Nov. 10, 2016, (c) Leeham Co.: Bombardier reported 3Q2016 and nine months results reflecting lower revenues as downsizing businesses and cost-cutting took effect.
Revenues for the current quarter were $3.7bn vs $4.1bn. For the nine months, revenues were $12bn vs $13.1bn. Earnings Before Interest and Taxes (EBIT), and before special items, were $87m vs $75m for the quarter. Losses are special items were $94m and $4.9bn.
For the nine months, EBIT was $323m this year vs $538m last year. Losses after special items were $722m and $4.66bn.
BBD burned through $320m in cash in the quarter vs $816m a year earlier. For the nine months, the cash burn was $1.56bn vs $2.37bn.
Alain Bellemare, CEO of Bombardier.
“We continue to gain momentum as we execute our turnaround plan and transform our company,” Alain Bellemare, President and Chief Executive Officer, Bombardier, said in a press release. “In the third quarter, we again delivered on our financial commitments, we achieved our program milestones and we continued to take the hard actions necessary to improve productivity, reduce costs and optimize our operations.”
The Commercial Aircraft division saw revenues increase to $538m from $480m in the quarter. Deliveries were up by two aircraft, to 16, year-over-year. However, net orders were a negative nine vs two YOY. This reflects cancellation of 12 orders by Russia’s leasing company Ilyushin Finance Corp. The book:bill ratio was negative.
EBIT was a loss of $317m vs $3.6bn.
Quotes are paraphrased.
- Earnings guidance is increased to the high end of previously stated numbers.
- The transformation plan is allowing BBD to perform in “any market.” Targets should be reached in 2018 through 2020.
- BBD is more than 80% complete with workforce reduction. On track to achieving cost reductions in 2016.
- There will be annual cost savings of $500m to $600m, with full run rate by 2018.
- CSeries continues to perform “exceptionally well” in service. More than 1,500 flight hours accumulated. Reliability is exceeding expectations. The first A check was conducted in under five hours, better than industry standards, with no problems identified.
- CS300 enters service with airBaltic shortly.
- We are working very closely with Pratt & Whitney on engine delivery issues. PW is working closely with us to support 2017 delivery schedule. An update will be provided at the investors’ day next month.
John Di Bert, CFO
- Financial performance for the year is ahead of original guidance.
- Still planning on cash flow break even in 2018.
- Recurring cash flow from continuing operations is a significant improvement.
- Ended 3Q with more than $3bn cash on hand from more than $2bn. Entering cash-generating 4Q.
- There has been $180m in restructuring charges YTD. Total for the year should be between $250m-$300m.
- Book:bill for all aircraft programs should end year at or above 1:1.
- Commercial aircraft: focus continues to be on execution. $2.7bn in full year revenues expected, including delivery of seven CSeries. EBIT expectations should improve by $100m to a loss of $450m.
- Market activity for CRJ remains slow.
- AB: We don’t expect any issues with the global supply chain as a result of the US election. It’s too early to speculate as to trade, but it should affect global supply issue.
- AB: The strategic agreement with COMAC has so far produced very little. It was prior to my time, but there hasn’t been much collaboration with COMAC.
- AB: The performance of the CSeries in service has been excellent. In 20 years I’ve been working on projects, it’s the best I’ve ever seen. The engine is performing very well. What we’re seeing is a production ramp up issue with PW. It’s a GTF production issue.
- JDB: We still see CSeries deliveries of 30-35 next year. As we get more clarity with PW we’ll see if we can catch up the shortfall from this year.
- JDB: We feel good about where we are on production for CRJ. (Backlog down to 69.) It’s a great aircraft. Campaign activity has been a bit of a low cycle. You should expect a little bit lighter volumes next year.