Bombardier YE2016 results better than expected

Alain Bellemare, CEO of Bombardier.

Feb. 16, 2017: Bombardier today posted better than expected results (even on lower revenue) for the fourth quarter and full year.

Goldman Sachs was first out with reaction among the analyst reports LNC receives:

Bombardier (Neutral) reported stronger-than-expected 4Q16 operating results. Revenue is below consensus and our expectations, but adjusted EBIT is well ahead of our estimate on better operating margins. Free cash flow is a larger source of cash than we expected. 2017 guidance is unchanged. Post the quarter end, Bombardier announced the Government of Canada will provide the company $283mn over four years in repayable contributions related to the Global 7000 and 8000, and the C Series. This investment will be repaid through royalties upon aircraft delivery.

BBD’s press release is here. The financial presentation from today’s earnings call is here.

Earnings Call

Alain Bellemare, CEO

John Di Bert, Senior Vice President and Chief Financial Officer

Quotes are paraphrased.

Bellemare:

  • BBD finished the year ahead of its turnaround plan. The transition year is “now behind us.” Bombardier is ready to resume growth.
  • “We successfully completed the derisking phase of our five year turnaround plan.” Bombardier is on a path to cash flow break even next year.
  • The CSeries is exceeding all expectations. It’s completed more than 4,000 flight hours and more than 3,600 revenue flights.
  • Korean Air becomes the first Asian operator this year.
  • There will be more than 40 CSeries in service by the end of this year.
  • We have greatly improved our financial performance and there is more to come.
  • 2017 will see return to growth. Cash flow improvement at commercial aircraft will improve to $300m.

Di Bert:

  • We have turned the business around…and we can perform in any market.
  • Ended the year with $3.4bn in cash, more than $4bn in liquidity. Liquidity is secure.
  • With C$372m from Canadian government last week, liquidity is secure.
  • 2016 was a pivotal year for BBD commercial aircraft. Seven CSeries were delivered, with seven aircraft.
  • 2016 saw the commercial re-launch of CSeries, with 355 firm orders and more than 500 when counting options.
  • EIS of CSeries was executed very well.
  • We are resuming revenue growth in 2017 to low single digits.
  • Commercial aircraft will have negative EBIT margin of more than $400m.
  • 2017 should be the last year of cash flow usage in our five year plan.
Q&A
  • AB: We absolutely are confident we can build the CSeries backlog in 2017. The backlog is solid and are focused on growing it and moving forward.
  • JDB: $600m and $850m due in 2019 and 2020 but expect to start generating positive cash flows. I’m not suggesting we’re going to retire that debt but we could deleverage or refinance that debt.
  • JDB: Managing the ramp up for CSeries despite engine delays.
  • AB: Affirms plans to delivery 30-35 CSeries this year, based on Pratt & Whitney’s production recovery of the GTF.
  • AB: Our confidence is increasing for more orders in 2017. There is clearly a market demand for CSeries.
  • JDB: Federal government loan is repayable over 15 years with a grace period of first two years through royalties on CSeries and Global 7000.

It was interesting to note that the company had no discussion of the CRJ or Q400, either in the press release or on the conference call. Analysts did not ask about these airplanes.

5 Comments on “Bombardier YE2016 results better than expected

  1. Not long ago dukeofurl questioned my use of the term White Tails while referring to the aircraft that Bombardier would have to park due to a lack of engines. Well, it turns out I was right about the colour of those tails. For those wondering why Bombardier has delivered so few aircraft at the beginning of the year, you may be interested to know that six CS100 have been completed and parked, waiting for engines. If you are curious about this check the following links:

    https://www.flickr.com/photos/skynar/32659333076/in/photostream/

    https://leehamnews.com/2016/10/27/visit-bombardier-airbaltic-cs300-roll/#comment-172646

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