By: Peter Szafranski
The recession has taken consumers, working families and investors on a roller coaster, with news seesawing on how certain companies and the economy in general are weathering the crisis. The latest tidings from Calgary-based Alternative Fuel Systems (2004) provide a case in point.
Alternative Fuel Systems (2004) Inc. (TSX-Venture:AFX), designs, develops and produces core components for the international automotive sector, specializing in the alternative fuel marketplace. AFX also supplies electronic engine management controllers, natural gas handling components and associated software to manufacturers of new vehicles and stationary engines, as well as to aftermarket fleet conversion specialists.
In late April came word that the company, reorganized only five years ago, posted record revenue and profit last year. Revenue figures for 2008 came in at nearly $4 million, more than double what registered in 2007. What’s more, the company found itself in the black, nearly half-a-million dollars at that, compared to a loss of more than a half-million the year before.
Much of these glad tidings were powered by sales of natural gas pressure regulators. In 2008, that business line contributed about 65 per cent of the Company's revenue in 2008. Significant growth was also recorded in the engine management and other electronic equipment business, where shipments to customers operating primarily in Southeast Asia increased as serial production of new vehicles using Alternative Fuel products ramped up.
That was the good news. However, as January of this year dawned, things changed, as AFX was told by a European client for whose vehicles it had supplied natural gas pressure regulators that such vehicles were being discontinued. The production halt that soon followed was projected to cause a significant dent in AFX’s revenue stream, given that sales of pressure regulators to this client amounted to about 55 per cent of the company’s revenue. AFX said it planned to counteract this loss (which should work its way into the picture by the end of 2009’s first quarter) by redoubling its efforts to grow the engine management system side of its business.
The stock peaked for the last 52 weeks at $1.95, and bottomed out at 4.5 cents, before beginning a climb to around the seven-cent mark. Whether and when the price begins a climb out of that hole depends largely on how those recovery efforts pan out.
