NFI reports first quarterly profit since 2021

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This article was published 02/08/2024 (767 days ago), so information in it may no longer be current.

NFI delivered solid results for its second quarter beating analyst expectations in just about every metric and producing its first quarterly profit since the beginning of 2021.

Strong industry dynamics, including a $30 billion public transit fund dedicated to funding for large public transit systems – the largest public transit investment in Canadian history that kicks in in 2026 — means the company will need to beef up its Winnipeg production capacity to do end-to-end production of zero-emission buses in Winnipeg for the first time in 15 years.

In an interview with the Free Press, NFI’s CEO Paul Soubry said, “You can image the excitement from our Canadian customers, our Canadian workforce and our Canadian supply chain.”

The enhanced Canadian production will be needed to handle increasing Canadian demand for its buses, in particular the zero emission models which are expected to make up 30 per cent of this year’s shipments and 40 per cent next year. It will also free up production capacity in the U.S. to allow the company to build more buses there as well.

Soubry said there will likely be a formal announcement about the details of the Winnipeg expansion in late summer or early fall.

With production facilities in Winnipeg, across the U.S and the U.K., the company has been on a hiring spree since 2023. Its global workforce is back up to 9,000 from a low of 7,300 in the depths of the pandemic (but still down from 9,500 pre-COVID). Soubry said the workforce will continue to grow this year and next but not at the same pace.

In Winnipeg, its workforce is back up to about 3,000 up from about 2,500 after pandemic shut downs.

Soubry said, “There’s no question increasing production capacity in Winnipeg and bringing work back into Canada will effectively give us even more labour growth in Winnipeg.”

Revenue was up 29 per cent to $851 million and completed bus deliveries were up 34 per cent to 1,246 for the quarter ending June 30 and earnings, as well as cash flow, operating profit and other financial results were up by triple digits.

The positive results indicate that after struggling mightily for close to four years of dealing with crippling supply chain challenges and a massive financial restructuring, the company has largely overcome those issues, although isolated parts delays continue to exist.

The market responded by sending shares in the Winnipeg bus manufacturer up more than 11 per cent to $19.08 on Thursday with some bids as high as $19.30, a new 52-week high.

The largest bus manufacturer in North America with its headquarters in Winnipeg, along with production facilities here and throughout the U.S. and the U.K., recorded a $3 million profit for the quarter, compared to a loss of $49 million in the same quarter last year.

Soubry said, “We were very pleased with the first half of 2024 which was in line with our projections.”

While the company’s after-market parts business continued to produce strong performance throughout the pandemic and post-pandemic period, its manufacturing operations were suffering.

But that much larger portion of the business is recovering well with demand and the overall number of orders continuing to remain strong.

The average selling prices of NFI’s heavy duty transit buses increasing by 56 per cent since 2021. Coupled with the completion of deliveries of lower margin buses that were saddled with inflation-priced parts and the increasing number of higher-priced higher-margin zero emission buses in the mix, Soubry said the company feels good about on-going recovery continuing throughout the rest of this year and into 2025.

Cameron Doerksen, an analyst with National Bank of Canada Capital Markets, increased his 12-month target price on NFI shares to $22.00 from $21.00.

In a note to clients, Chris Murray, an analyst with ATB Capital Markets, said, “NFI delivered a solid quarter, positioning the company’s normal production rates and margins in the second half of 2024 and 2025. We expect the results to be well received.”

martin.cash@freepress.mb.ca