- Revenue up 83% for the year and 155% for the quarter to $264 million and $100.6 million, respectively.
- Heavy-duty units shipped increased to 170 units in the quarter from 85 units the previous quarter and 71 units in all of 2010.
- Yearly revenue increased by 308.6% in the light-duty division to $66.6 million, 185% in the heavy-duty segment to $19.9 million, and sales from its joint venture with Weichai rose to $110 million for an increase of 145%.
- Gross margin improved to 39.6% from 32.5% a year ago.
Despite the strong growth, Westport is still in the red, posting a loss of $14.5 million for the quarter and $60.2 million for the year, worse than its 2010 results. But the jump in revenue and margins indicates that the company should soon be moving toward breakeven.
The engine maker continues to grow both organically and through acquisitions. In October, Westport bought AFV, Volvo's natural-gas-system supplier, and in July closed on its purchase of Emer, an Italian alternative energy fuel system provider. For a total price of just about $45 million, those companies already contributed $34 million to Westport's revenue in just the part of 2011 they were under their new parent's control. That additional contribution helped its light-duty division more than quadruple its revenue over the previous year. Meanwhile, organic LD sales doubled for the year.
Going the distance
With management projecting a revenue increase of about 50% in 2012, there's still plenty of upside for this company. The shale boom should continue to keep natural gas at record lows in North America, and the relative environmental friendliness of the alternative energy helps incentivize organizations to switch from diesel.
CEO David Demers said he believes 2011 was a tipping point in natural gas' adoption as a second major transportation fuel, and he added that Westport has begun shifting its focus away from market awareness, which it's been doing for the last decade, to "entering markets with leading products and reaching market penetration rates of 20% or more."
Looking at future profitability, management said it expects its LD division to reach breakeven in the second half of 2012, and believes the HD segment will hit breakeven when it sells 1,200 units per year. It moved 170 units in its most recent quarter. Westport's joint venture with Cummins continues to be its most established and most profitable segment, contributing $15.2 million in net income in 2011, nearly double its 2010 total.
Investments in research and development increased over the year to $53 million, and Demers feels confident that those expenditures "will produce strong returns in market position and profit contribution." The manufacturer's WiNG Power System for the Ford
The Canadian engine maker bears much in common with another young upstart trying to disrupt the transportation industry -- Zipcar
Still, much of that future growth could be baked into Westport's valuation. Analysts have revised their estimates downward in recent months. They are projecting negative net income through 2013, and that comes with a caveat that analysts tend to overestimate Westport's earnings. The company posted larger-than-expected losses across last year. However, I think revenue projections could be underestimated moving forward, as Westport will likely continue to acquire smaller outfits in different corners of the world. Just this past Tuesday, the company announced a $1.6 million purchase of assets from Advanced Engine Components, an Australian engine maker.
As the company continues to grow, look for net income to move closer to breakeven in the coming quarters. If management can deliver on that, investors should be rewarded in the long run.
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