Bombardier Shares Plunge Most on Record After It Slashes Earnings Forecast, Puts Airbus Deal In Doubt (excerpt)
(Source: Financial Post; published Jan. 16, 2020)
Bombardier Inc. warned it may ditch its joint venture building the A220 aircraft with Airbus and will consider selling even more assets to pay down debt, renewing investor worries about the Montreal-based manufacturer’s ability to stay afloat as the clock runs down on its five-year turnaround strategy.
The beleaguered plane and train maker’s stock price tanked more than 30 per cent on Thursday after it slashed its 2019 financial forecast for the second time in less than a year, largely due to missed milestones, delayed deliveries and extra production costs for several challenging rail projects. By close, Bombardier stock had fallen nearly 32 per cent to $1.22 on the Toronto Stock Exchange.
The “hugely disappointing” announcement surprised analysts given executives’ previous insistence that the company had turned a corner.
“This is a significant setback following management’s announcement following the third quarter that the worst for Bombardier Transportation may be behind,” BMO analyst Fadi Chamoun noted to clients.
Bombardier has already shed most of its commercial aviation assets since chief executive Alain Bellemare began his turnaround plan in 2015, focusing instead on the more profitable rail and business jet divisions in a bid to build a leaner, more financially stable company.
Now it’s mulling whether it should go one step further and abandon its partnership with Airbus, even though Bombardier has sunk about $6 billion into the program and committed to it for approximately five more years.
It expects to take a significant writedown on the Airbus venture after a business plan review indicated the A220 program will take longer to break even, make less money over its lifespan and require more upfront investments from cash-strapped Bombardier.
In 2017, Bombardier ceded control of its cash-guzzling C-Series program to Airbus, which renamed the jet the A220 under a joint venture owned 50.01 per cent by Airbus, 31 per cent by Bombardier and 19 per cent by the province under Investissement Québec. (end of excerpt)
Click here for the full story, on the Financial Post website.
Bombardier Provides Preliminary Financial Results and Updates on Accelerating Deleveraging Phase of Turnaround Plan (excerpt)
(Source: Bombardier Inc.; issued January 16, 2020)
(All amounts in this press release are in U.S. dollars unless otherwise indicated.)
MONTREAL, CA. --- Bombardier today announced its preliminary results for the fourth quarter and full year 2019. The Company now expects lower than previously guided financial performance, mainly as a result of actions taken to resolve challenging rail projects, the timing of milestone payments and new orders at Transportation, and the delivery of four Global 7500 aircraft slipping into the first quarter of 2020.
Aviation deliveries were strong in the quarter, totalling 58 aircraft in the fourth quarter for a total of 175 aircraft for the full year. This included 11 Global 7500, six of which were delivered in the fourth quarter. The remaining Global 7500 aircraft originally scheduled for delivery in the final days of 2019 are now expected to be delivered in the first quarter of 2020. As Aviation made good progress ramping up the Global 7500, its full year adjusted EBIT margin is still expected to be approximately 7.0%, in line with full year guidance.
At Transportation, the fourth quarter adjusted EBIT loss is anticipated to be approximately $230 million. This includes a charge of approximately $350 million related to certain projects in the UK (the Aventra platform), commercial negotiations with Swiss Federal Railways (SBB), and increased production and manufacturing costs for projects in Germany.
Delays in achieving technical milestones, including multi-unit software homologation for the London Overground’s LoTrain project (an Aventra project), and execution of production ramp-up required the Company to re-align certain delivery schedules with customers and absorb additional costs. Having achieved these milestones in the fourth quarter, Bombardier has entered into commercial negotiations with customers – to reset schedules, resolve late delivery penalties, and address related provisions and costs.
Consolidated free cash flow for the fourth quarter is estimated at approximately $1.0 billion, approximately $650 million lower than anticipated. This is largely due to the timing of cash inflows from milestone payments on large Transportation projects, and the later-than-anticipated closing of certain orders and call-offs. While the free cash flow shortfall is largely expected to be recovered in 2020, the recovery will be offset by the cash flow impact of the incremental costs recognized in the fourth quarter adjustments at Transportation.
While fourth quarter financial performance at Transportation was lower than expected, the Company continues to make significant progress completing legacy projects and to take the right actions to position the business for long-term success.
Airbus Canada Limited Partnership Update (ACLP)
With its exit from Commercial Aerospace, Bombardier is reassessing its ongoing participation in ACLP.
While the A220 program continues to win in the marketplace and demonstrate its value to airlines, the latest indications of the financial plan from ACLP calls for additional cash investments to support production ramp-up, pushes out the break-even timeline, and generates a lower return over the life of the program. This may significantly impact the joint venture value. Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results. (end of excerpt)
Click here for the full story, on the Bombardier website.