The Carbon Revolution Ltd (ASX: CBR) share price is on course to end the week with a strong gain.
In afternoon trade the carbon fibre wheels-focused advanced manufacturing company’s shares are up 8% to $2.96.
Why is the Carbon Revolution share price storming higher?
The catalyst for the strong gain by the Carbon Revolution share price on Friday was the release of its second quarter update this morning.
According to the release, as expected by management, Carbon Revolution’s sales continued to be impacted by COVID-19 headwinds during the second quarter. The quarter was also subject to manufacturing seasonality on another key customer program.
This led to the company reporting quarterly revenue of $5.6 million. This was down 52.8% on its first quarter revenue and 48.1% on the prior corresponding period.
Quarterly wheels sold were 1,972 for the three months, a decrease of 55.4% from the first quarter and 43.1% from the same period last year.
However, management’s commentary in relation to the second half appears to be the reason the Carbon Revolution share price is heading higher today. It advised that it expects wheel sales growth to return in the second half of FY 2021.
Management is positive on the second half. It explained: “The business continues to monitor the local and global impacts and risks related to COVID-19. There remain uncertainties arising from the ongoing impacts of COVID-19 and the automotive industry’s response in the near-term. On the basis of all currently available information, the Company expects to deliver strong sales growth in FY21.”
Supporting its growth will be the company’s investment in its Mega-line manufacturing process. This process is expected to lower costs, increase capacity, and help the company secure larger programs.
Management commented: “The design of the Mega-line manufacturing process has progressed significantly and is now ready to proceed once new programs are awarded. The Company expects that significant new programs will be secured in the next 6 months and these new programs will underpin the decision to invest in the first mega line. This demand for Megaline capacity is anticipated to come from both existing and new customers.”