Aug. 5, 2016: Bombardier reported its second quarter and half year results today, with a net loss of $628m for the half and a $490m net loss for the quarter.
Alain Bellemare, CEO of Bombardier. CBC photo via Google images.
Results for the commercial division recorded a loss before interest and taxes of $586m.
Ilyushin Finance Corp., one of the customers for the C Series that’s been on LNC’s “Red” category as a high-risk customer, reduced its order for 32 CS300s to 20. IFC also dropped five options.
“We continue to make very good progress executing our turnaround plan,” said Alain Bellemare, President and Chief Executive Officer, said in a statement. “We delivered on our financial commitments, achieved our program milestones and positioned Bombardier to meet both our full year guidance and 2020 goals.”
JP Morgan was the first of the research notes we received today, providing this take:
- Cash flow usage of $490 mn came in better than consensus of ~$625 mn. This was modestly worse than our estimate of ~$410 mn, but overall, it puts them on pace to meet guidance for cash use in the range of $1.0 -1.3 bn, which is still very Q4 dependent. Through 1H, the company has used $1.24 bn in cash and so the implication is that 2H cash flow will be flattish. Bombardier continues spending ~$150 mn per quarter on Global 7000 development.
- BBA weathering the storm. We have little doubt that the business jet demand environment remains challenging and Bombardier’s book-to-bill declined to 0.7x in 2Q16 from 1.3.x in 1Q1 Management has already acknowledged that another production cut is likely next year, albeit one less significant than this year’s expected ~25%. The magnitude of this next cut will depend on 2H16 order activity, which remains a risk, but YTD at least, orders have been OK. In addition, the adjusted EBIT margin 6.7% was +90 bps vs our estimate.
- Minor restructuring of a CSeries order. During the quarter, Ilyushin Finance Co. (IFC) reduced its 32 CS300s on firm order to 20 CS300s and eliminated five options as well. We believe this trimming of the order book was not unexpected. The C Series has used $470 mn of cash YTD vs a 2016 forecast for ~$1 bn. Production losses should ramp in 2H, partially offset by lower capex and cash inflows from deliveries.