Having several big contracts is a good problem to have. Especially for a small Quebec aviation company whose bread and butter comes from building landing gear for the big guys — companies such as Boeing and Bombardier.
Précision SF Tech Inc., based in Terrebonne, Quebec, specializes in manufacturing and assembling components for the civil and military aerospace industry. Primarily, the company works on medium-sized components, using hardened steel and alloys.
Currently, the company has just 37 employees and finds itself along the supply chain of Boeing and Bombardier through other big players such as Heroux-Devtek, Mecaer and RTI Claro, explained Michel Lapierre, company CFO of the supply chain contracts for Boeing. The company has also built parts for Bombardier’s C-series.
“When companies like Boeing and Bombardier use our products, it’s a real endorsement of our work,” Lapierre said.
The aerospace industry, particularly the aviation cluster in Quebec, is hugely valuable to Canada’s trade. “This is a small business operating in one of the high-profile supply chains,” said Jerome Brière, EDC account manager.
“When it comes to manufacturing aircraft, that’s the mecca of aerospace and when you get into the jumbo jets, that’s the mecca of mecca. The Boeing 777 is one of the most profitable supply chains to be involved in so there’s a ton of competition from companies in Germany and Italy. You really need to demonstrate the value proposition of your small company in order to get those contracts.”
The Boeing deals are nice contracts without question, but when the bank has already extended as much credit as it’s willing to offer, contracts that require a lot of R&D, can also cause financing headaches. SF Tech turned to Export Development Canada (EDC) for help.
“Our bank didn’t want to increase the line of credit,” Lapierre explains. “This is where EDC helped by giving a guarantee to our bank, which allowed them to almost double the credit line. That’s very valuable for us.”
EDC also guaranteed 90 per cent of a new line of credit to be used to finance work orders linked to the Héroux-Devtek contract, where the parts will be exported to Cleveland. The way the deal is structured, the financing will ultimately pay for R&D (upwards of $500,000 for the Boeing 777 contract alone) as well as the equipment required to build the new components for both Boeing contracts.
“The best part of this deal is that it allowed the company to cover these development and prototyping expenses,” Brière said. “That is usually huge cash flow hurdle that small businesses have to go through before being awarded a long-term supply agreement from top suppliers like Héroux-Devtek.”
Lapierre agreed: “It’s the R&D that takes the time, but once the pieces are developed, we can resell them and get repeat business,” he added.
SF Tech is a leader in its aerospace sector and one of only a few companies in Quebec that have secured a coveted MACH III designation. MACH is a certification program in Quebec’s aerospace cluster designed to maximize the industry’s performance and increase its competitiveness worldwide. SF Tech is currently working toward MACH IV, which would put it in an exclusive club with only four other Quebec companies.
“We have a good team and we work hard,” Lapierre said. “We know what we need to do and we do it.”