BNN - Monday, May 27, 2024 - 01:00 p.m. (ET) - Segment #3

( ) Michelob Ultra. So, it's a financial approach that just flows together. Kinda like this: Investments in the front... Insurance in the back. We do both. [phone ringing] ( ) Canada has one of the best backyards in the world. Don't let allergies prevent you from breathing it all in. (Sneeze, birds squawking) Get relief fast. Reactine acts fast to relieve allergy symptoms and lasts 24 hours. If you are an entrepreneur, you know what it means to be always invested. Grabbing hold of an idea and seeing it through, meeting old challenges with fresh solutions and believing in the power of tomorrow. We know because we're the exchange for entrepreneurs and we're always investing in public markets, in business, in growth, in you. Hello, looking back to trading day. I'm amber kanwar. Winnipeg based nfi group is a bus manufacturer with a focus on evs. >> They are aiming to have 40% of the buses they deliver in 2025 to be electric note the company over the last 5 years has struggled over the past year. It's up 65% as we're zooming out and taking a look at the last 5 years, they were definitely hit by the pandemic, all the supply chain related issues that affected making buses came home to roost at nfi. But the demand continues to grow. Can it grow to the next level? The company is forecasting that by next year, they'll have 4 billion in sales that would be double from what it was just a couple of years ago. Let's bring in paul soubry, president and ceo of nfi group. Paul, thank you so much for being with maybe we should just take a stock of past 5 years with you at the helm of the company because you know, that demand for ev buses continues to be there from especially. And yet you had all these challenges to deal with that that challenge the balance sheet. The challenge to supply chain, where are we in working out those kinks? >> Thanks for number and lot of people. >> Well, itself, you know, none of us to long and how the bill would be. We our way through covid. But as we come out of covid into global supply chain, challenges really kick in and most of them were largely systemic issues like availability of microprocessors are left anchor those kind of things. Absolutely hammered our around the world. All of our product lines, the inability to get certain components to complete a created a tremendous amount of pressure on ballot. She loves working process and of course, a massive refi we did at the end of 2022 really has set us up now for recovery of what now not only record market demand, but absolutely incredible backlog that we have here from coming across that this and I assume that informs your target of getting to 4 billion in sales by the end of next year. How confident are you that everything is working? >> Right now and then that you can hit that target. >> Well, a couple things, amber, to think about, first of all, most of our business, two-thirds, almost 80% of it is based on public picture months. And those public procurements are multi years in the making and most of them are flea renewal strategy is going from either diesel or natural gas or hybrids to some form of zero emission vehicle. So the backlog now has 14,700 units just for contacts. Last year. Our company delivered in total 4,000 units. We target of five-thousand the shirt are slaughter effectively sold out for this year. A good portion next year on summer business lines were already booking now with the 2026. So we don't have demand problem. We have strong government funding and we have recovering commercial operators. Wilson, north america, where the private motor coaches in the u.k.. The issue to us has been the pace of recovery is covered by to the availability of skilled labour. You are building very sophisticated zero emission vehicles in their bill, largely by hand because most of them are customers manufactured for our customers and the issues that pays, which are supply chain can keep up with our recovery. Could be nothing worse in our recovery that has record order to start really in a pace that we just can't deliver to, which sent as our customers increase she challenges for ourselves. So we governing the

recovery, not based on demand based on availability people, which has gotten considerably better. And the supply chain, which is cutting materially better as I think that's important for investors to understand, as you know, the last 3 years that the company has given the forecast, especially on the top line and each year has undershot that. >> And you identified some of those issues like labour, like supply chain are you saying are increasingly confident that that those kind of issues are not going to crop up. >> Well, it always a risk of certain issues. The supply things that really killed us in 21 22 in part, 23 were global supply dynamics. The inability to get microprocessors, for example, there's probably 70 80 parts on the bus that have michael processes in them. And so our ability now to think through the supply chain actually work with our suppliers on their supply chains has notably improve the supply reform. And so we too, are factored. We still have some suppliers that are challenge. We've dramatically beefed up. Our supplier inventor development teams, we have people inside or archie vendors, facilities during the pandemic. And as we came over supply chain, we had somewhere in the neighbourhood out, you're so high and critical suppliers, we're down to 2 or 3 now. And we're, we're always managing and we're doing in a highly customized environment. Never say never, but boy, we are materially more confident in our ability to execute to the forecast just context, in 2019, we did about 6,000 deliveries in 2022 that dropped the trot and 3,000 deliveries we 4,000 last year were targeting 5,000 approximately this year, about 6,000 next year. So we're not talking about getting off the charts volumes. As we're talking about getting back volumes we had pre-covid biggest difference. We've had a material reduction in our competitors. We have significantly better margins built into our backlog. And we have very, very firmly we're going to build to manage the engineering and the bills schedules to much confident than I've been in the last 4 years. For example, one where we're going to if there a risk, some analysts will point to as a result of the challenges that you had to deal with. >> And so you know, if there is a misstep, you know, for example, with one of the suppliers, I don't know what happens. But to your point, things happen. Do you have additional levers to paul financially to make sure that you know, that you have enough liquidity to get to where you're trying to go. >> But that's a really good question and you're no question, he's been on the minds of our, you know, our and was not investors for a couple years. Couple of major we refinanced the business that brought new in additional debt, but also issued equity. So that right-size the balance sheet from the get-go. But that was completed. The second issue, which has been troublesome for industry forever, is that the vast majority of our contracts, united states to not have milestone payments in what happened in 22 23 is what building buses wind with very low margins. And we're absorbing the costs of caring while working capital. Earlier this year, I was literally presented at the white house with the fta. And with our public transit association, I states and the fda has even clear guidance all of the public to transit. Nice taste of the, the ability muscle payments we sent helps finance the working capital through the production process to material changes to the way we work. Yet. Also gave clarity and guidance on how to reprice contracts when they are have normal inflation dynamics that come based on the indices. Changes are game changers for business. The good news for us is we were able to refine and back on our feet with a record bad news is we lost about a half dozen competitors over the last couple just couldn't make a go of and today really, there's only 2 competitors, united states canada. And we are the leader in the space. Is you mention at the white house. And as I understand a lot of your bus as you know, you can't just supply parts for anywhere from anywhere, you have to. >> You know, there's some made in usa requirements, especially when you're dealing with the federal government. >> How do you think about election and whether or not more protectionist policies are brought in after the election. >> Call to buy america worldly fta grants money to transit agencies and their 7. Of the material must be us origin and certain final assembly operations must physically have the united states. For example, you can put and orange international outside the united states. Our entire supply tire manufacturer machine complying with for a long, long time. Now when you go back to last 20 years and you look at the various administrations in the united states, republican or democrat a relatively strong support public transportation. It's not just the green development of public transportation that has gotten more focus. And the biden harris administration, you can find a city in the united states, a major city

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