“EBSU: The Quebec Manufacturer of Cabinets on the Brink of Bankruptcy Due to Acquisitions Gone Wrong and Reduced Orders from Major Retailers”

2023-05-27 04:00:00

A major Quebec manufacturer of kitchen and bathroom cabinets finds itself on the verge of bankruptcy following an acquisition that went wrong and the decision of hardware retailers RONA, BMR and Patrick Morin to reduce their orders.

The company in question, Ébénisterie St-Urbain (EBSU), employs approximately 140 people in Salaberry-de-Valleyfield. Its products are sold in nearly 1000 stores in Canada.

“Despite strong growth over the years, EBSU has encountered liquidity problems in recent months, mainly due to a temporary significant reduction in orders from its main customers, namely the retailers Rona, Réno-Dépôt, Lowe’s Canada, BMR and Patrick Morin”, can we read in a document filed on May 11 in the Superior Court.

Rona alone reduced its purchases from EBSU by 27% in late 2022 and early 2023, which left a $13 million hole in the company’s revenue, a product report reads. by the trustee responsible for the file, Dominic Deslandes of the accounting firm Raymond Chabot.

Result: EBSU suffered a loss of more than $1.5 million last year while it had generated net profits of nearly $500,000 the previous year.

RONA and BMR defend themselves

Asked to comment on the situation, Rona assured that she had not cut off supplies to EBSU and that she has “excellent relations” with this “major supplier”.

“Our backlog with EBSU fluctuates depending on the time of year, consumer demand and ongoing promotions. These fluctuations are not unusual and recur every year. 2022 was no exception,” said the Journal a RONA spokesperson, Valérie Gonzalo.

“Right now, our order volume with EBSU is very high,” she added.

It should be noted that just a few months ago, RONA (formerly Lowe’s Canada) named EBSU among its “suppliers of the year”.

“We have effectively reduced our orders with this supplier over the past year. This decline is explained in particular by the significant slowdown in housing starts in Quebec, which inevitably affects demand,” said BMR spokesperson Kaven Delarosbil.

“Costly” acquisition

As if that weren’t enough, an acquisition made in 2021 in Ontario also dealt a severe blow to the finances of the company, which was founded in 1981 by Michel Boucher and which is now managed by the son of the latter, Napoleon.

Photo taken from LinkedIn

Napoléon Boucher, president of Ébénisterie St-Urbain, a company founded in 1981 by his father, Michel.

Three months following the purchase of Woodlore by EBSU, the acquired company lost its largest customer, which represented 40% of its sales, or approximately $20 million. At the time of closing the acquisition, EBSU was unaware that the client was suing Woodlore for past “contractual defaults,” reads a document drafted by law firm McCarthy Tétrault.

EBSU is now crumbling under more than $61 million in debt. The company owes $3.2 million to the Quebec government, $4.6 million to the Business Development Bank of Canada, $2.5 million to the federal government, $25 million to HSBC Bank, $7 million to the former owner of Woodlore, William Phillips, and more than $12 million to his suppliers.

Photo taken from LinkedIn

In July 2022, the Minister of the Economy, Pierre Fitzgibbon (on the left), and the CAQ MP Claude Reid visited the EBSU facilities in the company of the company’s president, Napoléon Boucher.

Dismissals

To cut costs, the company laid off 79 of its 200 Ontario employees, Napoleon Boucher told the Journal. No Quebec employee has been laid off so far.

EBSU is currently looking for financial partners to recapitalize. It might also sell some or all of its assets.

“Leaders are working very hard to complete a restructuring that benefits all parties,” said Mr. Boucher.

He specified that the company might count on the support of its “main customers”, including RONA.

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