Westport Innovations Inc (WPRT)

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Westport Innovations Inc. (WPRT)

Q2 2013 Earnings Call

Aug 01, 2013, 5:00 pm ET


Darren Seed - Vice President of Investor Relations and Communications

David Demers - Chief Executive Officer, Director

Bill Larkin - Chief Financial Officer


Laurence Alexander - Jefferies

Robert Brown - Lake Street Capital Markets

Ann Duignan - JPMorgan

Ravi Gill - Goldman Sachs

Sanjay Shrestha - Lazard Capital Markets

Susie Min - Deutsche Bank

Eric Stine - Craig-Hallum Capital Group

Colin Rusch - Northland Capital Markets

Matthew Blair - Macquarie

Alex Potter - Piper Jaffrey

John Quealy - Canaccord Genuity

Pavel Molchanov - Raymond James



Hello. This is the Chorus Call conference operator. Welcome to the Westport Innovations Inc. 2013 second quarter financial results conference call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

At this time, I would like to turn the conference over to Darren Seed, Vice President of Investor Relations and Communications. Please go ahead, sir.

Darren Seed

Thank you, and good afternoon. Welcome to our second quarter conference call for fiscal 2013. It's being held to coincide with the disclosure of our financial results earlier this afternoon. For those who haven't seen the release and financial statements yet, they can be found on Westport's website at www.westport.com.

Speaking on behalf of the company will be Westport's Chief Executive Officer, David Demers and Westport's Chief Financial Officer, Bill Larkin. Attendance on this call is open to the public and to media, but for the sake of brevity, we are restricting questions to analysts.

You are reminded that certain statements made in this conference call and our responses to various questions may constitute forward-looking statements within the meaning of U.S. and applicable Canadian securities law and such forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. Actual results may differ materially from those projected in the forward-looking statements.

Information contained in this conference call is subject to and qualified in its entirety by information contained in the company's public filings and except as required by applicable securities laws, we do not have any intention or obligation to update forward-looking information after this conference call. You are cautioned not to place undue reliance on any forward-looking statements.

Now, I will turn the call over to David Demers.

David Demers

Thanks, Darren, and good afternoon, everyone. As I said in our last call, 2013 is a transition year for us, as we see the rapid development of markets for natural gas in transportation. We are rapidly moving from our proof of concept and market creation phase over the last few years to full commercial operation with a broad product portfolio. As the numbers show, we are seeing great progress in two key initiatives. LNG trucks and the China market generally.

So, trucking first. Launch of Cummins Westport's new ISX12 G is off to a good start this quarter and with the higher ratings that are available this month, we expect very strong growth in CWI with this new product over the next year. I think we have the right product at the right time to see us able to breakthrough that will establish LNG as a major fuel for trucks around the world.

We are still at the beginning in this market but we estimate we are at about 1% market penetration this year in LNG trucks. We will see a lot of new products entering the market over the next few years. Later this year, we will launch our Westport iCE PACK LNG Tank System and of course the fully integrated next generation HPDI trucks will be coming from Volvo next year.

Most analysts are calling for 5% to 20% market penetration in North America within five years, assuming that infrastructure investment keeps up, but basic risk (inaudible) but even the low end of those number would yield great value for our shareholders. So we are pleased to say that the start is behind us and we are confident in the growth trajectory over the next few years. We intend to continue to lead this industry with new technology and new products in partnership with the leading truck OEMs.

China also continued on its spectacular growth with over 144% growth year-over-year so far in 2013 with our joint venture. Our two other major market initiatives are, first, the light duty space, particularly commercial fleet vehicles and off road, and in particular the rail opportunity. Our Westport WiNG products have established market leading positions for performance, quality and value in that light duty space. With the merger with BAF and their product line in June, we have got a significant position in this marketplace and an attractive business model as we look at what we think is significant global opportunity emerging over the next few years.

Ford's announcement of the availability of CNG ready engines for the F-150 is just another example of how this is going mainstream. We believe we are positioned to deliver great products in this market. As we announced this afternoon, we expect to begin shipping of the Westport WiNG F-150s in Q1 of 2014.

In Sweden, I am certain with the availability of government incentive has slowed sales of our Volvo car business substantially in the first half of this year but the recent announcement by the Swedish government that NGD credits would continue for three years has revived sales. The new V60 product has been very well received and in the short term this may mean customer will wait for the new model but I think the medium and long-term opportunity remains very promising.

Now, our work with Ford and Volvo is under a long-term complete product business model where we sell an entire system but we are also increasingly active in the light duty space with our applied technology business where we supply components all the way and up to completely integrated systems to OEMs. The WP580 product announcement with GAZ this quarter, this system is also in development for Tata, where it's a generation of price and performance of systems that are in the light-duty market.

But in not too distant future, we expect a technology leap when gasoline direct injection engines become predominant around the world. We believe this offers an exciting new opportunity for natural gas and we are working to launch next generation technology systems with key customers.

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