Omnitek Engineering Corporation has reported results for its third quarter and nine months ended September 30, 2013, reflecting the impact of lower foreign sales due, in part, to the appreciation of the U.S. dollar, as well as inventory buildup to support the anticipated ramp up of domestic diesel engine conversion-to-natural gas kit sales in the current fourth quarter.
Net revenues for the third quarter were $280,921 compared with $562,367 a year earlier. For the same period, the company reported a net loss of $467,895, or $0.02 per share, compared with a net loss of $142,150, or $0.01 per share, a year earlier.
Net revenues for the nine-month period were $827,460 compared with $1.25 million a year ago, reflecting the impact of the company’s relocation to a larger facility in the second quarter. For the same period, the company reported a net loss of $1.09 million, or $0.06 per share, compared with a net loss of $1.32 million, or $0.07 per share, a year earlier.
Gross margin for the quarter ended September 30, 2013 was sharply impacted due particularly to lower foreign sales, fixed overhead and labor costs that could not be absorbed due to volume and product mix, as well as high freight costs associated with a planned inventory build to support the anticipated ramp up of domestic engine conversion business. Gross margin for the nine months was also impacted, due to the factors noted above. The company anticipates gross margin as a percentage of sales will return to more a normalized range of 40 to 50% as domestic sales commence and foreign sales regain momentum.
“Notwithstanding the impact of the aforementioned items impacting the quarter and nine-month period, sales in the current fourth quarter are expected to begin to reflect long-awaited domestic contributions. Our optimism is supported by expressed strong interest from large domestic trucking fleet operators and a commitment to convert from diesel fuel to natural gas engines,” says Werner Funk, President and Chief Executive Officer of Omnitek Engineering Corporation.
The company‘s recently announced strategic alliance with Minneapolis, MN-based diesel engine remanufacturer Reviva to produce a “drop-in” natural gas engine for the widely utilized Navister DT 466E and DT 530E heavy-duty truck engines, with plans to offer additional engine models, is expected to accelerate the conversion process for large fleet operators, Funk notes. “We look forward to expanding our EPA-approved engine lineup and leveraging this drop-in strategic model to achieve significant growth moving forward,” Funk says.
Funk notes the government shutdown and resulting furloughs, particularly at the Environmental Protection Agency (EPA), impacted the company’s testing process during the quarter and management’s ability to clarify certain technical matters.
At September 30, 2013, current liabilities totaled $505,794 and current assets totaled $4.8 million, resulting in positive working capital of approximately $4.3 million and a current ratio of 9.4 to 1. The company’s total assets at September 30, 2013 were $4.9 million. Funk notes management intentionally increased the company’s inventory levels more than two-fold to support the anticipated ramp up of domestic sales activities, with a target of commencing in the current fourth quarter and sharply increasing volume in 2014.
The company is working diligently to obtain EPA and CARB approval for additional diesel engine models to address the anticipated increasing demand from trucking fleets that operate with other diesel engine models to complement its EPA-certification of the heavy-duty Navistar DT466E and DT530E engines – including plans for the recently announced 12.7 L Detroit Diesel Series 60 and the Caterpillar C15 engine models as part of the second phase for the Puget Sound Clean Air Agency pilot project.
Funk adds that the company’s expansion of its international business continues, with a particular focus on markets in South America, Europe, Mexico and China. “Despite softness in foreign markets that impacted the quarter and reduced revenues derived from OE customers due to model-year changeovers, we anticipate significant new near-term sales opportunities in certain regions of Europe and China for large fleet customers,” Funk says.
He emphasizes that the cost for a diesel truck engine conversion can be recouped within a one-to-two year period, and even earlier if performed during a regularly scheduled engine overhaul.
For the full financial report, visit the Omnitek website.