Aug 18 Weak demand for alternative fuel vehicles
and increasing competition in Europe are weighing on Fuel
Systems Solutions Inc at a time when its peers are
riding a recovery in the U.S. auto industry.
Fuel Systems, whose products allow vehicles to run on
propane and natural gas, said it has lost customers in Europe,
which contributes about 40 percent of its revenue.
Where the Dow Jones U.S. Auto Parts index has
risen more than 20 percent in the past year, Fuel Systems shares
have nearly halved.
The company's shares fell as much as 9 percent on Monday
after the company cut its revenue forecast for the year.
"Their issue is that where they've been historically strong
has gotten weaker," Lake Street Capital Markets LLC analyst
Robert Brown told Reuters.
"The adoption of alternative fuels in the U.S. is actually
expanding quite nicely but the dynamics in Europe have been a
headwind," he said.
U.S. automakers are increasingly using alternative
technology to boost fuel economy and meet stricter mileage and
Auburn Hills, Michigan-based BorgWarner Inc, one of
the largest suppliers of turbocharging technology, reported a
higher second-quarter profit last month.
But Europe is still playing catch-up after a euro-zone
crisis that weakened automotive demand.
Fuel Systems was also hurt by the expiration of Italian
subsidies for the alternative fuel market a couple of years ago,
The company reported a 21 percent fall in second-quarter
revenue on Monday and reported its seventh loss in 10 quarters.
Brown said Fuel Systems had lost a contract with Peugeot SA
to rival Landi Renzo SpA due to pricing
The company also lost Volkswagen and Honda Motor
Co in China and Thailand, respectively, as the
automakers brought the services outsourced to Fuel Systems
in-house, Brown said.
Brown is top-rated for the accuracy of his earnings
estimates on Fuel Systems by StarMine.
New York-based Fuel Systems' shares were down 8 percent at
$9.73 in afternoon trading on the Nasdaq.
(Editing by Don Sebastian)