Interview with the Executive Vice-President, Investments

Normand Chouinard

Supporting our entrepreneurs to drive our economy

What are the major investment strategies of the Fonds?
One of our main objectives is undoubtedly to keep the flagships of our economy in Québec! We also work hard to make sure that decision-making centres stay here. Helping our small businesses grow to increase the pool of medium-sized and large businesses in Québec is also one of our major concerns. These strategies orient and guide our investment activities, which are always aimed at growing the Québec economy as well as creating and maintaining quality jobs.

"One of our main objectives is undoubtedly to keep the flagships of our economy in Québec! We also work hard to make sure that decision-making centres stay here."

Are there preferred sectors?
As a matter of fact, there are several! But we are always looking for transactions that create value for all stakeholders, regardless of the sector, and we continue to cover all sectors of the economy. Following are some examples of sectors where our investments had a particularly strong impact.

Let’s talk first about the life sciences sector. Together with the Caisse de dépôt et placement du Québec, we have invested in the privatization of Atrium Innovations, which will be able to continue its development and for which we have played a key role. We are proud of our efforts to keep this industry flagship in Québec.

More generally, our objective is to preserve what Québec has achieved in this sector. We work in partnership with all its stakeholders, and this is why it is important that specialized private funds invest here: they represent an amazing network that has broad expertise and can offer financial support to a large number of companies, both in better and poorer years. The life sciences sector would certainly be less developed than it currently is without the involvement of the Fonds.

Aerospace is also a strategic sector for Québec. In this sector, the Fonds supports sub-contractors that strengthen the supply chain because we want to avoid having prime manufacturers encourage their suppliers to move their operations to countries where labour is cheaper. For instance, during the last financial year, we invested in AV&R, a young robotics firm, which merged with Imac to enhance its service offering. Robotization is the future of the aerospace industry! We will continue to build on our achievements in this sector because it is necessary to reach a critical mass in terms of company size.

Adetel, a company specialized in designing embedded electronic equipment, is another example of an investment that allowed us to attract a foreign strategic investor to strengthen this niche of excellence. The Fonds stands out because of the European partnership network that it has successfully developed and that offers a rather unique international expertise.

The natural resource sector, especially the wood fibre sub-sector, bears mentioning. The Fonds is a major investor, a leader, in this sub-sector in Québec! Our investment in Groupe Lebel, in Rivière-du-Loup, through the Fonds Valorisation Bois, helps consolidate the manufacturing of value-added wood products and support the transformation of our forest resources. The Fonds Valorisation Bois targets successful companies and supports their development in these promising niches.

The Fonds makes two types of investments in this sector. It offers growth capital: Groupe Lebel, which acquired Cambium and Bois Daquaam is an example of such an investment. It also offer strategic capital: this is what we did in 2010-2011 with Chantiers Chibougamau, an investment that allowed us to support a regional company that adds value by transforming the resource into an innovative product: cross-laminated timber. Entrepreneurs are increasingly using “strategic” growth capital instead of “convenience” capital, which they may obtain from traditional financial institutions. And, at the Fonds, they find all the players in the forest sector, which allows them to create synergies.

Another important sector is the agrifood sector. Les Brasseurs du Nord, the maker of Boréale beers, comes to mind. The majority interest investment we made in this microbrewery in 2012-2013 allowed us to keep the ownership of this strong brand in Québec and to introduce, among other things, new beer flavours and the can format during the summer of 2014, thereby solidifying a homegrown brand, which is also one of our priorities.

I will conclude with mining. For several years, our investment strategy for this sector has been as follows: first, investing up to $1 million in exploration companies, and second, investing between $5 million and $20 million in companies that operate mines in Québec. However, it should be noted that the Fonds is committed to investing, according to its criteria, in projects that are socially acceptable to the communities where they are carried out.

During the last two years, in an environment of uncertain stock markets, we decided to be even more conservative and support mainly companies that are already in our portfolio. In the last financial year, we have made four investments. The Fonds has invested $8 million over four years in Mines Coulon, in partnership with Virginia Mines, Sodemex Développement, Sidex and the Fonds régional de solidarité FTQ Nord-du-Québec. The Coulon project, whose property is located in the Municipality of Baie-James, holds the largest undeveloped copper-zinc-silver resource in Québec. In developing this project, the company is looking to benefit from the expected zinc production shortfall in the next few years and the increase of the price of this metal on the market.

In addition, during the last financial year, the Fonds has injected an additional $10 million to support its partner, Stornoway Diamond, in the construction of the Renard project, the first diamond mine in Québec. Operating the mine will require over 400 jobs in the next two decades.

Finally, with the ongoing objective of diversifying our risks, we have added companies in the services sector (such as drilling companies) to our portfolio and given preference to those that could become consolidators in their market. We will also support high-potential projects that will promote secondary processing in Québec.

Are manufacturing SMEs still a preferred sector for the Fonds?
SMEs are at the core of the Fonds’ activities and will remain so: ensuring their vitality is part of our mission. It will take greater modernization of their equipment to achieve this vitality, and we will always be there to support them in their investments to improve productivity.

How are the Fonds’ investment opportunities shaping up for the coming years?
Investing in SMEs, in Québec as anywhere else in the world, is always a challenge for investors. An interesting challenge will you say, but a challenge nonetheless! Various factors can explain this: the lack of medium-sized businesses, competition from emerging countries, lack of capital to market new products and the large number of entrepreneurs who are planning to retire without having secured succession.

This being said, the Fonds will continue to offer patient capital: we want to support the growth of businesses, especially those that are the most promising in terms of wealth and job creation. In addition, as a socially responsible investor committed to sustainable development, the Fonds has developed strict investment standards; not only are we concerned with financial returns, we are also concerned with ethics.

It must be pointed out that, year after year, we inject hundreds of millions of dollars into the Québec economy to support companies and pursue our mission. And that’s what we will be doing in the coming years, by focusing on the strategies we just talked about. And if the past is any indication of the future, the Fonds will continue to play an essential role in Québec’s economic growth!

Through the investments of the Fonds and its network, we have created, maintained or protected over 530,000 jobs in Québec from 1990 to 2014.