Bus-maker on the rise

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This article was published 16/08/2023 (807 days ago), so information in it may no longer be current.

With US$443 million in new debt and equity about to finalized, NFI Inc. is ready to put the past three years behind it and more comfortably resume its role as industry leader in the heavy-duty transit bus market in North America.

That means it is ramping up its production rate and by 2025 will be making as many buses per year as it did in 2019 — about 6,000 — after deliveries were effectively cut in half between 2019 and 2022.

“COVID has been awful for everybody — our Motor Coach division didn’t make a damn coach for close to three years,” said Paul Soubry, NFI’s chief executive, in an interview. “The resulting supply chain challenges have been unprecedented and the impact on us has been absolutely brutal. However, we have been able to weather the storm.”

While he said the company expects some temporary inefficiencies as it looks to increase production, it sees a path for significant margin growth in 2024 and 2025.

“There is no question it will take time for operations production efficiency to get back to pre-pandemic levels, but Q2 2023 showed promising signs of significant recovery,” he told analysts on a conference call Wednesday to discuss its second-quarter results.

In order to continue ramping up production, the company has been furiously hiring back the folks who were laid off at the start of the pandemic and Soubry said they will need to hire 100 additional staff on top of that before the end of the year and another 300 to 400 next year throughout its operations in Canada, the U.S. and the U.K.

Mike Deley, the chairman of Unifor’s unit at NFI’s operations in Winnipeg, said all the workers from his unit who were laid off at the beginning of the pandemic are going to be called back. He figures there are about 50 people still left on layoff but they will be back before the end of September.

“Our workload is unbelievable,” Deley said.

The unionized workforce at the New Flyer shop in Winnipeg will eventually number 600 when everyone is called back and Deley said there are ads out there now looking for more people.

“They will most certainly need more people here in Winnipeg,” he said. “It’s fantastic. We are very happy.”

NFI struggled mightily with accessing things like circuit boards and electronics through the pandemic but has been able to smooth out most of it supply chain uncertainties.

After the bottom fell out of the highway coach market that its Motor Coach Industries division makes — the entire North American fleet was effectively parked after the realities of the pandemic sunk in — that business is coming back as well and the company is investing $10 million to get it back on its feet.

The company made about US$12 million in EBITDA (earnings before interest, taxes, depreciation and amortization) during the quarter ending June 30 — with a forecast of between US$40 million and US$60 million for the year — on sales of US$660 million in the quarter which was up from US$400 million in the same quarter last year. The company’s official guidance is to get annual EBITDA back to pre-pandemic levels of about US$400 million by 2025.

“The growth in our financial projections is driven by a combination of volume recovery, production efficiency recovery, improved product pricing and an increased mix of zero-emission buses,” he said. “We really believe we’ve turned the corner.”

Zero-emission buses accounted for a little more than 25 per cent of deliveries in NFI’s latest quarter. By 2025, it forecasts more than 40 per cent of all buses it delivers will be zero-emission amid increasing demand for electric vehicles.

“I would say there’s more wind in our sails than anybody else’s right now, but we’re being very cautious at the pace that we’re going to recover,” he said.

Soubry was also not prepared to claim victory over news last week that California-based Proterra Inc., the all-electric bus maker that had raised about US$1.2 billion in its 20 years of existence, has filed for bankruptcy protection.

As well, Nova Bus announced a few months ago that it would be exiting the U.S. market by 2025.

“All the metrics are on the rise — our order book, back log, bid universe, profit margins. I think we have seen the worst of it. Investors have confidence as do we. The next chapter of our life is recovery and then some really cool opportunities for the business,” Soubry said.

“The fact that some competitors are really stumbling bodes well and I think reflects on the quality of our company.”

In its guidance for its full year, NFI said it now expects revenue of US$2.6 billion to US$2.8 billion compared with earlier expectations for between US$2.5 billion and US$2.8 billion.

— with files from The Canadian Press

martin.cash@freepress.mb.ca