Hydrogenics Reports Higher 3Q Revenue; Closing Fuel Cell Test Equipment Business

11 November 2007

Hydrogenics Corporation, a developer and manufacturer of hydrogen and fuel-cell products, reported third quarter revenues up 18% year over year and 12% from the second quarter. It also reported that it will begin an orderly windup of its Burnaby, British Columbia based fuel cell test products design, development and manufacturing business.

The closing of the test equipment business—a low gross margin, low growth and loss generating business—is anticipated to take up to two years to complete and require between $3.5 million to $4.0 million of funding with a corresponding charge to earnings.

Third quarter revenues were $10.6 million, an 18% increase from the third quarter of 2006 and reflect increased onsite generation and test systems revenues of $1.2 million and $1.4 million, respectively, partially offset by $0.9 million of decreased Power Systems revenues.

Gross profit, expressed as a percentage of revenues, was 10% (6% in 2006) and reflects revenue growth and reduced unit costs in the onsite generation business, partially offset by lower revenues, product mix and $0.5 million of inventory reserves in the power systems business.

During the third quarter, Hydrogenics booked $5.2 million of new orders for onsite generation and exited the quarter with an $18.6 million order backlog. The orders received are primarily for industrial applications including chemical processing, metallurgy and generator cooling. The company also delivered ten electrolyzers of which three are for wind hydrogen installations.

The power systems business booked $1.4 million of new orders and exited the quarter with an $8.0 million order backlog. Hydrogenics said that it made progress towards product commercialization including improved performance and quality as well as reducing the cost of our fuel cell power modules.

In its materials handling business, the company commenced in-plant testing of the next generation HyPX 1-27 Fuel Cell Power Pack prior to the anticipated initial deployment in 19 lift trucks at General Motors’ Oshawa, Ontario facility in the first quarter of 2008.