India’s Fuel Systems Solutions, which makes alternative fuel components, posted strong quarterly results and kept its 2010 revenue outlook, but its shares fell as much as 8% on concerns of its key Italian market losing steam.
Reuters noted that the company warned last March that Italy was unlikely to repeat last year’s strong performance after its government decided to discontinue subsidies for alternative fuel systems.
The first-quarter results were attributable exclusively to the carryover from the 2009 Italian subsidies, Shawn Severson, an analyst with ThinkEquity, told the news agency.
“People still don’t have any colour on how the second and third and fourth quarter may shape up,” he added.
For the first quarter, the company earned US$28m, or $1.59 a share, compared with $7.1m, or 44 cents a share, a year earlier.
Revenue more than doubled to $161.7 million, attributable to delayed original equipment manufacturer (DOEM) installations in the company’s transportation business, driven by the expired 2009 Italian incentive programme.
Analysts on an average had expected earnings of 91 cents a share, on revenue of $145.1 million, according to Thomson Reuters I/B/E/S.
Fuel Systems, which makes components and systems that control the pressure and flow of gaseous alternative fuels, said the contribution to revenue from Italian markets has been more than 60%.
Analyst Severson said Fuel Systems has significant exposure to the European markets, and the present weakness there was also a growing concern for the company.
If sales return in Europe later this year, the company would probably be at a lower margin with the original equipment manufacturers becoming more price competitive, Severson said.
In a statement, Fuel Systems said it was broadening its international footprint, while seeing “stronger trends” in its industrial business.
Fuel Systems reaffirmed its 2010 revenue outlook of $400 million to $450 million, saying it currently had low visibility with respect to DOEM installations. Analysts were expecting revenue of $440.7m, the report said.