Fuel Systems Solutions, Inc. (FSYS)

[Democritus_of_Abdera]

Re: Expectations for Upcoming FSYS Q3 Earnings Report...

Westport (WPRT), a FSYS peer, has had a terrible quarter. Many of WPRT's problems are company specific... but not all; some are probably shared by FSYS as well.

Based upon the WPRT CC of Oct 30, 2014, I expect FSYS' US and European automotive business to have slowed down significantly this past quarter, but revenue from India and, perhaps China, should have increased.

Relevant WPRT CC quotes include:

David Demers, CEO WPRT in prepared remarks:

Although the differential between natural gas and oil prices remains intact in most markets. Since gas prices are down, the overall incentive to migrate to a new fuel is weakened in markets where there are no incentives.

European alternative fuel products have been hit hard by reductions in government incentives, by the decline in oil prices, which as I said, reduces incentives to look for change, but also generally softened economic conditions across Europe, which have reduced shipments of new cars.

China and India remained strong and growing markets. And in North America, we think clean air fleets are moving forward and doing well.

Ashoka Achuthan, CFO WPRT in prepared remarks:

Lower sales of WiNG Power System products have impacted our revenue for the third quarter of 2014. (Where WPRT's WiNG power system is used in Ford F250/F350 CNG bi-fuel systems)

China is developing well, and India shows strong promise now that diesel subsidies there are shrinking. We have seen significant impact on our business with OEMs in Russia due to the decline of the ruble and the complexity of compliance with sanctions.

...our Volvo Car business grew year-over-year and achieved positive operating income for the first time since its acquisition.

In the U.S. Ford sales are visibly affected by the decline in gasoline prices to the lowest level in four years. Although it is true that there is still a big gap between gasoline and CNG prices, the incentive to aggressively shift to CNG is simply not as strong.

Nancy Gogarty, President & COO WPRT in prepared remarks:

The Ford business, the business where Westport is the largest QVM, has faced some challenges due to lower gas prices. However, fleet management companies still have a very strong focus on our product.

Our Ford Canada activities have also started showing some traction with the oil and gas fleet. As mentioned earlier, while starting from a small base, our Volvo Car revenue has increased over last year and is helping to offset some of the reductions we’ve had in our Ford business primarily due to the launch of the Volvo V60 bi-fuel vehicle plus our continuing offering of the V70 bi-fuel.

In Q&A:

Ann Duignan of JPMorgan Securities:
... Can you talk about the outlook into 2015 and beyond, if oil prices stay where they’re at or even trend lower which we believe they could do?

Darren Seed VP Investor Relations WPRT:
... what is more important in our space is the differential between gas and oil, which seem to be pretty intact in most of our markets, hasn’t changed a lot because gas has been drifting down too as you know. What does change is the, call it the psychological urgency around moving. So I think that we are definitely seeing immediate impact on fleets like Ford pick-up trucks, with gasoline approaching $3, it’s not as urgent a priority, so sales are off but they’re not going to zero either.... it might be the pace of attracting new adaptors that’s going to slowdown..... Very different dynamic in places like China and India where the opposite is happening. China has got some very strict directives, so we see that accelerating pretty much as planned. India is removing the diesel subsidies. Actually, I think, they’re quite relieved that they are seeing some opportunity for cover on this one. So there is markets where we are seeing the focus on natural gas be enhanced as well.