Bombardier shares sink 15per cent after forecasts cut for profit, revenue

Bombardier shares sink 15per cent after forecasts cut for profit, revenue

Canada's Bombardier Inc on Thursday cut its full-year profit and revenue forecast, due to slower production ramp-up of some of its large projects in its transportation business.

FILE PHOTO: Logo of Bombardier is seen in Zurich
FILE PHOTO: Logo of Bombardier is seen at an office building in Zurich, Switzerland, February 28, 2019. REUTERS/Arnd Wiegmann/File Photo

REUTERS: Canada's Bombardier Inc cut its full-year profit and revenue forecasts on Thursday due to delivery delays and production challenges at some projects of its key railcar-making unit, and shares sank 25 percent in early trading before paring some of those losses.

The cuts to its forecasts come as the plane-and-train maker nears the end of a 5-year turnaround plan, after heavy investment in plane production drove the company to the brink of bankruptcy in 2015.

Shares erased some of their earlier losses to trade down 15per cent at CUS$2.46 by midmorning, with the company still the biggest loser on the Toronto Stock Exchange and the most active stock.

Montreal-based Bombardier trimmed its 2019 revenue estimate http://bit.ly/2vuDVjv by US$1 billion to US$17 billion, and expected adjusted core earnings to range between US$1.50 billion and US$1.65 billion, compared with its prior expectation of US$1.65 billion to US$1.8 billion.

"This is not great news, but this is not like 'the end of the world' news," said William Blair analyst Nicholas Heymann.

Bombardier has been dogged by a handful of rail contracts http://bit.ly/2vuDVjv in its US$34 billion backlog that generated a disappointing free cash flow result in 2018 and subsequent selloff of Bombardier stocks and bonds.

The company has since made progress on a project in New York City, where deliveries resumed after being temporarily halted for poor performance.

But in a separate contract, Swiss Federal Railways has so far declined to take delivery of more than 12 Bombardier trains in a total order of 62, as those already in service had not yet lived up to expectations.

In January, a Bombardier spokesman told Reuters problems with the Swiss trains would not cause “significant changes” to the company’s working capital outlook and were expected to be resolved within weeks.

A spokesman for Bombardier's Berlin-based rail unit could not be immediately reached on Thursday to comment on the state of these contracts.

Bombardier cut its full-year revenue forecast by US$750 million to about US$8.75 billion for its transportation business, which makes rail cars, and by US$250 million to US$1.15 billion for its commercial aircraft business.

The company will report first-quarter earnings on May 2.

Bombardier said it expects to deliver only 30 commercial planes in 2019, compared with 35 it had previously forecast, as the planned sale of its Q400 turboprop business is now anticipated to close mid-year.

The company, however, maintained its earnings forecast for its aerospace business and continues to expect free cash flow to break even, plus or minus US$250 million.

Bombardier also forecast lower-than-expected adjusted core earnings, operating earnings and revenue for the first quarter, due to delayed aircraft deliveries, slower project ramp up at its transportation business and unfavorable currency swings.

It now expects revenue of about US$3.5 billion for the three months through March 31, well below analysts' estimate of US$4.03 billion, according to IBES data from Refinitiv.

Adjusted core earnings of US$265 million is expected to miss estimates by 21 percent, while operating earnings of US$170 million is set to be 26 percent lower than analysts' estimates, according to the data from Refinitiv.

Bombardier cut its full-year revenue forecast by US$750 million to about US$8.75 billion for its transportation business, which makes rail cars, and by US$250 million to US$1.15 billion for its commercial aircraft business.

The company will report first-quarter earnings on May 2.

(Reporting by Arathy S Nair in Bengaluru, Allison Lampert in Montreal and John Miller in Zurich; Editing by Anil D'Silva and Bernadette Baum)

Source: Reuters

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