MagneGas Corporation has announced its financial results and provided a business update for the full year ending 31st December 2016.
Revenues for the full year ending 31st December 2016 increased 46% to $3.5m compared to $2.4m for the same period last year.
The company also experienced close to 20% revenue growth versus the same period last year for MagneGas fuel sales. This increase was primality due to additional customers and distributors acquired through ESSI and the results of marketing the company.
Gross margins increased to 43% from 39% for the full year ending 31st December 2016 versus 31st December 2015. This improvement was in part due to increased sales of the company’s higher-margin offerings, including MagenGas2® and its proprietary equipment sales as well as controlling the cost of materials. In addition, the gross profit from sales made to Green Arc Supply of Louisiana (Green Arc), were higher than anticipated due to lower component costs and installation expenses.
Operating expenses increased approximately $3.6m for the full year ending 31st December 2016 to $13.7m from $10.1m for the same period in the previous year.
The increase in operating expense in 2016 was primarily attributable to the completion of MagneGas’s new headquarters and increased consulting expenses related to research and development, investor relations, public relations and new business development.
Recent business highlights
Ermanno Santilli, CEO of MagneGas, stated, “We are pleased to report a 50% increase in revenue and 441 basis point increase in gross margin for the Q4 of 2016 versus the same period last year. We have benefitted from our MagneGas2® product line, which enables us to drive enhanced value for our clients in a price competitive and commoditised landscape.
“Our business model to leverage MagneGas 2® has continued to mature, as the premier wedge product in the industry. This has been a critical driver of revenue growth and has allowed the company to continue to rapidly gain market share. As a result, MagneGas has experienced impressive growth versus the overall welding supply and gas industry market growth rate of just 2-3% annually. We expect sales will continue to increase as we expand into additional locations and add new partnerships,” Santilli continued.
The company is gaining greater market penetration in the state of Florida, with the goal of expanding to a majority of the metropolitan markets in the state of Florida by the end of 2018. The company recently announced plans to expand into the Tampa, Florida market with direct sales of industrial gases, welding supplies, and MagneGas2® due to strong demand in the area.
MagneGas have also expanded its product offering to include the commercial sale of carbon dioxide (CO2) as a complimentary product to its industrial gas line of products. This strategy was tested with success in Sarasota and Ft Myers, and will now be rolled out into other retail locations in the state of Florida in the coming months. MagneGas plans to initially sell CO2 in the restaurant, travel and leisure markets where there is a large amount of CO2 use in carbonated beverages.
MagneGas has gained a strong foothold in the US automotive market. Earlier this year the company announced that the direct sales of industrial gases, welding supplies and, MagneGas2® to a Fortune 100 US automaker. That relationship has since expanded to include a second facility in October 2016. The facilities MagneGas are currently servicing produce light trucks and automobiles, and are using MagneGas2® as the exclusive fuel for metal cutting.
Earlier this month, MagneGas announced that it had successfully installed a 100kw Plasma-Arc Gasification system at Green Arc. As previously announced, Green Arc purchased a Gasifier to manufacture and distribute MagneGas2® exclusively in certain regions of Louisiana and Texas. Pursuant to the terms of the Gasifier Purchase Agreement, MagneGas received a total of $775,000 for the purchase of the system in addition to recurring royalty payments.
“We are excited to have our first operating system at a customer location, and plan to replicate this model which includes upfront payments plus long-term, high margin royalties,” Santilli added.
In January 2017, MagneGas signed a definitive agreement for a $2.65m equipment sale of our proprietary gasification and sterilisation system, MagnesGas2® fuel and cylinders to a company based in Germany. This transaction represents the largest sale in the company’s history and MagneGas Corporation’s first equipment sale in Europe. Moreover, the German company has indicated their interest to purchase additional systems for multiple markets. These first two systems are expected be used for demonstrations and service contracts with the goal of entering the agriculture, municipal wastewater treatment and industrial gas markets in Germany.
“We believe this transaction positions MagneGas Corporation for expansion across Europe and globally,” concluded Santilli.