FuelCell Energy (FCEL, Financial) looks well positioned for better performance in the future. With solid results in the recently reported quarter, FuelCell Energy is focusing on accelerating its growth momentum. The company is seeing good improvement in the industry, so it is mainly concerned with strengthening its long-term prospects.
Focusing on key strategies
FuelCell is focusing on various key strategies for improving its financial position. It has taken many strategic moves. In Asia, its partnership with POSCO Energy is giving good positive signs. This will help FuelCell to collaborate customer opportunities and integrate them in such a way that that it will drop the overall cost.
Results were not up to the mark as what FuelCell anticipated, but the management is confident of delivering better performance in the future, as many of its projects are in advanced stage of closure. This will surely help the company to deliver better results in the second half of the fiscal year.
Besides these initiatives, FuelCell has announced a 1.4 mega watt fuel cell for the University of Bridgeport. This will help the company further as its unique attributes of ultra-clean power plants make them especially well suited for universities. Due to this university installation, FuelCell is in discussion with multiple project investors regarding the sale of the power plant and retention of the associated multi-year operation and service agreement.
More catalysts ahead
FuelCell’s partnership with POSCO is expected to be a growth driver for it. This will also help FuelCell to expand its business in Asia. This will also help the company to further reduce the product cost. Further, FuelCell has plans to collaborate with POSCO to support multi-national customers expressing interest in the fuel cell projects. Also, the company will have an added advantage which may lead the customers to move to FuelCell’s camp from the other fuel cell projects.
To achieve its cost cutting initiatives, FuelCell is further synchronizing its integrated global supply chain. It is expected that this partnership with POSCO will also improve FuelCell’s profit margins as the combined purchasing volume of both the companies will lead to lower product costs. Also, POSCO’s manufacturing facility in South Korea is under construction. FuelCell is expecting greater opportunities for growth after its completion, because when it becomes operational by 2015, it will double the global production capacity of its products, providing it cost advantages. To support this, FuelCell is continuing its investment in capacity and market development by POSCO. Moreover, FuelCell has also accelerated spending in the quarter to support the contract development of projects, which is expected to enhance the probability and speed up the timing of closure while aligning with its ability to immediately start construction and to recognize revenue.
With the recent orders that FuelCell saw with the power plant installations for United Illuminating and University of Bridgeport, it is seeing good traction for its product mix. FuelCell has become more focused on its objective of attaining EBITDA break even. Besides the cost cutting initiatives, FuelCell is also engaged in expanding the size of its market opportunities. By reducing its price per kilowatt, FuelCell is also increasing its competitive offering.
FuelCell’s expanding install base and reputation for delivering successful projects is driving inquiries and supporting progress towards closing orders in its on-site CHP and utility grid support markets.
Conclusion
FuelCell's strategies are moving in the right direction, and the company should continue improving. Hence, investors should definitely consider investing in FuelCell's growth story for the long run.
