FuelCell Energy Inc., which makes fuel cells for electric power generation, said Thursday its loss in the third quarter of fiscal 2008 widened by about 65 percent, due in part to higher cost ratios from a manufacturing defect in fuel cell stack production.

The company reported a loss of $26.8 million, or 39 cents per share, for the quarter ending July 31 compared with a loss of $16.2 million, or 24 cents per share, in the same period of 2007.

FuelCell said losses expanded as higher volumes of product sales resulted in increased operating costs, although product margins did improve year-over-year. The company's cost ratio also was impacted by a manufacturing defect in fuel cell stack production resulting in a $2 million charge to cost of sales.

Revenue more than doubled to $27.9 million from $13.5 million in the year-ago period.

Analysts surveyed by Thomson Reuters, on average, expected a smaller loss of 27 cents per share on revenue of $21.1 million.

The company said it increased its manufacturing run rate to 30 megawatts annually in order to fulfill a backlog that more than doubled from the previous year's quarter to $100.7 million, primarily on orders from the company's South Korean partner Posco (nyse: PKX - news - people ) Power.

FuelCell Energy (nasdaq: FCEL - news - people ) shares fell $1.13, or 13 percent, to $7.65 in morning trading.