard's CEO says he remains optimistic about global adoption of hydrogen power.  (Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)
Despite the near-term headwinds, Ballard's CEO says he remains optimistic about global adoption of hydrogen power. (Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images)

Ballard Power Systems (BLDP.TO)(BLDP) cited a tough economy as the Vancouver-based hydrogen technology firm lowered spending plans in the face of weaker sales and tighter margins.

Ballard, which sells fuel cell solutions for buses, commercial trucks, trains, marine vessels, and stationary power, on Wednesday reported $20.9 million in total revenue in its second quarter. The 16 per cent year-over-year decrease was driven by lower sales across the company's power product and technology businesses.

At the same time, Ballard, which reports its financials in U.S. dollars, lowered this year's capital spending guidance by about US$10 million, to between US$130 million and US$150 million.

"Recognizing a challenging and uncertain macroeconomic environment, we've decreased our planned investments in 2022," chief executive officer Randy MacEwen told analysts on a post-earnings conference call.

Adding to weakness in the quarter, Ballard says operating expenses climbed 58 per cent for the three months ended June 30, mainly due to "higher expenditure on research, technology and product development activities."

It also booked an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $35 million, compared to a loss of $19.7 million in the second quarter of 2021. The company says its gross margin fell due to "pricing strategy, higher fixed overhead costs, higher warranty provisions and adjustments, increase in supply costs, and inventory adjustments."

Despite the near-term headwinds, MacEwen says he remains optimistic about global adoption of hydrogen power.

"We have high conviction in the long-term opportunities for hydrogen and fuel cells, and are encouraged by the growing importance governments and customers across the globe are placing on acceleration of the energy transition," he said on the call.

On Sunday, the U.S. Senate passed a bill committing US$369 billion in climate-related spending over 10 years. The House of Representatives, narrowly controlled by President Joe Biden's Democrats, is expected to vote on the Inflation Reduction Act later this week.

MacEwen called the legislation a "major catalyst in the U.S. market." He says a "strong U.S. industry backdrop" has encouraged Ballard to establish a small manufacturing footprint in Oregon.

"It wasn't too long ago, maybe two years ago, where the U.S. market was not a high priority for us," he said. "We had really characterized the U.S. market as a California market. That has clearly changed over the last year."

In Canada, Ballard is working with CP Rail (CP.TO)(CP) on a hydrogen locomotive program.

"We're excited to report that CP is progressing on hydrogen infrastructure. CP is planning the production of two hydrogen production and fuelling facilities in Calgary and Edmonton, Alberta," MacEwen said. "More broadly, we're seeing a lot more interest from rail operators to decarbonize."

Toronto-listed shares climbed 3.23 per cent to $11.18 as at 12:44 p.m. ET on Wednesday. In 2019, the stock was among the top performers on the Toronto Stock Exchange, riding a wave of enthusiasm for clean energy solutions. During the clean energy bubble of the early 2000s, the stock nearly hit $200 per share.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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