Ballard Power stock falls; CEO expects lumpy sales for 'foreseeable future'

Shares of Ballard Power Systems (BLDP.TO)(BLDP) fell on Monday as the Canadian fuel cell-maker spelled out uncertainties ranging from the U.S. presidential election to the slower-than-expected global adoption of hydrogen technology.

CEO Randy MacEwen told investors that sales will be lumpy for the "foreseeable future."

Ballard reported second-quarter financial results on Monday. The Vancouver-based company builds hydrogen fuel cells for buses, commercial trucks, trains, marine vessels, and stationary power applications.

The company, which keeps its books in U.S. dollars, reported a US$31.5 million loss for the three months ended June 30, deeper than the US$28.2 million it lost in the same quarter a year ago. Sales climbed four per cent to US$16 million, shy of analyst forecasts, driven mainly by Ballard’s bus and truck-focused businesses.

Toronto-listed shares closed 5.99 per cent lower on Monday at $2.51. The stock sank as much as seven per cent to a new 52-week low during the trading session.

Ballard says new orders in the second quarter amounted to US$5 million, down sharply from almost US$130 million in the two previous quarters. The company blames customers deferring new orders into the back half of 2024.

“We expect continued quarterly order lumpiness for the foreseeable future,” MacEwen told analysts on a post-earnings conference call on Monday.

“We continue to observe a slow pace of contract awards for new clean hydrogen projects,” he added. “We’ve spoken before about the slowing effects of the inflationary and interest rate environment over the past few years that are creating challenging economics for many hydrogen projects.”

On top of a tough economy, MacEwen cites “continued policy uncertainty” in the United States, where Ballard has focused much of its growth plans since reconsidering an investment in China.

“The clean hydrogen production tax credit rules, the draft regulations that were released eight months ago, are still being debated by the industry,” MacEwen said. “It remains unclear whether these regulations will be resolved before the U.S. presidential election. This is delaying investment in the U.S. hydrogen industry.”

In Europe and China, he says the availability of low-cost, low-carbon hydrogen, and the needed refuelling infrastructure, seem to be delayed by multiple years, creating “significant headwinds” for Ballard in those markets.

Ballard cut its 2024 capital spending guidance on Monday from a range of US$50 million to US$70 million, to a range of US$25 million to US$40 million, "reflecting management decisions to reduce and defer certain planned capital expenditures given slower market adoption."

In April, the company announced plans for a new fuel cell Gigafactory in Rockwell, Texas, supported by US$54 million in tax credits from the Internal Revenue Service. MacEwen says Ballard has secured US$94 million to date in U.S. government funding.

“That’s almost a once-in-a-lifetime opportunity for funding,” he said. “The problem is that the overall investment cycle is coming earlier than the market adoption. That’s really what we’re wrestling with.”

MacEwen says a final investment decision on the Texas facility will be made in the fourth quarter of 2024.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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