UK
AIM listed Clean Air Power PLC (CAP), developer of dual-fuel diesel to natural gas conversion systems, has issued a trading update including details of successful trials of their Genesis product, updates on sales prospects in Australia and details of activities in the company’s components and emissions reductions arenas.
Dual-Fuel™ Technology
The company says that recent trials of the ‘Genesis’ product with department store giant Tesco have now been completed with both CAP and Tesco in agreement that it achieved all of its objectives. The results are currently under review and final trial conclusions from Tesco are expected in early 2007.
CAP anticipates further trials with other major company fleets over the coming year as interest in the Genesis product continues to build.
In the UK, sales growth has been significantly slower than anticipated, while in mainland Europe the company has completed its first Genesis conversion on a DAF vehicle for an Italian cooperative based near Rome. The CAP update says this conversion opens up a potentially important market on the continent where a more mature natural gas refuelling infrastructure assists market penetration. Italy and Germany, in particular, are already well served with public natural gas fuelling stations.
In Australia, the Company has seen a rapidly developing market for its products as improvements are made to the country’s gas infrastructure and the commissioning of new processing plants which increase the availability of natural gas for transport, particularly liquefied natural gas (LNG). In November an order for around £0.5m ($US980 million) was received from William Adams Pty Ltd for delivery in 2006.
In addition a contract was agreed with Mitchell Corp Australia Pty Ltd for the supply of systems for 50 vehicles, with the option for another 20, to be delivered during 2007 and 2008. Total revenue from this second contract is expected to amount to £1.5m ($US2.95 million) for the 50 vehicles rising to £2.1m ($US4.13 million) if the option on the additional 20 units is taken up. This contract with Mitchell’s will be finalised during the next month subject only to additional funding being provided by the Australian government.
Clean Air Power’s activities with truck manufacturers in Europe continues with the Board being confident of developing cooperation during the coming year. Whilst original expectations anticipated revenues from this market sector during 2007, the process of securing agreements with major truck manufacturers is taking longer than anticipated. Actual revenue will now not occur in the coming year.
Components Business
The company also manufactures some of the components incorporated in the company’s Dual Fuel Technology. A number of these components are also used in spark ignited gas engines, hydraulic gearboxes and certain other applications.
With sales mainly in Europe and the USA, growth in demand for gas engine components during 2006 has exceeded expectations and has been accompanied by strong margins. The company anticipates further market growth in 2007.
Emissions Reduction Business
This area of CAPs business provides solutions to very large stationary diesel engines such as those used in pumping stations. The current market is mainly in the US where CAP provides a service whereby the emissions from new installations are treated to meet local legislation.
The Company expects revenues and margins for 2006 to be in line with expectations and with similar levels of business being maintained during the coming year.
Summary
The trading update says the company is now well placed to take advantage of the growing momentum for reduced climate change emissions, whilst also delivering significant cost reductions, and is capitalising on regions such as Australia where there is a clear demand for its technology. The company expects similar demand to develop throughout Europe in the coming year.
Lower sales in certain regions have led the Board to anticipate that profits for the full year will be below expectations, but not significantly. However, the Board remains confident that discussions with truck manufacturers and large fleet operators will lead to good progress during 2007, coupled with strong demand for Dual-Fuel™ in its identified key growth markets.
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