Taiga | “Really no light at the end of the tunnel,” says expert

An inability to finance itself, an expected default on a loan and the specter of further cutbacks: Taiga, one of the young electrification shoots supported by governments, will have difficulty seeing the end of the tunnel.

The first quarter financial report released Wednesday by the manufacturer of snowmobiles and electric watercraft does not bode well for the future. Under pressure, the company, which has already signaled that there was “significant uncertainty” about its future, is up against the wall.

“There is really no light at the end of the tunnel,” said Raphaël Duguay, professor of accounting at Yale University, after examining Taiga’s financial situation. In my opinion, I think it’s only a matter of time before the company becomes safe from its creditors. »

Activities are already at a standstill, for an indefinite period, inside its factory located in the Montreal borough of Lachine. Taiga, which had more than 300 employees last fall, saw its workforce drop by a third. Its coffers are emptying and new challenges are on the horizon.

Still in deficit, Taiga warned that it would likely not be able to meet the terms of a loan obtained from Export Development Canada (EDC) requiring it to post cash flows of at least $4 million at fourth quarter as well as other financial ratios.

If this scenario occurs, the federal agency could demand repayment of its loan, which would place the Quebec manufacturer in an even more precarious financial situation. By email, Taiga declined to say whether she had requested relief from EDC.

A steep slope

At the same time, the young company’s financial reserves are dwindling. At the end of the first quarter – as of March 31 – it only had 2.5 million in cash left, a quarterly drop of around 3 million. Its inventories reached around 32.5 million, double its annual sales.

“The company believes it is unlikely that it will be able to secure additional financing […] for the foreseeable future,” she warns in her report.

In this context, Taiga adds that it could have to reduce its activities “significantly”, which would have consequences on its workforce.

By email, the company says it is working to sell off its current stocks in the hope of avoiding further cuts. Its Lachine factory covers 110,000 square feet (10,220 square meters).

EDC agreed to lend 5.25 million more to Taiga last March. The company received a lifeline from Investissement Québec and Northern Private Capital on March 30, 2023. The investing arm of the Quebec government and the Toronto firm had agreed to lend it 40 million.

Taiga wants to restore shine to its finances by adjusting its production and adding sales through dealers – rather than relying solely on sales directly to consumers – to boost its turnover.

“Taiga’s gross margin is negative,” notes Mr. Duguay. Every time Taiga sells products, he loses money. Potential buyers become more reluctant to buy [les produits] because they wonder if the company will be able to honor warranties and if parts will be available. There is a snowball effect. »

The manufacturer of snowmobiles and electric watercraft entered the Toronto Stock Exchange in April 2021. Its stock was trading around $13. The title has steadily lost weight since then. On Wednesday, it dropped 5% to close at 28 cents. This gave the company a market value of 9 million.