California, New Jersey and Texas moving ahead. First quarter results announced.
Clean Diesel (CDTI) reported its first quarter results on May 10, 2012. The results were disappointing. Highly competitive bidding for the London Low Emission Zone business caused revenue to be below expectations and margin erosion continued from the fourth quarter 2011 into 2012. This caused a write-down of inventory in the first quarter of 2012.
Both Heavy Duty Diesel and catalyst revenue increased year/year, as did the internal sales of catalysts to the diesel division. However, despite the carry-over of revenue from 2011 into 2012, due to the extension of the requirements in the London LEZ, there was a decline in revenue from the fourth quarter level. Also, although the revenue in the diesel division increased. from the third quarter to the first quarter, the transfers and other revenue account declined. This suggests that internal sales of the catalyst systems were lower, which has a negative effect on gross margins.
On a geographic basis the US was essentially flat year/year, Canada and Sweden down slightly and the major gain occurred in the UK. With the LEZ initiative ending the business in the rest of 2012 will be biased towards California, New Jersey and Texas. We expect gross margins to improve from the first quarter level.
The company also announced two new catalyst systems that will be used in vehicles launched later in 2012. These catalyst have been approved by an OEM and by CARB. The first system is designed to meet the most stringent California regulations. The second catalyst system replaces the expensive Platinum and Rhodium with more widely available Palladium. Although the OEM contracts for catalysts usually contain pass-through provisions on the costs of the precious metals the replacement of high cost metals with lower cost materials can be a significant cost reduction to the vehicle's OEM.
On May 10, 2012 Clean Diesel announced the receipt of over $1 million for the retrofit of the diesel particulate removal systems in over 100 school buses in Texas. The retrofit, using the company's Purifilter Plus emission control system, can be done very quickly (over lunchtime) and is fully compliant with CARB and EPA requirements. The systems employ both active and passive regeneration and the order should begin in June and be completed in July 2012.
On April 30, 2012 the company announced it has received about $0.7 million in new orders for Clean Diesel's ECS-branded Purifilter Plus diesel particulate (soot) emission control systems that are approved by the New Jersey Dept. of Environmental Protection Mandatory Diesel Retrofit Program. Under this program dump, recycling and tow trucks are required to meet certain standards by established deadlines.
So far Clean Diesel Technology has received more than $3.4 million orders under the NJDEP program. This latest order should be completed by July 2012.
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