Electric Lion | The chests are almost dry

The coffers continue to empty and are almost dry at Lion Électrique, which also sees the specter of repaying its debt appearing in its rearview mirror.

Still under financial pressure, the manufacturer of electric buses and trucks must refinance debt tranches totaling US$30 million while it is still counting its pennies. These themes were at the heart of analysts’ questions on Wednesday, on the occasion of the publication of the unveiling of the results for the first quarter ending March 31 – where the Quebec company widened its loss.

As of March 31, only US$5 million remained in Lion’s reserves, representing a US$25 million decrease from the previous quarter. Lion can obtain an additional US$26 million through its credit facility.

“I will not go into the forecasts (on liquidity),” the chief financial officer, Richard Coulombe, limited himself to saying during a conference call, in response to one of the questions on the subject. “Our levels on April 30 are more or less identical to those in March. »

The company has not yet reaped the full benefits of the difficult decisions made in recent months, mainly workforce reductions and the implementation of a weight loss regime to reduce expenses.

Loans to repay

Reimbursement or refinancing deadlines are now on the horizon.

A loan of 22 million taken out from the Caisse de dépôt et placement du Québec (CDPQ) and Finalta Capital, which bears interest at nearly 11%, matures next November. A credit facility of US 5 million obtained from the National Bank must also be repaid. The company’s long-term debt is around US$258 million.

To achieve this while replenishing its coffers, Lion is mainly relying on the reduction of its investment expenses, the subsidies offered on both sides of the border to encourage sales of electric buses and trucks, and the reduction in the level of its stocks. These fell by 12 million US dollars in the first quarter, but still total 237 million US dollars, the equivalent of almost all of its sales for 2023 (253 million US dollars). At the end of the year, the manufacturer expects the reduction in inventories to range between 50 and 75 million US dollars.

The cuts in recent months should result in annual savings of around US$40 million, according to Lion.

In addition, in 2024, the manufacturer’s investment spending is expected to hover around US$5 million – half the previous target. Plants in Joliet, Illinois and Mirabel (batteries) are now complete.

“The first quarter was the first in recent years where we had virtually no capital investment,” noted Lion founder and CEO Marc Bédard.

Lion also received good news in the Canadian market. An order for 200 school buses has finally received funding from Infrastructure Canada’s Zero Emissions Transit Fund (ZEPTF) – a program that can cover up to 50% of acquisition costs. Lion has already delivered 50 units to its customer, Lang Bus, during the first quarter. Half of Lion’s order book depends on the FTCZE. The company has previously criticized the program’s long processing times.

Backwards

The responses from Lion’s management were not sufficient to reassure investors and financial analysts. On the Toronto Stock Exchange, at the close, Lion’s shares dropped 8.4%, or 12 cents, to trade at $1.31.

“Lion seems very optimistic about its liquidity,” says Raphaël Duguay, an accounting professor at Yale University, after reviewing the financial data. “The question of subsidies which are long overdue, the company does not control this element. »

Some financial analysts who follow Lion’s activities agree with Mr. Duguay. In separate reports, Benoit Poirier, of Desjardins Securities, and Rupert Merer, of National Bank Financial, each raise concerns about the state of the Quebec manufacturer’s liquidity.

“Due to the high risk surrounding liquidity and timing regarding FTCZE, we are changing our recommendation to (sell),” wrote Mr. Merer, in a note sent to his clients.

In a report released last month, Kevin Chiang of CIBC World Markets estimated that Lion had sufficient liquidity to cover five to seven quarters of business.