Chart Industries is continuing to see demand for its equipment and solutions related to the transition to clean energy infrastructure and specialty markets amid the coronavirus (Covid-19) pandemic.
The US equipment and systems provider yesterday released its mid-second quarter business update in which Chart said the current economic situation continues to be challenging for its oil-related product lines.
With more than $60m of cost reductions taken year-to-date, Chart said it continues to expect margin expansion throughout 2020 and strong free cash flow for the year, with debt paydown a priority.
April 2020 free cash flow of $12.6m was driven by strong earnings, cash collections and supplier terms extensions.
Through 29th May (2020), second quarter orders totalled approximately $135m, with orders in-house that will be booked in the first days of June totalling an additional $14m.
In April and May, Chart received orders from 67 new customers, including 20 in China, where quarter to date orders and sales have exceeded its original 2020 plan.
“April earnings per share and adjusted earnings per share after adding back severance costs were very strong, as our non-energy related businesses have continued to perform,” stated Jill Evanko, Chart Industries President and CEO.
“While the pandemic has altered 2020 for everyone, we are focused on shaping our business to deliver good results in 2020 and position Chart to take advantage of the strong fundamentals of the clean energy transition.”
Demand for oxygen related critical care products was strong in the month of April and first two weeks of May, while quoting activity for traditional industrial gas applications has increased in the second half of May as the hyper-focus on oxygen delivery has subsided to pre-Covid-19 levels.
Chart continues to see consistent and strong quoting and order levels for fuelling stations, repair and service, small-scale LNG infrastructure and specialty markets, including the receipt of a $2.3m order for a European country’s Armed Forces.
Chart also expects to receive a small-scale terminal order in North America in June 2020.
E&C Cryogenics demand for quick turn refurbishment, repair and service-related product and services has increased over the past eight weeks, with orders of $7.2m associated with this type of work.
Venture Global’s Calcasieu Pass big LNG project continues on schedule and in May, Chart booked an additional $1m order related to the project.
In addition to E&C Cryo, Chart continues to grow repair and service across its four segments, including hitting a major milestone yesterday with the completion of a five-year long-term agreement with a major industrial gas customer for repair and service.
Areas that softened in the first two months of the second quarter 2020 include HLNG vehicle tanks, beverage tanks, and air-cooled heat exchangers.
Air cooled heat exchanger orders quarter-to-date total $12.1m while the fans business continues to book and ship consistent with first quarter levels.
While beverage tank orders were soft for the first six weeks of the quarter, the past two weeks’ beverage activity has picked up with orders from customers such as Yum! Brands, Quik Trip, Broward Nelson, Nuco and Jimmy Johns.
Key customers in Chart’s HLNG vehicle tank line returned to production in early May, approximately one month sooner than we had previously anticipated.
Chart said it continues to expect a $15 to $20m reduction to its expected 2020 HLNG vehicle tank revenue due to the shutdown.
Government support of the transition to clean energy fuels is heightened, with India extending excise duties on diesel, and Germany is expected to extend the toll exemption for LNG heavy duty trucks on German highways in early June which will continue to incentivise companies to build infrastructure, including LNG fuelling stations and additional over-the-road LNG trucks.
Chart previously announced it had received a letter of intent from Shell for seven fuelling stations in Germany and in May 2020, received the first purchase order for two of the seven stations plus a surprise four station order that has not yet been booked from another customer last Friday evening.
Other regions, in particular in Southeast Asia, continue to address their need for power infrastructure. One such country is Indonesia, and early in the second quarter 2020, Chart signed an agreement with Risco Energy Solutions, a private investment company, to provide LNG equipment such as storage tanks, ISO containers, trailers, mobile equipment, and fuelling stations, to support the rapidly growing Indonesian gas-to-power infrastructure needs.
Risco is an active gas infrastructure provider to PT Perta Gas Niaga, a subsidiary of the Pertamina Group.
Given the weak demand for air-cooled heat exchangers and the continued optimisation of its cost structure, Chart took further reductions on 29th May (2020).
The total cost reductions taken last Friday equalled $11.9m in annualised cost savings, bringing the year-to-date total to $60.7m of annualised cost savings.
Of the $60.7m, approximately $51m are structural changes that can be maintained at volume levels above $1.6 billion.