Westport Fuel Systems Q1 Loss Widens; Sales Fall, Costs Rise
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Losses at Westport Fuel Systems Inc. widened in the first quarter of 2024 on the back of weaker revenue and inflationary cost increases, with new CEO Dan Sceli laying off staff and revamping its manufacturing facilities in response to underlying concerns.
Vancouver, British Columbia-based fuel system component manufacturer Westport reported a loss of $13.6 million in the most recent quarter, compared with a $10.6 million loss in the same period a year earlier.
The company’s revenue decreased 6% to $77.6 million year-over-year from $82.2 million on the back of a decrease in sales volumes at Westport’s delayed original equipment manufacturer, fuel storage, light-duty OEM and heavy-duty OEM businesses.
“Despite revenue temporarily falling short of our expectations in the first quarter, we’ve initiated cost-saving measures and have demonstrated a marked improvement in our cash from operations,” Sceli said in a statement accompanying the results. “Recognizing the significant tasks that lie ahead, we remain steadfastly dedicated to our priorities for 2024.”
Westport Fuel Systems Q1 2024 Earnings
“Through strategic head count reductions across the organization, we are aggressively streamlining our workforce to bolster operational agility,” he said. “Our cost reduction measures also focus on initiating changes to our production lines to optimize manufacturing cost reductions and increase efficiency. These actions are not only enhancing our overall efficiency but also fostering a culture of accountability and collaboration.”
Sceli
He added, “In our pursuit of profitability, cost cutting is not merely a priority — it is an imperative. We recognize that sustainable growth hinges on our ability to tightly manage expenses.”
Westport took a $500,000 hit against its bottom line from severance costs in the most recent quarter. During the company’s quarterly earnings call, Sceli told analysts Westport parted with six senior managers. Sceli told Transport Topics in an email May 14 that there will be fewer than 10 departures.
However, Sceli remains optimistic about Westport’s prospects.
We announced our First Quarter results, read press release here:https://t.co/Eh9Wm47Tkm — Westport Fuel Systems (@WestportDotCom) May 8, 2024
“The goal is to simplify the business and go back to the basics,” he told analysts. “Westport is fortunate to be part of a compelling industry in which alternative fuels are seeing increased support and investments. We are also fortunate that government policy in key jurisdictions like Europe and North America is heading in the right direction for hydrogen as a fuel source.”
The company is working with locomotive and marine propulsion customers for its high-pressure gas-injection fuel system (HPDI) as well as with Volvo Group on a heavy-duty trucking joint venture whose product line the partners expect to sell to other OEMs.
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Westport and Volvo in March sealed their high-pressure gas-injection fuel system for commercial applications JV.
In early May, the European Commission approved the venture, saying it did not raise competition concerns. Operations are due to ramp up before the end of the second quarter.
“These [HDPI] initiatives represent more than just technological advancements. They embody our unwavering commitment to a brighter, greener future for generations to come,” Sceli told analysts.
“We believe that high horsepower applications will be most effective when used with diesel cycle combustion, the option with the highest efficiency and durability,” he said. “Therefore, changing the fuel instead of changing the fundamental technologies for these applications is the best option for decarbonization and functionality, and HPDI is the solution.”
Analysts are also positive about the technology’s impact on the company’s future, especially the Volvo JV.
“The HPDI JV is on track to be formed by the end of Q2 and remains our primary focus as it further cements [Westport] as a key solution provider and lifeline for Volvo and other OEMs’ internal combustion engine (ICE) offering going forward and will strengthen the balance sheet,” Craig-Hallum Capital Group Senior Research Analyst Eric Stine said in a May 9 note to investors.
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