Clean Diesel Fourth Quarter Results
Ian Gilson, CFA
Clean Diesel Technologies (CDTI) announced its fourth quarter and 2011 full year results on March 12, 2011. Revenue was ahead or our projections due to better than expected results from sales in the London LEZ (28% of 4Q11 revenue). Operating margins were slightly below our projections. Pretax was a loss of $0.3 million as compared to our estimate of a loss of $0.1 million. After a review of intra-company transfer pricing there was a tax credit of $0.7 million. The company reported EPS of $0.06 on 7.217 million shares.
Revenue from the London Low Emissions Zone regulations was $6 million for the fourth quarter and $8 million for the full year. The regulators have extended enforcement by 28 days and this will move about $3 million to $4 million from 2011 into the first quarter of 2012. This news was announced in December 2011 and have been factored into our estimates. Out of the 12 or so competitors for business in the London LEZ Clean Diesel was in the top three in revenue. As previously discussed the company had expected to garner about 15% of the market and did so.
Both California and New Jersey are implementing key retrofit diesel pollution control measures, and these two markets are strong areas for the company, and this should extend into 2012 and 2013.
The catalyst market improved somewhat. The negative impact of the Japanese earthquake a year ago has ended, the situation is now more stable. Clean Diesel continues to transfer more catalyst production in house in support of the Heavy Duty Diesel Systems production of pollution control systems.
In 2012 we expect a continuation of growth in California and New Jersey as well as increased approval of pollution control systems for a wider number of diesel engine types. The London LEZ market was about 20,000 retrofit systems worth about $80 million, or $4,000 per system. The CARB initiative covers over five times the number of vehicles as compared to the London LEZ market, although many heavy trucks currently in non-compliance in California will probably be scrapped. There should be a steady improvement in light vehicle sales (cars and trucks) which translates to a pick-up in catalyst group sales for Clean Diesel.
Operating expenses should be at about the same level as the second half of 2011, with a slight decline in the second half of 2012.
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