MagneGas Corporation, a leading clean technology company in the renewable resources and environmental solutions industries, has reported financial results and provided a business update for the second quarter ended 30th June, 2018.
Ermanno Santilli, CEO of MagneGas, stated, “The strong momentum MagneGas gained from reaching higher revenues in first quarter of 2018 continued on into the second quarter. With each strategic acquisition and subsequent expansion, more customers and potential partners are recognising the way our MagneGas2® is transforming their industries in a positive and environmentally-focused way. Revenue for the second quarter, ended 30th June, 2018 increased 201% to $2.9m, largely driven by our sales expansion brought on by the Trico Welding acquisition in April.”
MagneGas continued to make significant progress as the environmental technology business evolved, especially given the progress it made under the US Department of Agriculture grant-funded project in agricultural sterilisation. Following a demonstration earlier this year, MagneGas was invited by the USDA to present findings at the Soil and Water Conservation Society’s 73rd International Annual Conference on Culture, Climate and Conservation. These results prove that the technology can play a real and impactful role on water conservation, water purification and the elimination of harmful contaminants that impact the safety and quality of fresh water resources around the world.
MagneGas has also identified two European Commission-sponsored grants for its waste-to-energy and agricultural sterilisation programmes. Based on the company’s research, the two grants would be a strong fit to advance MagneGas’ fourth-generation gasification project. Under this project, MagneGas would redesign its current third generation plasma arc model revealing a fourth generation that dramatically increases the surface area of its plasma arc and potentially reducing costs of the generated gas by up to 90%.
Scott Mahoney, Chief Financial Officer of MagneGas, added, “The MagneGas team is proud of our operational advancements so far this year and also on our clear focus on cost control. It is also important to note that the company took a series of steps to further improve profitability in June of this year. We made a series of staffing changes, including at the board level, that in total save the company more than $50,000 per month in cash expenses starting in July.”
Another area that MagneGas expects to see significant financial performance improvement is in two of its acquired operations. Implementing its strategy of boosting staffing resources to enable the business to scale quickly led to sales increasing by over 33% during the quarter, and over 50% since we acquired the business in February. Most importantly, the operation improved the operating profits by over $84,000 per month during the quarter.
In the current year, MagneGas has three overall business objectives. First, the company wants to scale its US industrial gas revenues so that it is financially self-sufficient. Second, MagneGas wants to unlock the growth potential of the European markets. Lastly, it wants to explore new and complementary technology opportunities, leveraging both its existing technologies as wells as through partnerships or other technology additions to its patent portfolio.
Second quarter 2018 financial results
Revenue for the second quarter ended 30th June, 2018 increased to $2.9m, compared to $966,204 in the same period last year. The 201% increase in revenue was due primarily to the acquisition of Trico Welding Supplies in Northern California which generated $1,392,757. Only $568,000 of the growth in revenue was outside of the Trico acquisition and it was largely due to MagneGas’ expansion into the East Texas, Louisiana, and San Diego markets via two acquisitions made in the first quarter.
For the three months ended 30th June, 2018 and 2017, the company generated a gross profit of $935,126 compared to $433,547. Gross margins for the three months ended 30th June, 2018 and 2017 were 32% and 45%, respectively. The decline in gross margins was due to acquisition accounting treatment of the acquired inventory values. The company recorded $331,061 in additional cost of goods sold during the second quarter due to acquisition accounting. If this amount were excluded, gross margins would have been 44%.
MagneGas is currently in the process of installing a bulk industrial gas fill plant at its Clearwater facilities. These facilities are estimated to further improve combined gross margins by 3 to 5 percentage points as the company expects to improve its gas margins in Florida.
Operating costs for the three months ended 30th June, 2018 and 2017 were $4.3m and $3.5m, respectively. The increase in operating costs in 2018 was primarily attributable to its April acquisition of Trico Welding Supplies, and significant capital markets activity during the period.