Midi-bus could be big boost

Mid-size line could reverse New Flyer's earnings dip

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A partnership forged last year with United Kingdom's biggest bus-maker is about to pay dividends for Winnipeg's New Flyer Industries Inc.

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Hey there, time traveller!
This article was published 08/08/2013 (3291 days ago), so information in it may no longer be current.

A partnership forged last year with United Kingdom’s biggest bus-maker is about to pay dividends for Winnipeg’s New Flyer Industries Inc.

The company announced in May of last year it was entering into a joint venture with Alexander Dennis Ltd. to produce a smaller, medium-sized transit bus for the North American market.

CEO Paul Soubry told industry analysts Wednesday it’s close to securing its first Canadian sale of the North American version of its so-called midi-bus.

SUPPLIED Already used in the U.K., Hong Kong, New Zealand and Australia, mid-sized buses are a niche market New Flyer is hoping to cultivate in North America.

Although the initial order is expected to be a modest one — five buses — Soubry said New Flyer officials still believe the partners can sell between 100 and 120 of the vehicles in North America in their first year of production.

“I’m still very bullish on the niche we’re going after with the midi,” he added.

He said they also expect to begin selling the buses south of the border before the end of the year.

When he announced the long-term joint venture last year, Soubry estimated the North American market for midi-buses at about 1,000 units per year.

Potential buyers include public transit systems and private operators such as airports.

New Flyer’s midi buses are based on models Alexander Dennis has been successfully selling in the United Kingdom, Hong Kong, New Zealand and Australia. However, the steering wheel will be on the left instead of the right and they’ll be altered to comply with North American safety regulations.

The buses will be offered in nine-metre and 10-metre models, and will have a 10-year operational life. By comparison, New Flyer’s standard, heavy-duty buses come in 12-metre and 18-metre lengths, and have 12-year lifespans.

The North American version of the midi-bus will be manufactured at New Flyer’s production plant in St. Cloud, Minn. The plant is being expanded to accommodate the new line and the company said in April it expects production to get underway before the end of this year.

Soubry provided a brief update on the status of the joint venture during a conference call with analysts to discuss New Flyer’s second-quarter financial results, which were released Tuesday evening.

He couldn’t be reached later for further elaboration.

The final results showed June’s acquisition of a U.S. rival — Alabama-based North American Bus Industries, Inc. (NABI) — took a big bite out of New Flyer’s Q2 net earnings.

Earnings for the three-month period ended June 30 were down 50 per cent from the same period last year — $1.7 million versus $3.4 million.

The company blamed the decline primarily on a $3.3-million increase in costs associated with the $80-million NABI acquisition, and on $600,000 in non-recurring expenses related to the integration of its recently acquired Orion parts-business into New Flyer’s aftermarket operations.

That included moving Orion’s parts operations from Canton, Ohio, to a New Flyer facility in Kentucky.

But while its net earnings took a hit, New Flyer’s revenues and consolidated-adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) were much more encouraging.

The company said Q2 EBITDA improved by 10.4 per cent to $18.1 million from $16.4 million a year earlier. And total revenues jumped by 18.4 per cent to $268.7 million from $227 million.

The revenue gain was due in part to a 10.9 per cent increase in bus deliveries during the quarter — 489 equivalent units (EUs) versus 441 a year earlier.

That drove up bus revenues for the quarter by 10.1 per cent to $217.3 million from $197.4 million.

Revenues from after-market operations soared by 73.4 per cent to $51.3 million from $29.6 million in Q2 2012.

Soubry told analysts the demand for full-sized, heavy-duty transit buses continues to improve. New Flyer’s backlog of orders at the end of Q2 was 8,536 EUs, he said, which is a 13.4 per cent improvement from the end of the first quarter of the year.

And the backlog of firm orders was up 18.6 per cent to 2,252 EUs.

In dollar terms, the total value of the order backlog was $3.7 billion, compared to $3.3 billion at the end of Q1.

New Flyers shares (TSX:NFI) closed Wednesday up 11 cents to $11. 54.

murray.mcneill@freepress.mb.ca

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