What: Shares of FuelCell Energy (FCEL -6.93%) are up more than 26% at the time of this writing, following the announcement that it has completed the shipment of 5.6 megawatts' worth of power-generating fuel cells to its Asian Partner POSCO and that its second joint-venture facility in South Korea is slated to come online in the coming months.
So what: The sale of 5.6 megawatts is not really that big of a deal in the grand scheme of things. FuelCell Energy currently has 100 megawatts of annual manufacturing capacity at its one facility in Connecticut. The real mover for FuelCell Energy here will be when the POSCO facility comes on line and ramps up to full capacity. The new facility will double FuelCell's current manufacturing facility and will help to bring down per-unit costs as a result. Ultimately, the company intends for these two facilities to ramp up such that combined they are able to manufacture 400 megawatts' worth of fuel cells annually.
Now what: While these sorts of announcements are what an investor wants to hear, eventually these sorts of moves will have to start translating into bottom-line results for the company. Sales have been on the decline for three straight quarters now, and this past quarter's sales were the lowest it has seen in four years. Also, the company has not been able to grow its gross margins past the 10% mark.
If FuelCell really wants to make progress toward profitability, the start-up of its POSCO joint-venture manufacturing facility needs to help significantly boost total sales and bring down per-unit costs. Without that, the company will continue to show red ink for a long time.
