NFI Group ((TSE:NFI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for NFI Group presented a mixed sentiment, highlighting both strong demand and backlog growth alongside significant challenges in the U.K. market and supply chain disruptions. While successful refinancing and improved liquidity were positive aspects, the restructuring and impairment costs in the U.K. market were notable lowlights impacting net earnings.
Strong Demand and Backlog
NFI Group reported new orders of 822 equivalent units (EUs), with 95% being firm orders, contributing to a total backlog of 16,198 EUs valued at USD 13.5 billion. The Q2 LTM book-to-bill ratio of 119.9% underscores robust demand, primarily driven by government funding in North America.
Improvement in Adjusted EBITDA
The company achieved a 19% year-over-year increase in quarterly adjusted EBITDA, alongside a $7.6 million improvement in adjusted net earnings. Additionally, there was a 7.9% increase in return on invested capital, indicating efficient financial management.
Successful Debt Refinancing
NFI Group successfully completed the refinancing of its First and Second Lien debt, which resulted in increased liquidity of $326.7 million and improved credit ratings, strengthening the company’s financial position.
Reduction in Supply Chain Risk
The company made significant strides in supply chain management, reducing the number of high-risk suppliers from 50 in 2022 to just one, reflecting improved supply chain health.
U.K. Market Challenges
NFI Group faced competitive pressures and cost advantages from non-U.K. OEMs, leading to restructuring provisions, goodwill impairments, and tax asset write-downs for its subsidiary, Alexander Dennis.
Supply Chain Disruption Cost
A $6.7 million adjustment was necessary due to seat supplier disruptions, which affected manufacturing labor and overhead, highlighting ongoing supply chain challenges.
Net Loss and Restructuring Expenses
The company reported a quarterly net loss of $160.8 million, largely due to significant non-cash impairments and restructuring provisions, impacting overall earnings.
Forward-Looking Guidance
NFI Group reaffirmed its 2025 guidance, projecting revenues between $3.8 billion to $4.2 billion and adjusted EBITDA ranging from $320 million to $360 million. Despite facing non-recurring expenses, the company remains optimistic about its strong demand environment and improved supply chain health.
In summary, NFI Group’s earnings call reflected a balanced sentiment with strong demand and backlog growth countered by challenges in the U.K. market and supply chain disruptions. The company’s successful refinancing and improved liquidity are positive indicators, while restructuring costs and net losses pose challenges. Looking ahead, NFI Group maintains a positive outlook with reaffirmed guidance for 2025, driven by robust demand and strategic financial management.