The problems that have plagued Plug Power (NASDAQ: PLUG) persisted in its second quarter as the company once again posted poor results. The stock has lost about 80% of its value in the past year.
Let’s take a closer look at the issues the company is facing and whether it has an opportunity to stage a turnaround.
Plug Power’s problems
The biggest issues facing Plug Power are negative gross margins and cash outflows. The company found a niche selling fuel cells used in forklifts and other material handling equipment to high-volume warehouses. However, in conjunction with these deals, it has long sold the hydrogen fuel needed to power these devices at a loss.
That trend continued in its most recent quarter, with the company reporting a gross loss of $131.3 million. That was worse than the $78.1 million gross loss it posted a year ago, but an improvement from the gross loss of $159.1 million it recorded in the first quarter.
For the second time this year, in addition to negative fuel gross margins, it also had negative equipment gross margins. On the bright side, its negative fuel gross margins did see some improvement stemming from the green hydrogen production facilities that the company has built.
Building out hydrogen product plants in order to supply its customers with hydrogen fuel is a big part of its plan to try to get to positive gross fuel margins. Increased production from its Georgia facility, along with some price increases, helped fuel the improvement. Meanwhile, it’s anticipating that a new hydrogen plant it is building in Louisiana in a joint venture with Olin will begin producing hydrogen in the fourth quarter.
Given that the company has been selling both its equipment and its fuel at lower prices than it costs to produce them, Plug Power has continued to pile up losses and burn through cash. In the quarter, the company posted a loss of $262.3 million, or $0.36 a share. Meanwhile, it had operating cash outflows of $254.7 million, while its free cash flow was negative $350 million.
Looking at Plug Power’s balance sheet, the company has $214 million in debt…
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