“Creating an aircraft of this unique caliber is challenging”, the company said Thursday. Costly delays already had postponed the CSeries launch, triggering a management shake-up early this year and a strategic review of Bombardier’s operations to generate efficiencies.
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Bombardier is pushing back the commercial debut of its Global 7000 business jet by two years, yet another setback for a planemaker that has seen debt balloon due to delays with the CSeries commercial program. The company blamed the delay largely on a wing redesign aimed at improving the plane’s performance.
The company’s cash flow use in the first quarter, at US$808 million, was double the projection from Fadi Chamoun, an analyst with BMO Capital Markets.
After his first full quarter at the helm, CEO Alain Bellemare said he has a stronger grasp of what the company needs to do to turn around and it is looking to reduce the cost of making its planes and trains. After the IPO, Bombardier will retain control of the unit.
The delay to the Global 7000 program comes two months after Bombardier announced a production rate cut on current in production Global family aircraft.
“The cash usage year to date is in line with our plan”, Mr. Bellemare said. The company had previously announced plans to spin off part of its rail division in an initial public offering in an effort to solidify the company’s financial position, and Bombardier intends to move ahead with that plan later this year.
THE parent company of Derby train-maker Bombardier has dismissed reports that it is in talks with German firm Siemens about merging their rail units.
“[Investors] are concerned the cash burn was higher this year than last year despite reduction in aircraft development spending”, said Anthony Scilipoti, president of Veritas Investment Research.
But Bombardier only took eight new business jet orders during the period. The company blamed the decline on the soft demand from China, Russian Federation and Latin America.
The company’s second-quarter update was a mixed bag for investors. “So far, third-quarter sales activity has been good”, he said on the call. As recently as last year, Bombardier promised a 2016 debut for the 7000, with the smaller 8000 following in 2017.
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As a result of the “softness in demand”, Bombardier reduced its profit margin forecast in the unit to a range of five per cent to six per cent for this year, compared with a February forecast for seven per cent. Revenue fell 5.5 percent to $4.62 billion. Adjusted to exclude items, earnings also came in at six cents a share, down from 10 cents a year earlier but a penny better than analysts polled by Thomson Reuters had expected.
