Ballard Power and the all-important year-end

Randall MacEwen and Hu Chunhua, Guangdong party chief, © Ballard

Canadian manufacturer Ballard (Nasdaq: BLDP) ended the first quarter of 2018 on a total revenue of USD 20.1 million. During the same period a year ago, it generated USD 6.2 million in one-time revenue from technology transfers and engineering support. This amount needs to be taken into account, that is, taken off, if the goal is to paint an accurate picture of year-over-year growth. Still, the company’s gross margin was 33 percent. Randall MacEwen, Ballard’s chief executive, said that the first half of each year was usually slower than the second, his reason for sticking to a revenue target of USD 120 million for 2018. In the meanwhile, backlog reached USD 220 million and is expected to grow further. I think that the loss, said to be over USD 5 million, or minus USD 0.03 per share, was a product of multiple R&D efforts, which all required money. And with USD 52.5 million in cash reserves, Ballard has a bright future.

In collaboration with several partners, the company has been working on the development and construction, or integration, of a variety of fuel cell prototypes. These projects need cash at a time when big orders and mass production aren’t at the top of the agenda. An unknown customer, which could be Toyota Tsusho, has provided Ballard with more than USD 4 million to design air-cooled fuel cells planned to be integrated into forklift trucks. Likewise, the corporation inked a supply and collaboration agreement with Hyster-Yale, a global heavyweight in forklift truck manufacturing. The deal could result in stack quantities several times the contract value of Plug Power’s bookings – at the high point of Ballard’s and Plug’s collaboration. A few years ago, Hyster-Yale acquired fuel cell producer Nuvera and has reportedly invested around USD 100 million in its R&D facilities. But the agreement with Ballard seems to indicate the Canadian supplier has more to offer than the Italian subsidiary.

Operating on several fuel cell markets

Large delivery service companies such as UPS and FedEx Corp. want to add more EVs to their fleets, and not all will be fully electric courier vans. The two corporations are also testing range extender prototypes and other fuel cell solutions. Past a successful trial stage, these systems mean big business for Ballard, as well as Hydrogenics and Plug Power. As I see it, the new megatrend called fuel cells will drive growth at Ballard, especially over the next two years – prototypes are vital to generating large orders. Right now, the stock market is all but ignoring the Canadian business. But as investor legend Warren Buffett says, patience is a virtue for successful investing. In addition, you should know the company whose shares you intend to buy and be fully convinced that it’s the right decision to make. It would be time for Buffett to invest in fuel cells himself. Apple, a company in which he owns a major stake, has been doing so for years.

Risk warning

Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small and mid-cap ones, i.e., they may experience high stock volatility. This article is not to be taken as a recommendation of what shares to buy or sell – it comes without any explicit or implicit guarantee or warranty. All information is based on publicly available sources and the content of this article reflects the author’s opinion only. This article focuses on mid-term and long-term prospects and not short-term profit. The author may own shares in any of the companies mentioned in it.

Written by Sven Jösting

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