Quantum Fuel Systems Technologies Worldwide Inc. finally may have found its niche.
Quantum plans to double the space devoted to its production of natural gas fuel tanks next year. The move comes with the natural gas segment poised for likely long-term growth, as a wide array of companies and the public sector seek cheaper fuel alternatives for fleets.
Quantum will add 30,000 square feet of space next year on a tract situated next to its new headquarters and envisions another 30,000-square-foot expansion in 2014. The first fuel tanks are expected to roll off the production line in the first quarter, with a manufacturing target of producing 12,000 tanks in 2013—about a fourfold increase from prior years.
“We’re trying to stay ahead of the curve,” Quantum Chief Executive Brian Olson told the Business Journal.
Olson, the company’s finance chief since 2002, was promoted to his current role in June and given a board directive to rein in corporate overhead costs, divest unprofitable business units and refocus efforts on the automotive sector.
Quantum, as part of the manufacturing expansion and build out, signed an equipment sale-and-leaseback deal that will provide $3.25 million in capital. About $700,000 will be used to pay off recently acquired equipment, and $2.55 million is earmarked for future equipment needs.
Dynamics
Quantum aims to take advantage of several favorable dynamics playing out in the market for compressed natural gas and CNG products. Those include rising demand in the commercial and public sectors, improved economics, expanding infrastructure for production and fueling, new compressed natural gas engines slated for release in 2013 and increased numbers of vehicle conversions.
“All of that is necessitating us to grow capacity,” Olson said. “We’re dealing with multiple customers and multiple markets.”
The business line also brings higher margins, a particularly important factor for Quantum, which has struggled to find a profitable niche in a variety of automotive and renewable-energy markets. Fuel tank sales and back orders also are up.
New purchase orders rose 230% to $14.2 million in the first nine months of 2012.
• Headquarters: Lake Forest
• Business: Alternative energy
• Founded: 2001
• Ticker symbol: QTWW (Nasdaq)
• Fiscal 2011 revenue (through April 2011): $20.3 million
• Recent earnings: ($9.4 million) for third quarter
• Market value: About $33.9 million
• Notable: Changed after fiscal 2011 to a calendar-year reporting basis; in the midst of a headquarters move from Irvine as it consolidates operations in Lake Forest
Quantum—which shifted to a calendar year after its fiscal 2011—still recently reported a 44% drop in pro-forma third-quarter revenue to $5.8 million. Olson attributed the sales drop to fewer contract orders on components and drive systems from Anaheim-based hybrid luxury automaker Fisker Automotive Inc., which ramped up production last year for the debut of its flagship Karma sedan.
Quantum posted a pro-forma $9.4 million loss in the September quarter, compared to $3.8 million in red ink a year ago.
The loss was attributed to increased engineering costs related to hybrid technologies, software development and its unprofitable renewable-energy businesses.
Quantum remains involved in the production of components for hybrid vehicles, even as it doubles down on its bet on the production of natural gas tanks.
Quantum has put Toronto-based subsidiary Schneider Power on the sales block and expects to have a buyer in the next three to four months, Olson said. It acquired the solar and wind power provider for $20 million in 2010.
Quantum also owns a 25% stake in Asola Solarpower GmbH in Erfurt, Germany, and has invested nearly $9 million in the company, according to regulatory filings.
Asola makes solar panels and solar roofs, including the ones on the Fisker Karma.
Asola continues to see operating losses and revenue declines amid competition from Chinese manufacturers, Quantum disclosed in its third-quarter financial results.
Quantum hasn’t made a decision on whether to dispose of its Asola interest, Olson said.
Resignations
The company first disclosed its renewed business plan in May, following the resignations of former Chief Executive Alan Niedz-wiecki and Chairman Dale Rasmussen.
The resignations followed a board discussion of the company’s direction, according to regulatory filings.
Earlier this month, Quantum transferred its stock listing from the Nasdaq Global Market to the Nasdaq Capital Market and continues to trade under the symbol QTWW. The move gave the company another 90 days, or until April 29, to comply with the minimum $1 stock requirement to trade on the Nasdaq or face a possible delisting.
Quantum is in the midst of consolidating all of its operations into its three-building campus in Lake Forest. It plans to shed its 95,000-square-foot headquarters in Irvine by early next year and sublet the property.
The relocation will end Quantum’s presence in Irvine, where it first established its headquarters in 2001 after the company was spun off from Santa Ana-based Impco Technologies Inc.
