Westport lands $50 million deal for LPG systems

War between Russia, Ukraine has had impact on Westport's sales

Europe is important market for Westport Fuels. | BIV Files

Westport Fuel Systems Inc.  (TSX, Nasdaq:WPRT) has landed a contract, valued at $49.6 million, with an undisclosed original equipment manufacturer (OEM) to provide propane systems for vehicles in Europe.

The company announced it has been awarded a contract to provide its liquid petroleum gas (LPG) fuel systems for various vehicle applications.

“The deal is forecasted to provide €38 million in revenue through the end of 2025, with production expected to begin in Q4 2023,” Westport said in its news release.

The deal is with an undisclosed “global original equipment manufacturer.”

“Westport will provide fuel systems solutions for the Euro 6 applications to this OEM, supplying the entire LPG system from the fuel tank to the fuel injectors,” Westport says.

Euro 6 applications refers to European emissions standards, which have been increasing in stringency since the first standards, Euro 1, were set in 1992. The next set of standards, Euro 7, are expected in 2025, and Westport is currently developing systems to meet the new standards.

Westport makes systems – injectors, fuel storage and other components – for a variety of alternative and low carbon fuels for vehicles, including propane (LPG), compressed natural gas, liquefied natural gas (LNG) and hydrogen.

Europe is a significant market for Westport. The energy crisis in Europe and war in Ukraine has had an impact on Westport’s business, the company said in its most recent financial statements.

"The first quarter of 2022 was challenging as our industry continues to deal with significant gaseous fuel price fluctuations due to the ongoing uncertainty in supply levels and geopolitical risk,” the company said in its 2022 first quarter financials.

In 2021, Westport noted that OEM revenue for Q1 2021 -- $42.7 million – was up from $34.2 million for 1Q20. That increase was driven in part by sales to OEMs in Russia and India.

Westport noted revenue for the first quarter of 2022 was $24.7 million, down from $33.7 million in the first quarter of 2021.

“The decrease in revenue was primarily driven by decreased sales volumes to mainly Russian customers due to the Russia-Ukraine conflict, a decrease in sales to Africa which in the prior year period included a large one-time infrastructure project, and … foreign exchange impact.