Stock Smarts: New Flyer a Success Story in Bleak Manufacturing Landscape
Demand is soaring for Winnipeg-based bus company’s clean energy products.
It’s no secret that Canada’s manufacturing sector isn’t what it used to be. It seems like every time we turn around, another company is closing down facilities and laying off staff.
The automotive sector, once the backbone of Ontario’s industrial complex, has seen hundreds of high-paying jobs move to the U.S. and Mexico in recent years, leaving the unemployment rate in Windsor hovering around 10 per cent.
A few weeks ago, giant Caterpillar Inc. announced it is closing its Electro-Motive Diesel rail locomotive office in London, Ont. About 50 people will lose their jobs. Three years earlier, the company closed the London locomotive plant, switching production to Indiana at the cost of 450 jobs.
Last year, H.J. Heinz shut down its ketchup plant in Leamington, Ont. with the loss of 740 jobs. Earlier, the Hamilton area was rocked by the news that U.S. Steel was pulling out. And the beat goes on.
Against that backdrop, it’s encouraging to come across an industrial success story. Winnipeg-based New Flyer Industries (TSX: NFI) is proof that manufacturing can survive and prosper in today’s Canada.
The company said that clean propulsion systems (such as natural gas, diesel-electric hybrid, electric-trolley, and battery-electric) represented approximately 71 per cent of the total backlog. New Flyer delivered 625 buses during the third quarter and received 1,133 new orders.
The company added to its backlog late last week with the announcement of a firm order from the Massachusetts Bay Transport Authority for 325 buses, with a value of $223 million. The deal also includes options for another 400 buses at a cost of approximately $254 million.
Earlier, New Flyer announced second-quarter results that showed significant improvement over 2014. Revenue was up 8.2 per cent year-over-year to $375 million, due to growth in both bus manufacturing and aftermarket sales. Net earnings came in at $12.4 million ($0.22 per share) compared to $3.6 million ($0.06 per share) in the same period of 2014. Free cash flow was $26.4 million and declared dividends were $8.4 million.
For the first half of the 2015 fiscal year, the company reported net earnings of $23.2 million ($0.42 per share). That was a big improvement over $9 million ($0.16 per share) the year before. Free cash flow in the first half was $38.8 million while $16.8 million was paid in dividends for a free cash flow payout ratio of 42.7 per cent. That compared with 61.2 per cent during the first six months of 2014.
For years, New Flyer was a low-profit operation, better known for its attractive dividend than for its growth potential. It was only this year that the share price began a breakout above the $14 mark, reaching a high of $20.84 at the start of this month before pulling back to the current level.