Here are some points that I WANT AND EXPECT the CEO of QTWW to address next week during the CC.
1. This Ryder contract was obviously already signed and the PR sitting on someone's desk PRIOR to the announcement from Hexagon/Agility. They have a comment from Ryder's President of Global Fleet Operations, and presumably their permission to release news about the deal..
And it's apparently a material event, as it's a long-term purchase agreement with a company that generates $5 Billion in revenues and has a fleet of 30,000 trucks and vehicles.
Why was it not released earlier?
finance.yahoo.com
2. Does this agreement between Hexagon-Lincoln and Agility mean that Agility will no longer purchase CNG tanks from QTWW?
My reading of their PR is that they have formed a Joint-Venture.. But nothing states that they are curtailing their current, or near future, orders for CNG tanks from QTWW in favor of Hexagon tanks that they currently LACK the ability to produce.
What they DO STATE is that they have to build out MORE manufacturing capacity for CNG tanks via this JV. It does not state that Hexagon-Lincoln will NOW be providing CNG tanks that were previously being ordered from QTWW.
As part of the joint venture, the parties have also committed to build a dedicated cylinder production facility that will be co-located with a new fuel system assembly operation to be built by Agility. The exact location of this new plant has not yet been announced, but is intended to be located in the eastern US, close to OEM and fleet customers who operate there. This facility will complement Agility and Hexagon’s already state of the art manufacturing and provide customers with the industry’s best economies of scale, logistical costs and response times.
Here's the crux of the JV.. They want a dedicated production capacity. And they want it on the East Coast.
Barry Engle, Agility’s CEO, stated: “The Agility Hexagon joint venture ensures that in a rapidly growing market we will always have sufficient cylinder capacity to meet our customers’ needs.
agilityfuelsystems.com
Does this mean that Hexagon have an surplus supply of CNG tanks sitting around somewhere? How long does it take to build a NEW "Dedicated" cylinder production facility? 30 days? 6 months? 1 year?
Who provides the tanks that Agility needs in the meantime, assuming that Hexagon's production is ALREADY dedicated to previous customers? Or do they have surplus production/inventory to meet Agility's requirements?
Furthermore, since Agility has been using QTWW CNG tanks to a great extent, there has to be a continuing relationship, if only for warranty purposes. It's my sense that QTWW didn't want to engage in a dedicated CNG cylinder agreement with Agility, because they are looking at flexibility with regard to bigger customers, namely GM, Toyota, Hyundai.. Westport? (Kevin Douglas connection?) , and NOW.. Ryder..
Again.. Ryder is a Fortune 500 company, compared to PRIVATE Agility, which may have $60-70 million in revenues..
I'm not sure how accurate this is, but the following link says their revenue is about $47.5 million per year..
hoovers.com
Or it could be more like $70 million based upon Page 6 of this presentation:
marcellusdelval.org
So what did Agility gain by going with Hexagon/Lincoln? Well, probably a dedicated CNG fuel tank manufacturer for them that will focus on their needs.. But they certainly didn't seem to gain any real capacity, as their PR stated that they would have to ramp-up manufacturing (capital investment?)
And THIS predicates a 50% haircut on QTWW's stock price yesterday? Really now..
But we have to also blame QTWW management for this. They ARE NOT COMMUNICATING.. And since we're in an incredibly dicey market environment right now, if you're not communicating with your shareholders, you're undermining their confidence.
Hawk |
