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Bombardier Lowers 2014 Goals as Fourth-Quarter Profit Falls

Thursday, 13 February 2014 09:23 AM

Bombardier Inc. lowered 2014 profit targets for aerospace and train divisions as the company reported fourth-quarter profit that missed analysts’ estimates.

Earnings before interest and taxes at the planemaking business will amount to about 5 percent of revenue this year, down from an earlier plan for a 6 percent margin, Montreal-based Bombardier said today in a statement. Ebit at the rail division will be about 6 percent of sales, short of the 8 percent goal that “remains the objective,” it said.

“Initial 2014 guidance is significantly below our forecast,” Fadi Chamoun, an analyst at BMO Capital Markets in Toronto with an outperform recommendation on Bombardier stock, said today in a report to clients. Cash resources “appear sufficient to support capital spending and program development, but are not at a comfortable level.”

Bombardier outlined plans in January to eliminate about 1,700 aerospace jobs after pushing back the new CSeries airliner model’s entry into service by about nine months. Bombardier had 201 firm orders for the CSeries as of Feb. 9, compared with a target of 300 by the time the plane makes its commercial debut in the second half of 2015.

CSeries Postponements

Three delays to the introduction of the CSeries, Bombardier’s biggest-ever plane at 108 to 160 seats, have prevented the company from curtailing spending as fast as planned. Capital expenditures at the aerospace unit will be in a range of $1.6 billion to $1.9 billion this year and total $1.2 billion to $1.5 billion in 2015, Bombardier said today. Those figures exceed the $1.5 billion budgeted for 2014 and $1 billion for next year that the company targeted a year ago.

“We have adequate liquidity to finance our product development and our operations in the foreseeable future,” Bombardier said today in a filing on its website.

Prototypes of the CSeries have logged about 77 flight hours in the five months since the jet’s September maiden flight, according to Benoit Poirier, a transportation analyst at Desjardins Capital Markets in Montreal, who advises investors to buy Bombardier shares. That represents about 3 percent of the planned 2,400 hour flight test program.

Bombardier used $771 million of free cash flow in the quarter, down from $854 million a year earlier. Available short-term capital resources amounted to $4.8 billion at Dec. 31, including cash and cash equivalents of $3.4 billion, Bombardier said. That compares with $4 billion and $2.6 billion respectively a year earlier.

Delivery Plan

The manufacturer is targeting a 20 percent increase in plane deliveries this year to 280 aircraft, including 200 business jets and 80 regional models. Capital spending at the aerospace unit will drop to less than $1 billion in 2016, Bombardier said.

“We’re both excited and realistic about the next two years,” Chief Executive Officer Pierre Beaudoin said in the statement. “We’ve continued to invest during challenging times to improve our leadership position in the market place. We have one overriding objective and commitment: generating strong, sustainable, profitable growth. And our investments are about to pay off.”

Net Declines

Fourth-quarter net income excluding some costs and gains dropped to $129 million, or 7 cents a share, from $181 million, or 10 cents, a year earlier, Bombardier said today. That missed the 11-cent average of 18 analyst estimates compiled by Bloomberg.

Revenue rose 15 percent to $5.32 billion, beating the $5.05 billion average estimate, while the order backlog climbed to $69.7 billion from $64.9 billion a year earlier.

Excluding currency effects, revenue at the trainmaking division will rise by a “mid-single digit” percentage from last year’s $8.77 billion, Bombardier said. The Ebit margin at the unit, excluding one-time gains or costs, amounted to 5.8 percent of revenue in 2013.

Bombardier’s widely traded Class B shares fell 2.7 percent to C$4.04 at the close in Toronto yesterday. The stock has declined 12 percent this year, while Canada’s benchmark Standard & Poor’s/TSX Composite Index climbed 2.1 percent.

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Bombardier Inc. lowered 2014 profit targets for aerospace and train divisions as the company reported fourth-quarter profit that missed analysts' estimates.
Thursday, 13 February 2014 09:23 AM
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