Shares of Ballard Power Systems (BLDP.TO)(BLDP) fell to their lowest level in six months on Tuesday, after the company reported financial results well below analyst expectations. The B.C.-based hydrogen fuel cell technology firm blamed a 26 per cent year-over-year sales decline on pandemic-related challenges and a "muted" Chinese market.
Ballard saw its stock surge in the early months of 2021, as U.S. President Joe Biden promised historic spending to fast-track the adoption of green energy. However, shares of the company, which builds fuel cell solutions for trucks, buses, trains, and ships, have steadily declined since early February.
In its latest quarterly results reported Monday night, Ballard said sales in China continued to slow due to delayed government policies to support hydrogen adoption in the world's second-largest economy. In Europe, the company said COVID-19 has caused customers to put off taking possession of hydrogen-powered buses. Revenue from Ballard's technology division, which assists clients with fuel cell development, also fell 29 per cent in the quarter, primarily due to lower revenue from the company's program with Audi.
For the three months ended March 31, Ballard booked $17.6 million in revenue, down 26 per cent year-over-year. Analysts polled by Bloomberg expected $25.7 million in sales for the quarter.
"Our Q1 revenue was... consistent with our internal projections, and reflecting a muted China market currently awaiting further policy pronouncements," chief executive officer Randy MacEwen told analysts on a post-earnings conference call. "While the pandemic is still challenging many markets, we see encouraging recovery signs, including strong order conversion."
That optimism reflects MacEwen's view that hydrogen adoption in the transportation sector is still in early innings, or as he puts it, in "the first second of a 24-hour day." He says the policy backdrop from governments continues to favour clean energy, giving the company a "clearer line of sight on long-term growth in our core medium and heavy-duty motive applications of bus, truck, rail and marine."
He expects adoption of hydrogen power to build through 2023 and 2024, ahead of a major acceleration into 2030.
Ballard has built an extensive list of global partners, including Audi, Weichai Power, one of the largest diesel engine manufacturers in the world, and German auto parts giant MAHLE. In Canada, the company inked a deal in March with Canadian Pacific Railway (CP.TO)(CP) to use the company's fuel cells in hydrogen-powered trains. On Monday, it announced plans for a joint venture with Linamar (LNR.TO) to develop and sell fuel cell powertrains.
"This opportunity on light-duty vehicles will initially focus on cargo vans, and applications like taxi fleets. We are looking at fleets where you have a high utilization," MacEwen said on the call. "This opportunity will enable us to have an offering for the passenger market long-term as well."
Responding to a question about how and when Ballard’s new partnerships will translate to sales, he said: "I think we still need to take a step back and acknowledge and understand that these markets of bus, truck, rail and marine are still going through transition [and a] very early stage of market adoption today."
"In some cases, some of the details aren't known yet," he added.
Toronto-listed Ballard stock closed 19.52 per cent lower at $19.99 per share on Tuesday.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.