It is “impossible” for Lion Electric to be “profitable” while it builds new plants, says its founder and big boss Marc Bédard. Listening to him, there is a glimmer of hope for disappointed investors: profits could appear as early as next year.
Highlighting a “great first” on Monday – the inauguration of the battery plant in Mirabel – the businessman found himself forced to answer questions surrounding the stock market performance and the finances of the bus manufacturer. and electric trucks.
“For the Lion Foundation, am I proud of the decisions? Yes. Am I proud of the [market] valuation today? No. On the other hand, I can’t change much about it, ”explained Mr. Bédard, in a press scrum, on the sidelines of the event.
The Lion Electric Company is still posting operating losses, about two years after its IPO. On Bay Street, we are far from the peak of $28.40 per share reached in June 2021. The stock even hit a 52-week low last week before recovering a bit. It gained 11.9% on Monday, to close at $2.63 — giving the company a market value of $581 million.
Several electrification players, such as Rivian and Proterra, have been rocked on the stock market over the past year amid economic volatility, Bédard said, noting that Lion was not the exception to the rule. .
Without going so far as to make a promise, he suggests that earnings — something that would help reassure analysts — could be on the horizon. One of the reasons ? Investments that should be much lower from next year.
Lion expects to spend about US$65 million (CAN87 million) this year at its US assembly site in Illinois and the battery plant in Mirabel, in the Laurentians. From 2024, this amount will “really drop”, says the president and CEO of the company. National Bank Financial analyst Ruper Mercer believes it should be $52 million. At Desjardins Securities, Benoit Poirier anticipates 40 million US.
“Most of the capital expenditures to be made have been made,” said Bédard. There are some left in 2023. The short-term challenge is to absorb these short-term costs. We do not give forecasts, but the objective is to be profitable. Our goal is not to always build and not be profitable. »
Although six of the nine analysts who track Lion’s business recommend buying the company’s stock, there are indicators that investors should watch out for, they suggest. With $88 million in the coffers as of December 31, there is still a risk of dilution if the company needs the cash, said Tamy Chen at BMO Capital Markets.
“We believe it will take several more years for electric truck orders to be more meaningful,” the analyst said in a recent report, adding that Lion needs to deliver more electric vehicles and ensure produce enough batteries, which is no small feat.
Present at the press conference, the Minister of Economy, Innovation and Energy, Pierre Fitzgibbon, expressed his confidence in the management of Lion. It is rather on the stock market value of the company that he keeps an eye.
“You have to be careful not to lose these companies,” he said. When we see stock market prices like this, my fear is that we are vulnerable [to a takeover bid]. Of course you have to keep an eye out. »
Mr. Bédard agrees, but warns that it is “not for sale”. Together, the president of Lion and Power Corporation control 47.5% of the manufacturer of electric trucks and buses – enough to cool the enthusiasm of a buyer tempted to present an unsolicited purchase offer.
“I don’t want to speak for them [Power Corporation], but I think it’s going well,” Bédard said. That point [a sale], I don’t see it. »
Lion Electric benefited from loans totaling 100 million from Ottawa and Quebec to build its plant, whose bill is estimated at 185 million. By operating its own battery complex, the company will no longer be dependent on external suppliers. This should allow him to reduce the cost of building a vehicle by 10 to 15%, according to Mr. Bédard.
The big boss of Lion Electric assures that the Société des alcools du Québec (SAQ) is not dissatisfied with its first 100% electric truck. “It’s fake news, it’s not the position of the SAQ,” said Mr. Bédard, in a press scrum. A Radio-Canada report broadcast at the end of March stated that the Crown corporation was disappointed with the performance of the Lion8 received last February. The truck was “unfit to drive,” an executive from the state-owned company told Radio-Canada, who did not reveal the latter’s identity. “It’s normal for a vehicle to come back, especially at the beginning of a business relationship,” replied Mr. Bédard. The vehicle has not been driven much, there are some adjustments to be made. Are the vehicles perfect? It would be ridiculous to say yes. »