Bus maker NFI Group Inc. plans to ramp up production after being hard-hit by supply chain issues during the pandemic, saying it could reach 2019 output levels in two years.
NFI chief executive Paul Soubry said Wednesday the company expects some temporary inefficiencies as it looks to increase production, but 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.
"To meet these expectations, we will ramp up production, which is primarily a function of a stable supply chain and the addition of labour to existing facilities rather than requiring major investment capital of new facilities. We plan to exit 2023 at higher production levels and we'll continue to increase that in 2024."
NFI's deliveries dropped by about half from 2019 to 2022, said Soubry, noting the company's 2025 delivery targets include about 6,000 total equivalent units.
"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 25 per cent of deliveries in NFI's latest quarter. By 2025, it forecasts 40 per cent of all buses it delivers will be zero-emission amid increasing demand for electric vehicles.
While "systemic global issues of demand have gone away," Soubry said NFI is still coping with supplier-specific challenges related to input materials or their own labour demands.
He said some of those issues are affecting the ramp-up of electric vehicle production, with the company struggling to source supplies such as high-voltage cables.
"The last thing we want to do to ourselves, to our employees or our customers or our investment community, is overpromise or try and ramp up too fast," Soubry said.
"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."
NFI reported a loss of US$48.1 million in its latest quarter compared with a loss of US$56.0 million in the same quarter last year. The bus maker, which keeps its books in U.S. dollars, said the loss amounted to 62 cents per share for the quarter ended July 2 compared with a loss of 73 cents per share a year earlier.
Revenue for the quarter totalled US$659.6 million, up from US$398.0 million in the same quarter last year.
On an adjusted basis, NFI said it lost 46 cents per share in its latest quarter, better than analysts' expectations of a 49-cent-per-share loss. That compared with an adjusted loss of 64 cents per share a year earlier.
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.
Adjusted earnings before interest, taxes, depreciation and amortization are now expected between US$40 million and US$60 million compared with its previous guidance for between US$30 million and US$60 million.
This report by The Canadian Press was first published Aug. 16, 2023.
Companies in this story: (TSX:NFI)
Sammy Hudes, The Canadian Press
