Savaria Corp

TSX:SIS

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, afternoon and evening. My name is Cecilia, and I will be your conference operator today. At this time, I would like to invite everyone to the Savaria Corporation's Q1 2022 Conference Call. [Operator Instructions]

This call may contain forward-looking statements, which are subject to disclosure statements contained in Savaria's most recent press release issued on May 11, 2022, with respect to its Q1 2022 results.

Thank you. Mr. Bourassa, you may begin your conference.

[Marcel Bourassa, executive]

Thank you very much, Cecilia. I just [indiscernible] that's always interesting to make -- to have you on the call this morning. And that was a special quarter. I would call that special, okay? Because we had COVID, we had the war, that create instability. And when the people don't like, it's instability. They are not ready okay to put more money in the market, they maybe take up some money from the market, okay?

But Savaria is a [ stock ], okay? You know me, I don't know, for 25 years, that I start in Savaria. But right now, we have over 2,000 members of Savaria. And that's great, okay, because this company is resilient because the people -- you had a war or you had COVID, you need -- one time you will need product like Savaria. And Savaria offer the biggest number of products to help the mobility of the people.

For sure, it's more the aging of the population is the base of our company. And everybody in the world, okay, should have access to the mobility for the stair, and for our kind of other product that you need in house or in the church or at work.

So we have a company client, okay? We are the only company in the world that offer a line complete like that. So it's why I was excited 25 years ago, but I was -- I am excited this morning because when the stock market is very difficult, okay? And yesterday night, I was -- this morning, I was looking at the analyst. Okay. Thank you, the analyst. So you make a great job to support Savaria. But we present you the fact, okay? The fact is we will have, okay, a tremendous year. We are very satisfied, more than satisfied, about Q1, okay?

The sales of $184 million, okay, in this quarter, okay, it's very important, okay, that will push up maybe to exceed our sales that we project. So I would pass -- and organic growth, okay? Just we make $12 million of target growth. When I look at the stats of April, okay, the organic growth is there.

And it is very important. So you take our number, and you are better than me in mathematics, okay, which then -- and you see, okay, that our projection, it's very realistic. We are in good position.

And you will have the same guy who will speak our products. Everybody, okay, I think is very enthusiasts. We have some new things that we will say to you on the call, okay, like a new factory in Mexico. That's very exciting. So we have Mexico. We have China. So that will be more easy, okay, to maybe the inventory level can be a little bit higher when it'll be in production down there.

But what is important right now, you don't want to miss stuff, okay? Just a couple of millions of a difference that make a big difference in a quarter, okay, of our delivering products.

So for me, I thank you to be there, thank you to support me. I will pass the phone, okay, to Steve, our CFO.

[Stephen Reitknecht, executive]

Thank you, Marcel, and good morning, everyone. I will begin with some remarks regarding our Q1 2022 consolidated financial metrics. For the quarter, the corporation generated revenue of $183.5 million, up $71.5 million or 63.8% compared to Q1 2021 due to the acquisition of Handicare in March of 2021, and also due to strong organic growth of 12%. Q1 2022 will be the last quarter showing any acquisition growth attributable to Handicare.

Gross profit and gross margin stood at $58.5 million and 31.9%, respectively, compared to $37.4 million and 33.4% for Q1 2021. The increase in gross profit was mainly attributable to the addition of Handicare. The decrease in gross margin was primarily due to inflationary pressures on supply chain, including increased shipping costs.

Adjusted EBITDA and adjusted EBITDA margin stood at $24.4 million and 13.3%, respectively, compared to $17.3 million and 15.4% in 2021. The increase in adjusted EBITDA dollars is again due to the addition of Handicare. The decrease in adjusted EBITDA margin is due most notably to inflationary pressures on the supply chain, including increased shipping costs as well as a reduction in Government of Canada COVID employment retention subsidies.

Total subsidies received for Q1 2022 was $0.2 million versus $1.1 million in 2021, reflecting a decrease of $0.9 million year-over-year.

Now I will move on to our segment results. Revenue from our Accessibility segment was $130.3 million in Q1 2022, an increase of $49.8 million or 61.7% compared to the same period in 2021. The increase in revenue was mainly attributable to the acquisition of Handicare, which provided 53.4% growth. In addition, this segment experienced organic growth of 8.7%, which continues to be driven by strong demand in the residential sector.

Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, for the Accessibility segment stood at $20.5 million and 15.7%, respectively, compared to $13.9 million and 7.2% for the same period in 2021. The improvement in adjusted EBITDA is mainly due to the acquisition of Handicare. The reduction in adjusted EBITDA margin is mainly attributable to inflationary pressures on the supply chain, including increased shipping costs.

Revenue from our Patient Care segment was $41.7 million for the quarter, an increase of $16.2 million or 63.5% when compared to Q1 2021. Revenue growth was driven by the acquisition of Handicare, which contributed 41.5%. In addition, the segment saw a 22.2% of organic growth for the quarter which was driven in large part by the easing of pandemic restrictions and improved access to long-term care facilities versus last year.

Adjusted EBITDA and adjusted EBITDA margin for the Patient Care segment, both before head office costs stood at $5.3 million and 12.8%, respectively, compared to $3.7 million and 14.5% for Q1 2021. The increase in adjusted EBITDA was mainly due to the acquisition of Handicare and additional organic revenue coming from the easing of pandemic restrictions and increased access to long-term care facilities. And the reduction in adjusted EBITDA margin is primarily due to the aforementioned additional costs in the supply chain.

Revenue from the Adapted Vehicles segment was $11.5 million, an increase of $5.5 million or 92.2% when compared to Q1 2021. The Handicare vehicle division based in Norway provided 83.6% of our acquisition growth for the quarter. The Canadian division experienced organic growth of 12.9% in the quarter, driven mainly by some pent-up demand from last year.

Adjusted EBITDA and adjusted EBITDA margin, both before head office costs, for the Adapted Vehicles segment finished at $0.6 million and 4.9%, respectively, compared to $0.6 million and 10.4% for Q1 2021. The decrease in both metrics was mainly due to a reduction in the Government of Canada's COVID-19 employment retention subsidies and the aforementioned inflationary pressures on the supply chain as well as delays in sourcing key materials.

For the quarter, net finance costs amounted to $1.4 million, which is stable when compared to Q1 2021 net finance costs of $1.5 million. Interest on long-term debt was higher by $0.9 million due to the financing of the Handicare acquisition. However, this was offset by prior year having a loss of $1.8 million on a foreign exchange contract which was used to help secure the Handicare acquisition.

Net earnings were $5.3 million or $0.08 per diluted share for the quarter compared to of $3.8 million or $0.07 per diluted share for Q1 2021. Net earnings was largely impacted by amortization of intangible assets related to the Handicare acquisition. Adjusted net earnings, excluding amortization of intangible assets related to acquisitions, reached $11 million or $0.17 per diluted share compared to $8.8 million or $0.16 per diluted share for Q1 2021. This reflects an increase of 25.7% or 6% on a diluted share basis.

Turning now to capital resources and liquidity. Savaria generated cash flows from operating activities of $13 million for the quarter compared to $27.9 million in Q1 2021. In the prior year, there was a onetime favorable increase to net earnings to net changes in noncash operating items of $7 million, based on the initial consolidation of Handicare results. In addition, strategic investments in inventory were made this year, which further decreased cash flow from operations.

As at March 31, 2022, Savaria had a net interest-bearing debt position of $317.7 million and was in compliance with all of its covenants. On a trailing 12-month adjusted EBITDA basis, Savaria's net debt to adjusted EBITDA ratio was approximately 3.7x. This represents a decrease of 0.05x versus Q4 2021. Savaria has funds available of approximately $128 million to support working capital, investments and other growth opportunities.

Looking forward, unpredictable changes in the macroeconomic environment continue to make it difficult to predict future performance. However, considering our recent financial performance and our strategic integration plan with Handicare, we are confident that for fiscal 2022, we will generate revenue in excess of $775 million, with adjusted EBITDA in the range of $120 million to $130 million.

And with that, this completes my prepared remarks. I will turn the call back over to Marcel.

[Marcel Bourassa, executive]

Steve, thank you very much, okay. I see that you mentioned great number, okay? And what is important, we have the cash flow to make acquisitions, small acquisitions in some places in the world that we are not there or with some products.

Early this year, we buy a company that was manufacturing our controller. And we have great people allocated in this company. So I am more than happy right now about controller. We, a little bit, protect ourselves by acquiring this great company. So -- and the people in this company is great.

Handicare, something as a [indiscernible], they will take care of the division of Garaventa in [indiscernible], and we do the same thing from us, okay, we take care, here in Toronto, of their products in the United States and Canada. And it's just great, okay. And you see the Patient Handling, we have 1 guy at the top that -- a new guy this is Patrick, he has a tremendous experience and working with Les and Phil, they put this kind of number that Steve gave you. So it's just good, good and very good.

So we are ready okay for your questions. Cecilia?

[Operator]

[Operator Instructions] So we will now take our first question from Michael Doumet from Deutsche Bank (sic) [ Scotiabank Bank ].

[Michael Doumet, analyst]

Nice quarter on the organic growth. But the first question I wanted to ask is really on some of the margin compression that we saw in the quarter. And I'm assuming -- well, I'll first state a lot of the companies we've been covering, we've been seeing similar pressures. And I'm assuming some of the headwinds here are going to moderate going forward, especially as you get a little bit more price. I'm just trying to piece maybe some of the moving parts here. And I was wondering if you can help us maybe put together expectations for Q2 margins whether we should see a step up there or if it's more gradual for the balance of the year.

[Marcel Bourassa, executive]

You will see a step-up in Q2 for sure, okay? Because our increase of price is there. And you will see that our volume like our backlog in Toronto for North America and for the products that we make, it's 3x what it was last year. That's something to have a backlog like that, okay? So we have just to do what we are supposed to do, and that would be a great quarter and a great year.

So I will ask, Steve, that if you can comment on that, please.

[Stephen Reitknecht, executive]

Yes, absolutely. Thanks, Marcel. So good to talk to you, Michael. The price increases that went into effect across the business, we didn't see a large impact in Q1. We are expecting a more significant impact in Q2. Our goal continues to be to increase margins, definitely above where we're seeing in Q1. So we are expecting more of an impact in Q2, and we'll expect an increase for the remainder of the year.

[Michael Doumet, analyst]

That's helpful. And I guess the second question, maybe a little bit of a bigger picture question, probably for Sebastien. We always view the Chinese facility as competitive advantage for Savaria. It's given you a cost advantage, it's given you a vertical integration.

I'm assuming you want something similar here with Mexico, but it does feel like a significant shift for the company. So I guess my question is, is Mexico intended to support additional growth or transition manufacturing capacity? I guess, what advantages are you looking for longer term here?

[Sébastien Bourassa, executive]

Thank you, Michael. Yes. So I think -- don't forget, Savaria has 20 years' experience in China, and China has been, I think, very good for the company. It's very stable, very reliable. But in the last 2 years, it takes a bit longer to get container and a bit more disruption. So yes, and now we will have a target of $1 billion by 2025. So we have to create some capacity, and we thought that Mexico was closer to North America, was making sense. It is attractive, okay, to produce something at a reasonable cost. So definitely.

And now we have a bigger team and we have more experience. So I think, yes, we will be open in September this year, in a few months. So we are putting a lot of effort in our planning, and we'll make sure that we have the right resource to support this. I don't expect a huge impact this year, but I think differently from the next year, we will see some good impact, okay, to help us to increased the output in our factories in North America by supplying some standard parts in the subassembly from there. And that it will be a great adventure for us.

[Michael Doumet, analyst]

Yes, that makes a ton of sense, given the dynamics. I guess just as a quick follow-up before I turn it over. Just potential costs around the construction and the ramp-up and inventory trends that we should expect as it relates to that.

[Marcel Bourassa, executive]

No. But you know that we ramp down there, okay? So it's not our building. And for sure, we will do the same thing that we do in China. So they will buy some product from outside and ask about that, okay, that's the beginning, okay? We can see for '22, '23 and after that, we will see if we have to -- have some machinery down there, some equipment. But -- so the cost is not very high, okay?

And I think that's a big plus, to have something, a product that can arrive here in 1 week by truck, directly to Toronto. And instead of passing 3 months on the ocean and on the rail. So that's a diversification.

And I can -- my people, my friends in China, I can assure you that it's -- you are very important for us, and you will continue to be very important. But we did a little diversification, and Mexico is a great diversification. And we know some companies down there, we'll make a little bit some effort. And people from [indiscernible] that these shareholders help us on that, too, because they are partnered with us.

So -- and we have great people, and we've already visited some companies that are in Mexico since -- like BRP office in years and years and years. And they are very successful to [indiscernible] for them. So we will continue to begin with our experience in China. We will do the same, but closer than that for us. So that is a great transaction.

[Operator]

We will now take our next question from Frederic Tremblay from Desjardins.

[Frederic Tremblay, analyst]

First question is on the Patient Care segment. Obviously, you're benefiting from some pent-up demand with the increased access to long-term care facilities. I was just wondering if you had any visibility on maybe how long that positive [indiscernible] some pent-up demand could last? Obviously, we've had about 2 years of underinvestment in that -- some long-term care facilities. So is that something that you would expect to last for several quarters? Or was it mostly limited to Q1?

[Marcel Bourassa, executive]

Several quarters, okay, and I would pass the line, within 1 minute, to Nicolas. And -- but you know that our backlog down there, okay, it's a level that was never before. So that gives us some caution for our next production for many quarters. And we have a group -- a better group than ever that we have in this division. That I said before, we have, right now, Patrick. And when we put Patrick with Les and Phil, we have a winning combination. So our specialist in that is Nicolas.

Nicolas, can you continue and say a little bit different than me?

[Charles Rimbert, executive]

Thanks, Marcel, and thanks, Fred. I guess, as Marcel indicated there, I think we feel very confident about the team that we have in place. So it starts at the top. So we have a very strong team there. And as you had indicated, we are taking advantage of some of this rebound spending exiting COVID. So what you saw there in the first quarter at whatever it was, I think, 22% of organic growth, that builds off of -- in Q4, I think we're at 17% of organic growth. And I believe you've double-digit organic growth in Q3 of last year.

So I think it's a continuation of this trend as we're really exiting this more of a lockdown environment. Some of it is related to facility access. For sure, some of it is capital spending that's happening now that had kind of been allocated towards other more needy areas during the COVID time. So we are seeing a rebound from that.

I think we're also seeing some market share gains. Our team has been very good at winning a lot of these projects that have been put on the market. So will we have 22% organic growth for the next 5 years? Probably not. But I would say, over the next several quarters, we do expect to have similar kind of double-digit growth within the Patient Care segment.

But also longer term, I mean some of these trends that we're seeing coming out of COVID is years of underinvestment. Here in Canada, for example, there's a lot of these new build activity, which is kind of boosting much of our sales here in Canada, and that's something that we should see over the next several years.

So I would say, yes, right now, we are in a kind of an advantaged situation here exiting COVID. But I do think longer term, there's still some very positive trends as it relates to the organic growth potential for that segment.

[Frederic Tremblay, analyst]

Great. And then maybe a question for Steve on the capital allocation priorities in the near term. Can you just maybe update us on CapEx expectations and deleveraging for 2022?

[Stephen Reitknecht, executive]

Yes. So we're committed to delevering at least half a turn this year. Q1 is typically for us, our seasonally worst quarter, it's our weakest quarter. So we will -- we did delever slightly in Q1, but we will delever more in Q2, Q3 and Q4. I am expecting to exceed that half a turn this year. But as far as our published guidance, we're sticking with half a turn.

We are remaining diligent with CapEx spend. We are tightening where we can. And we're going to be spending under our budget this year. So even with the Mexico investment, we will be spending less than initially planned.

[Operator]

Our next question is from Zachary Evershed from National Bank Financial.

[Zachary Evershed, analyst]

When the flow of goods starts to get better as we see logistics kind of unsnarl. Do you think there's pricing risk where prices could come back? Or are you pretty settled at current levels?

[Marcel Bourassa, executive]

Sebastien?

[Sébastien Bourassa, executive]

I think, Zach, if you don't -- if you remember, we have a multiple brands between Handicare, Garaventa, Span and Savaria. And I think when we see we make some price increase or there's inflation, I think it's -- different brand has different seasonality when they make new price increase. I think this year, we have reset on most of our brands. But again, if there's some effect during the year on inflation, on the incoming material, definitely, we'll need to review what needs to be done. I think it's an ongoing project, let's call this way.

[Zachary Evershed, analyst]

Got you. And with the backlog up 3x from where it was last year, are you happy with your current labor force? Or would you prefer to ramp up even ahead of the New Mexico facility in September?

[Marcel Bourassa, executive]

We'll ramp up, okay? Because we have a good team in Toronto. Maybe I'll always want to have more and more, okay. But we have a good team and you will see the number of Q2. We have a good start with April. So we have a good start, but we have more bookings than we were at the beginning of the month in April. So I think Mexico will help us to do a little bit faster.

And -- but it's very, very interesting to begin a month -- or right now, we are over roughly $20 million of booking to do. We never had that in our life, never, never, never had that, okay. And so we are working hard to deliver as soon as possible. So it's why I see, until the end of the year, very, very busy.

[Sébastien Bourassa, executive]

And as said, just to add 1 thing, Zach, No -- don't forget, in Q1, I think we have lost 7% of our production hours in 4 of our main factories, in [indiscernible]. That did not help our output if we will ever get all those hours, I think we'll have received some better organic growth, right?

[Zachary Evershed, analyst]

Absolutely makes sense. And then just if you could drill down for me on where exactly in the supply chain you're seeing pinch points and how you see that evolving over the course of the year.

[Marcel Bourassa, executive]

Sebastien?

[Sébastien Bourassa, executive]

Yes. I think right now, Zach, in China for now, we do not lose a week of shipping since the beginning of the year, our 2 factories in Xiamen and Huizhou have been able to perform. Yes, we have a few supplier in Shanghai area where the other month lockdown maybe, but just a few small parts. So I think it's just like it's a worldwide issue right now, even if you have a local supplier or [indiscernible], you might get some small components in different places.

I think electronics is maybe one of those, which is a bit [ utter ]. And I think the acquisition of Ultron has been pretty key for us so far. Right away from the start, they have been able to manufacture some PCB in-house so that we can eliminate some of our potential challenge.

So I think -- and it's important we control our process. We do a lot of parts in-house in our different factories. So that help us a bit turn around some of the supply chain issues sometimes.

[Operator]

We will now take our next question from Nick Agostino from Laurentian Bank.

[Nick Agostino, analyst]

I guess first, Steve, one point of clarification. You said earlier that all the price increases will have the full benefit in Q2. And then I thought you mentioned something about the rest of 2022. Were there any more planned pricing increases? Or for the time being, this is it?

[Marcel Bourassa, executive]

Excuse me, Steve. But right now, when we see our results of Q1, we see the result on the first month of Q2, okay. We are not talking about adjusting pricing from our Savaria division. Handicare will be a little bit different, okay? But we want a fair price to the consumer, to the dealers and to the manufacturer of ours. Everybody, at this point, you have to have the products and our dealer has to make money, okay?

So right now when I see the number that we took out, I think we have done what we had to done. And don't forget that, sometimes, they buy in advance, okay? And many other manufacturing will say, "Oh, your price is no more good." No. Ours, okay, you have a price and we stick with our price.

So I see some, even at the end of the Q2 and Q3, we will see some elevators that would be done and ship, okay? And then after that, it's just the new price will be in. So it takes some time. But we have -- what is important, we are satisfied where we are right now in terms of percentage.

Can you add something, Steve?

[Stephen Reitknecht, executive]

Thanks. I was just going to echo Sebastien's earlier comment about -- and you touched on this, too, Marcel, is that we do have different divisions, different business units across different markets. So yes, some of the price increases in some of those businesses will be done, are done. And we haven't seen the full impact of those, and we will throughout Q2 and the rest of the year. But some of the other divisions, we're continuing to evaluate. Yes, I just wanted to add that.

[Nick Agostino, analyst]

And then my next question, just going back to the Mexican, it sounds like it's more of a sourcing of products, similar to China, as opposed to just a pure assembly plant. And I'm just wondering, if you look at the competitive landscape, thinking more, obviously, you've acquired Handicare and Arjo still out there. And I'm just thinking when it comes to lead times, you guys are obviously strengthening your position within the North American market. Can you just speak to what you're seeing out of Arjo in their abilities when it comes to lead times? Are they also getting better? Or do you think that their infrastructure doesn't support what you've done?

And then maybe, Steve, any color on what sort of margin benefit you guys anticipate out of that Mexican facility when you capture lead times, workforce, lower cost base, reduced shipping costs. If we look out to 2023, what sort of margin lift can we think about from the Mexican plant?

[Marcel Bourassa, executive]

Sebastien, you begin, and I will kick in.

[Sébastien Bourassa, executive]

Okay. So I think, firstly, the impact on the margins, Nick, I think it's too soon to comment on it. I think first, we have to finish the year to set all their [indiscernible] there. But definitely, we are doing it for a reason, which is to have some cost benefit and the most important to be able to attract some talent and to be able to deliver on this $1 billion capacity that we need to have.

And I think in terms of lead time, Savaria has always been good at lead time across the different brands, okay? If we look at the lead time at Span, okay, it's extremely quick. And again, a massive project on ceiling lift, very often it's a planning. But if we need a quick turnaround, we are really, really good.

Elevator is, yes, right now, it's a bit longer. But again, the customers do know it. They have time to plan it when they make renovation on new housing, and stairlift for [indiscernible] that's why we bought Handicare. They are the best at lead time. And right now, with the development we have brought back in Toronto for manufacturing, by the end of Q2, we should have probably the best lead time in the industry.

So I think lead time is still a key for us. I think the Mexican is more to rebalance our supply chain, to lower inventory over time what we have on [indiscernible] with China. That's a bit -- that we might answer, Nick. Maybe Marcel, you want to add something?

[Marcel Bourassa, executive]

No, Steve will add something.

[Stephen Reitknecht, executive]

I mean, Sebastien touched on our margin expectations. It is a little bit early to sort of give guidance on that. Yes, we will save shipping costs, clearly, but there's also another savings, and that's on working capital. So bringing some of this production closer to our largest market, being North America, we will be able to save safe working capital investment dollars and be able to allocate that elsewhere.

[Marcel Bourassa, executive]

And just my second -- just to give you an example, okay, what we are doing in Toronto. So we manufactured the flicker, okay? And what is very important, in July, we would be able to deliver this product, in 1 week time, okay? The best in the industry. And so we were [indiscernible] this association that this purchasing we have made, okay, with Handicare help us to have that partnership that we take, we believe that we can be the best in North America.

So come in Toronto and see our manufacturing that we did in Toronto, you will be amazed when you see, I don't know what is your residence in Toronto. But you can see that we are more robotic than before, okay. And what we want to do to the dealer and the customer, deliver a project as soon as possible when you make the order. And we are gaining on that, okay? We are gaining a lot, okay? And so thanks for my people to work on that. So -- and thanks to continue to follow us after how many years?

[Nick Agostino, analyst]

I think it's been about 8 years, give or take.

Just one last question on the Ultron acquisition. Obviously, you're acquiring one of your controller manufacturer. And controllers are obviously a key component across your entire product set. A similar question to Mexico. What sort of margin benefit do you think you can get, given the fact that these controllers are everywhere in your products?

[Marcel Bourassa, executive]

Sebastien, you want to answer that? I can, but answer that, please.

[Sébastien Bourassa, executive]

Nick, for this year, fortunately, when we have given guidance, we knew we were closing this acquisition. So I don't think there's a change for this year. But it was more than just pricing. It was more to make sure we have the parts. We control our supply chain to be vertical integrated, and after that, to make sure that right now, we have different brands, different type of electronics for similar products. So over time, we want to streamline our PCB to make sure we have more -- the latest technology in our elevator, like Bluetooth, Wi-Fi, name it, okay? It's important for us. We need to be ahead of the competition. So by designing our things in-house, we should be able to have the best product in terms of electronics in our different products.

[Operator]

[Operator Instructions] We will now take our next question from Derek Lessard from TD Securities.

[Derek Lessard, analyst]

[indiscernible] curious if any of that was being driven by customers looking to lock in prices ahead of any price increases that were coming up.

[Marcel Bourassa, executive]

I missed the beginning of your sentence. I don't know it's just me, okay? Or Sebastien, did we hear all the question?

[Sébastien Bourassa, executive]

No, we have missed the beginning. Derek, do you mind to start over, the questions?

[Derek Lessard, analyst]

Yes, sure. I was just -- I was curious of any of the strong organic growth that you experienced. Was that being driven by customers looking to lock in prices sort of ahead of any price increases that you're putting through?

[Marcel Bourassa, executive]

That's a very good question, okay. I am sure a little -- at least maybe 20%, okay, it's for that, okay? But that -- it's a reality, our booking is very -- but a little part is for that. They want to reserve their price, okay? We want to be -- we check the game, okay? They don't order to [indiscernible]. We need a name of the customer. We need some information, not that it is a fake order. We check the game.

[Derek Lessard, analyst]

Okay. I mean, that's fair. What I found as well in the MD&A is that you did single out, in the Accessibility division, synergies with Handicare. It was one of the drivers of the organic growth. Maybe if you can just talk about what you're seeing on that side in terms of synergies?

[Marcel Bourassa, executive]

Sebastien?

[Sébastien Bourassa, executive]

Yes. So I think if you remember, Derek, at the beginning a year ago, we said that we'll have a $12 million of synergies by the end of this year. I think we're on track with that. This is moving currently and some of the key projects that we added, was to close the Sweden stock office. This has been done after that, if we talk while bringing back the manufacturing of Freecurve in North America, that has been done. It was to start the distribution of stairlift from one location [indiscernible] in Greenville now and to merge the team.

Right now if you want to order straight stairlift in North America by the team of Handicare and Savaria have merged together, they work together.

So I think a lot of those [indiscernible] are underway. But again, there's some that is still on the agenda for this year. So I would say that I'm quite happy with the progress we're having. And right now, that the travel has eased a bit, definitely, our teams are mixing together. We are coming here.

And a good example of a small project, like last month, I had 4 people from Handicare here to work with us, okay, how can we revamp one of our SMB line here in Toronto, where we are super busy? Get some idea from the inside of the company? Again, the team of [ Peter ] has done a good job, okay, to come, and we challenged the way we do elevator over the last 20 years. So I think that's just an example of synergy that we are always working on something.

[Derek Lessard, analyst]

Okay. And maybe a few more for me, in terms of the Mexican initiative. Just maybe if you can comment on what you're seeing in terms of labor availability and maybe the workforce quality in Mexico.

[Sébastien Bourassa, executive]

So I think, yes, definitely, I think in terms of labor pricing so far, we did our due diligence, and it seems that Mexico is a little bit more attractive than China versus the labor cost per hour. So I guess that's a good news. Deliverability seems to be there. And I think the chance is when you start from scratch, you can decide to hire the person that you want. So we are going to start differently with a good staff that has good technical knowledge in the office, and they can speak in English, in English and Spanish, so definitely.

And I think that people would be happy to work for a foreign company right now. If we look at the company, we are stepping up over there, it will be like, I would say, dream factory. We'll have a good [indiscernible] to shorter employee exactly what we do that they understand exactly. So we're expecting to be a world-class manufacturer over there.

[Derek Lessard, analyst]

Okay. And maybe just one final one for me. I was curious if you have any visibility or if you're seeing any relief right now maybe on the freight side or shipping side of the supply chain?

[Sébastien Bourassa, executive]

Yes, the freight is not like last summer. Last summer was more like a $25,000 a container. Right now, in the first quarter, we saw some $18,000 to $20,000 per container. So I think it is similar to Q4, but it's not the same as it was last summer. So it's a bit better. It still takes a lot of time to come on the ocean. But in terms of pricing, it's a bit better than it was last summer.

[Marcel Bourassa, executive]

Okay. And Sebastien, a third question, okay. Just to answer why we are going, okay, with the manufacturing, the Freecurve, okay? Now we have the [indiscernible] coming from Europe. But in August, we will have the equipment here. And we will save how much, Sebastien, per month of shipping that we bear right now?

[Sébastien Bourassa, executive]

Yes. Just to -- so yes, we are manufacturing some Freecurve in Toronto, but still, we have a few parts that is still coming from Europe. So we're expecting that from this summer, we should be able to save $200,000 per month. So that's an example of synergies which is going to help us for the second half of the year.

[Operator]

As there are no further questions at this time, I'd like to turn the call back to your speakers for any additional or closing remarks.

[Marcel Bourassa, executive]

Okay. Thank you very much, Cecilia. Thanks for the people that listened to us this morning. We're very enthusiast, and you will see that we will try very hard and we will succeed to meet our guidelines, that's what is important. So thank you from my team, and see you at the next quarter. Thank you.

[Operator]

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.