Bombardier says it’s on track, despite 22% Q1 profit drop
CEO Pierre Beaudoin expects to meet full-year guidance for 2014.
MONTREAL — Bombardier says it’s on track to deliver promised results for the year, despite posting a 22% drop in earnings in the first quarter and near doubling of its use of free cash.
The Montreal-based transportation giant’s net aircraft orders surged to 91 from 28 a year ago, pushing the aerospace division’s backlog to a record US$38.5 billion. It delivered 56 planes during the quarter, three more than the same period a year ago.
Overall, Bombardier, which reports in US dollars, earned $115 million for the period ended March 31, down from $148 million a year earlier.
Excluding one-time items, net income amounted to $151 million, down from $156 million in the 2013 quarter.
Revenues for the train and plan manufacturer were ahead slightly at $4.4 billion, compared with $4.3 billion year-over-year.
Bombardier met expectations of eight cents per share in adjusted earnings in the quarter, according to analysts polled by Thomson Reuters. But Bombardier missed expectations of $4.58 billion in revenues.
The company used $915 million of free cash in the quarter, up from $590 million a year ago.
Its total liquidity slipped to $3.9 billion including $2.5 billion of cash, compared to $4.8 billion in short-term capital and $3.4 billion of cash as of Dec. 31.
“We’re satisfied with our first quarter results and we’re on track to meet our full-year guidance for 2014,” president and CEO Pierre Beaudoin stated.
“Our continued investment in a leading portfolio of products is paying off, as demonstrated by our record backlog of $76.9 billion (including the railway division) which sets the stage for strong revenue growth over a five-year horizon.”
Bombardier Aerospace’s revenues decreased 8.7% to $2.1 billion from $2.3 billion a year earlier, while Bombardier Transportation’s revenues increased by the same amount, or an increase of 7% excluding currency impacts.
The company received 17 firm orders to Q400 turboprops from six customers in the quarter and 16 large CSeries from Saudi Arabia valued at $1.2 billion based on list price, with options for an additional 10 CS300s.
To date, Bombardier has received commitments for 447 CSeries aircraft from 18 customers in 15 countries, including 203 firm orders.
The world’s third-largest aircraft manufacturer said the delayed CSeries aircraft program continues to make “solid progress” with test flights reaching the maximum operating altitude of 12,497 metres (41,000 feet) and the maximum operating speed of Mach 0.82 or 871 km/h. The fourth flight test vehicle is expected to complete its first flight in the coming weeks.
The composite Learjet 85 business jet’s maiden flight took place during the quarter and Bombardier signed a firm order with an undisclosed customer for three Global 6000, two Global 7000 and three Global 8000 business jets, for a total value of $537 million based on list prices.
Although the financial results were in line with expectations and orders were strong, analysts said they were concerned about the higher use of cash in the quarter.
“Overall, we view these results negatively, mainly due to the significant and unexpected free cash flow usage in the quarter,” Walter Spracklin of RBC Capital Markets wrote in a report.
Joseph Nadol of J.P. Morgan said the cash outflow was the most troubling part of the results even though aerospace investments decreased to $484 million from nearly $600 million. If these investments on new aircraft programs drop further, he expects Bombardier will meet its target decrease investments to between $1.6 billion and $1.9 billion.
Bombardier recently announced it’s freezing the salaries of its roughly 38,000 non-unionized employees as it deals with costly delays in the launch of its CSeries commercial jet. It has also eliminated 1,431 of the planned reduction of 1,700 aerospace employees.
Bombardier Transportation has purchased the Australian signalling company Rail Signalling Services for an undisclosed price. It said the acquisition strengthens its presence in a market where large investments are planned.
© 2014 The Canadian Press