Bombardier reports second quarter 2017 results

Bombardier has reported its second quarter 2017 results and highlighted the progress it is making transforming the company and building earnings power.

“We continue to make solid progress executing our five-year turnaround plan,” said Alain Bellemare, president and chief executive officer, Bombardier Inc. “We are improving our operating margins, transforming our operations and executing on our growth programs, which will allow us to deliver long-term sustainable value to our customers and shareholders. With our strong performance over the first half of the year, we are well positioned to achieve our full-year guidance and expect EBIT [earnings before interest and taxes] before special items at high end of our range, between $580 million and $630 million.”

For the quarter, Bombardier reported revenues of $4.1 billion. EBIT before special items grew to $164 million, up 55 per cent over the same period last year. EBIT margins before special items were 8.2 per cent for Transportation, a robust 8.9 per cent at Business Aircraft and 7.7 per cent at Aerostructures. Commercial Aircraft recorded an EBIT loss in line with the C Series ramp-up plan. Free cash flow usage was also in line with plan at $570 million for the quarter.

In Business Aircraft, Bombardier’s all new, class-defining, ultra-long range business jet, the Global 7000, exceeded 500 flight-test hours, and remains on schedule to enter service in the second half of 2018.

Bombardier also announced that Sheila Fraser expressed her intention to resign from the company’s board of directors for personal reasons. The board accepted Fraser’s resignation and thanks her for her five years of dedicated service and the insight and wisdom she brought to Bombardier during her tenure.

Bombardier reported consolidated revenues of $4.1 billion in the quarter and $7.7 billion for the first six-month period, relative to $4.3 billion and $8.2 billion for the same periods last year, mainly as a result of previously-announced production rate adjustments in aerospace segments, consistent with market demand and continued growth in Transportation.

Free cash flow usage was $570 million in the quarter and $1.2 billion year-to-date, mainly as a result of the Global 7000 test program coupled with the C Series working capital and production ramp up. These results led Bombardier to reiterate its full year guidance of revenue growth in the low-single digits, excluding currency impacts, EBIT before special items at the top half of the range, between $580 million to $630 million and free cash flow usage between $1 billion and $750 million.

Segmented results and highlights

Business Aircraft

• Bombardier is increasing its EBIT margin before special items guidance to approximately eight per cent and reaffirming its revenue and delivery guidance for the year;
• Delivered 36 aircraft in the second quarter, including a high level of Global aircraft deliveries, yielding a strong EBIT margin before special items of 8.9 per cent. On a year-to-date basis, deliveries total 65 aircraft, on target to reach Bombardier’s full year guidance of 135 aircraft deliveries;
• In May 2017, Bombardier unveiled the new Premier cabin for the Global 5000 and Global 6000 business jets. The new design draws inspiration from the high-end craftsmanship and the spaciousness, comfort and productivity of the Global 7000and Global 8000 aircraft cabins;
• Continued to progress on the Global 7000 and Global 8000 aircraft program with three flight test vehicles (FTVs) in flight testing, cumulating more than 500 flight hours. The flight validation program and aircraft systems integration are demonstrating a high degree of maturity. Bombardier also entered into a comprehensive settlement agreement with Triumph Aerostructures LLC that Bombardier said resolves all outstanding commercial disputes related to the manufacture of the aircraft program’s wing. Multiple production aircraft started moving through the assembly line and the program is on track for entry-into-service (EIS) in the second half of 2018;
• In line with Bombardier’s strategy to grow its aftermarket business, it inaugurated two service centres at the Biggin Hill Airport in London, England, and in Tianjin, China, further strengthening its customer support network;
• In June 2017, Bombardier achieved the historic milestone of delivering the 3,000th Learjet business jet manufactured, which was also the 100th Learjet 75 aircraft to be delivered.

Commercial Aircraft

• Bombardier is reaffirming its revenue, delivery and EBIT before special items guidance for the full year;
• Delivered 20 commercial aircraft during the quarter, including six C Series, seven CRJ Series and seven Q400 aircraft. With year-to-date deliveries of regional aircraft and turboprops totaling 28 aircraft, the company reached the halfway mark of its full year delivery guidance for CRJ Series and Q400 aircraft. Production is ramping-up to support approximately 30 C Series aircraft deliveries. C Series aircraft deliveries are expected to gradually intensify in the second half of the year;
• Including deliveries during the month of July 2017, C Series aircraft fleet now totals 16 aircraft, with both the CS100and CS300 aircraft continuing to perform well with Swiss International Air Lines (SWISS) and Air Baltic Corporation AS (airBaltic);
• During the quarter, Bombardier received firm orders for 12 Q400 aircraft, valued at $397 million at list price, and letters of intent (LOI) for up to 52 Q400 aircraft, valued at up to $1.8 billion at list price. This order activity includes an LOI from SpiceJet for up to 50 aircraft, and the exercise of options by Philippine Airlines for seven additional aircraft.
• With respect to the petition filed by The Boeing Company (Boeing) before the U.S. Department of Commerce and the U.S. International Trade Commission regarding the alleged threat caused by future exports of C Series family of aircraft to the U.S., Bombardier said it disagrees with the assertions and is responding to the petition proceedings. Bombardier said it expects the U.S. Department of Commerce to issue its preliminary determinations on applicable duties, if any, during the fall of 2017 and to issue its final determinations during the first half of 2018.

Aerostructures and Engineering Services

• Bombardier is reaffirming its revenue guidance for the year and revising its EBIT margin before special items guidance to approximately eight per cent;
• EBIT margin before special items was 7.7 per cent for the quarter and 7.6 per cent year-to-date, an improvement compared to the same periods last year, driven mainly by higher margins on intersegment contracts and aftermarket sales;
• Effective July 1, 2017, Michael Ryan became president, Aerostructures and Engineering Services. Ryan, who previously served as vice-president and general manager of Bombardier’s Belfast Aerostructures facility, succeeds Jean Séguin, who is retiring after a very successful 36-year career with Bombardier. Ryan reports directly to Alain Bellemare, president and chief executive officer, Bombardier Inc.