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This article was published 12/8/2016 (1163 days ago), so information in it may no longer be current.
NEW Flyer Industries continues to outperform expectations with increased revenue and profits in the second quarter and successful ongoing integration activities of Motor Coach Industries’ operations.
The Winnipeg bus manufacturer posted substantial increases in earnings and revenue as a result of the inclusion of Motor Coach results in the quarter. Increased profit margins and a 6.6 per cent increase in the average selling price contributed to the strong results.
Revenue for the quarter was $586.9 million, up 56.5 per cent compared to the same period in 2015, and EBITDA (earning before interest, taxes, depreciation and amortization) was up 104.8 per cent to $80.3 million.
Net earnings increased 180.9 per cent to $34.7 million.
New Flyer CEO Paul Soubry said the company has already achieved about $5 million of the $10 million in expected cost savings related to the MCI purchase of last year through the rationalization of corporate costs and the co-ordination of sourcing and purchasing activities. The company has also just completed the full integration of the parts department of New Flyer and NABI, the Alabama bus company it acquired in 2013.
Soubry said the first two quarters of ownership of MCI have gone very well.
"We have been warmly welcomed by MCI," he said. "The focus has been on culture, facilities upgrades, investigating information-technology-harmonization potential, coach quality and customer service. Management is taking the necessary time to evaluate and assess the various scenarios before determining further strategic actions."
New Flyer shares were up 7.43 per cent Thursday to $44.82, hitting a 52-week high on fairly heavy trading.
In his report to investors, Trevor Johnston, an analyst with National Bank Financial, said he remains encouraged the unusually strong profitability in the quarter may persist given, among other things, a growing backlog of business.
"Evidence suggests that profitability continues to ramp for the transit bus business," he said.
Bert Powell, an analyst with BMO Capital Markets, said in his report, "New Flyer continues to under-promise and over-deliver. The company has delivered buses and motor-coaches manufacturing margins that were significantly higher than expectations for the past six consecutive quarters."
The only cautionary element to the second-quarter results — "the elephant in the room," Soubry said — was the uncertainty over a large MCI order from New Jersey Transit.
On July 11, MCI received notice of an executive order by the governor of New Jersey for "an immediate and orderly shutdown of all ongoing work" under a contract to build commuter coaches for New Jersey Transit because of financial issues with the state. MCI has a contract to build 184 coaches for New Jersey in the first year, 142 of which were to be delivered in 2016.
Soubry said there were 85 coaches already under construction on the assembly line, and negotiations and monitoring of the situation was ongoing as to whether or not New Jersey will agree to the receipt of those coaches.
Soubry said he was comfortable New Jersey needs the buses, and it is only a matter of timing as to when the matter will be resolved. But he said it could still impact the company’s forecast delivery totals.
The company expects to deliver approximately 3,450 units through the course of 2016, up from 3,265 in 2015.
He said he does not expect the results of the U.S. presidential election will have much impact on market that has sustained strong order activity for a couple of years now.
"We’re confident with the robustness of the market," said Soubry. "Right now, the outlook is very positive."
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.