Fuel Systems Solutions, Inc. (FSYS)

[Democritus_of_Abdera]

Re: 2013 Q4 CC of Mar 14, 2014...

The fundamental message of the CC is summarized by the following statement by Pietro Bersani (FSYS CFO) during the Q&A:

Pietro Bersani - Q&A: So, to summarize, I think about this year as an year where Fuel Systems will be experiencing lower revenues with the same level of profitability and with a bunch of new programs and which will put a company very nice position in particular from 2015 moving forward. And certainly we believe that the profitability will be coming interesting in this respect because of these reasons.

Lower revenues in 2014 are anticipated for the following reasons:

1) There is a price war in the European aftermarket for LNG conversions.
2) The price advantage for CNG has decreased in the Asian market due to increased CNG costs.
3) Asian partners are switching to in-house sourcing and are now competitors.
4) GM's discontinuance of the 2015 Chevrolet band in Europe will affect 2014 production.
5) The Nacco program in Brazil will end.
6) The Venezuela market is unpredictable, but more likely negative than positive.

The revenue slide in 2014 will be mitigated (somewhat) by:

1) The Ford Transit Connect Taxi program will begin production in May.
2) There will be doubling of CNG vehicles produced for the US market (still small)
3) There will be increased volumes in the stationary industrial and auxilary power markets.

Expected changes in 2015 are:

1) GM will discontinue the Chevrolet brand in Europe
2) The Ford Transit Connect Taxi program should expand to other countries.
3) CNG prices might moderate in Asia (particularly India).
4) The US CNG automobile/truck market should continue to increase
5) The LPG direct injection system will be introduced.
6) After-market pickup truck platforms will be developed

Where, in my opinion, the most important future positive event is the introduction of the direct injection system. However, until this, or some other volume driver is demonstrated to be true, I expect the stock price to be volatile at the low end for the rest of the year.