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At first glance, you’d think that Winnipeg-based NFI Group Inc. (NFI-T) is the right company in the right place at the right time. Instead, the company has been hit by Murphy’s law: Anything that can go wrong, will go wrong.

NFI is a leading manufacturer of buses and motor coaches. Its battery-electric and fuel cell-electric vehicles are in more than 110 cities in six countries. The company proudly proclaims on its website that it is “leading the evolution to zero-emission mobility.”

NFI operates in Canada and the United States. Apart from Winnipeg, it has facilities in Ontario and U.S. operations in Alabama, Minnesota, Washington and New York. Product names include New Flyer, MCI, Alexander Dennis and Arboc. The company has 3.5 million square feet of production space and the capability of manufacturing up to 8,000 vehicles a year, powered by everything from clean diesel and natural gas to a range of hybrid and electric products.

The buyers are out there. The company has a near-record backlog of 4,150 units. But it all seems to be falling apart.

As the switch to electric vehicles intensifies, you’d expect a company such as NFI Group to be flourishing. It’s not – quite the opposite. At this point, the firm looks more like a candidate for bankruptcy than an up-and-coming transportation disrupter.

The company’s woes are reflected in its share price. In April, 2018, the stock was trading at almost $60. A year ago at this time it was around $28. It closed Friday at $9.63, down about 65 per cent in the past 12 months.

What’s happening? On Oct. 24, the company released a third-quarter preview that can only be described as dismal. NFI expects adjusted EBITDA in the quarter to be a loss of between $15-million and $17-million. For the full year, the company is guiding toward an adjusted EBITDA loss of between $40-million and $60 million. (EBITDA stands for earnings before interest, taxes, depreciation and amortization.)

Full-year revenue is projected as coming in between $2-billion and $2.2-billion, down from the previous estimate of $2.3-billion and $2.6-billion.

“The third quarter was another very challenging period as we saw strong demand for our products and services, offset by continuing supply disruption resulting in production inefficiencies and the inability to complete and deliver contractually committed buses. In addition, we continued to experience short-term margin pressure from higher inflation and surcharge driven input costs,” Paul Soubry, NFI’s chief executive officer, said in the preview.

In response, the company is implementing a five-part action plan to attempt to stop the bleeding. This includes:

  • A two-week freeze on new vehicle starts at New Flyer in hopes that suppliers can deliver the needed parts to complete projects already under way.
  • Following the end of the freeze, the company will only increase production once confidence in supply chains has improved.
  • NFI will work with suppliers and sub-suppliers to search for alternate or substitute parts where possible, increase production-line parts inventories and develop longer lead times to better support new vehicle output.
  • Continue cost cutting initiatives, including reducing overhead. The company has already closed two production facilities, one fabrication facility and nine parts distribution locations.
  • Discuss additional financing solutions with its bankers and government partners.

The company says that demand for its products is strong and that is expected to continue into 2023. But strong demand doesn’t translate into revenue if it can’t deliver its products.

NFI described these problems as “near-term headwinds” and reiterated its guidance for 2025 of between $3.9-billion and $4.1-billion in revenue and adjusted EBITDA of between $400-million and $450-million.

Investors are clearly taking this optimistic forecast with a large grain of salt. The stock continued to tumble last week, losing 17 per cent even in the midst of a strong TSX rally.

Despite all this bad news, the stock continues to pay a quarterly dividend of 5.31 cents a share (21.24 cents a year) to yield 2.2 per cent. The dividend was slashed by about 76 per cent last December, but it’s surprising it hasn’t been eliminated completely. That could be the next step in management’s austerity plan. Full third-quarter results will be released Nov. 15. A dividend suspension could come then.

NFI shares could enjoy a huge recovery in the next few years if the company can turn this mess around. Based on what we’ve seen to date, don’t bet on it.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 9:39am EDT.

SymbolName% changeLast
NFI-T
Nfi Group Inc.
-0.08%13.31

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