Bombardier to create single aviation division, sell
Belfast plant
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[May 02, 2019]
By Allison Lampert
MONTREAL (Reuters) - Canada's Bombardier
Inc said on Thursday it would unite its corporate and regional
jet-making units into a single aviation division, as it continues
focusing on its strongest businesses while shedding aerostructure
facilities in Belfast and Morocco.
The announcement comes ahead of an annual general meeting later in the
day, where the plane and train maker is expected to face questions from
investors on whether its turnaround plan is still on track as its
transportation unit grapples with delayed rail contracts.
Investors were rattled last week when Bombardier cut its first-quarter
and full-year revenue targets for the transportation division, its
largest unit, raising concerns over whether it will still meet its 2020
targets of boosting margins and generating $20 billion in revenue.
Bombardier on Thursday posted first-quarter revenue and profit, in line
with revised expectations issued a week ago, when it sharply cut
estimates for full-year profit and revenue.
It had slashed its full-year transportation revenue forecast by almost 8
percent to about $8.75 billion.
The company said in a statement it was making progress toward completing
five long-term rail projects that have been marred in some cases by
delivery delays and production problems, but these would take a few more
quarters for completion.
Bombardier's planned sale of its Belfast wing and structure-making
operation, the largest high-tech manufacturer in Northern Ireland which
employs 3,600, stunned workers who called on the British government to
retain jobs.
A separate facility which produces aeronautical-equipment in Morocco
will also be sold.
Under Chief Executive Alain Bellemare, Bombardier has been selling off
businesses, including the money-losing Q400 turboprop program, to focus
on more profitable units like rail and corporate jets.
The rail division, which is expected to generate $10 billion next year,
is crucial to Bombardier's five-year turnaround plan, after heavy
investment in aircraft production drove it to the brink of bankruptcy in
2015.
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Logo of Bombardier is seen at an office building in Zurich,
Switzerland February 28, 2019. REUTERS/Arnd Wiegmann
Besides creating a single aviation division headed by business aircraft
president, David Coleal, the company said it will consolidate its five
aerostructures businesses to focus on facilities in Montreal, Mexico and its
newly acquired Global 7500 business jet wing operations in Texas.
Bombardier's commercial aircraft president Fred Cromer will continue to lead
efforts as the company weighs the future of its money-losing regional jet
program.
Some investors have questioned Bombardier's credibility in revising its
financial guidance after a recent debt raise.
"The concern, particularly after the March debt raise, is whether management
remains committed to its longer term 2020 guidance," said Toronto-based AltaCorp
analyst Capital Chris Murray by email.
"We expect that during that process, the company had reiterated prior 2019
guidance, which it changed last week, adding to concern on the part of
bondholders."
A Bombardier spokesman declined to comment and said management would address
questions at the meeting.
Bombardier said it continues to expect full-year free cash flow to be breakeven,
plus or minus $250 million, as Global 7500 aircraft and key transportation
project deliveries are expected to accelerate in the second half of the year.
Adjusted core earnings rose by $1 million to $266 million in the three months to
March 31, while revenue fell 13 percent to $3.52 billion.
(Reporting By Allison Lampert in Montreal. Additional reporting by Arathy Nair
in Bengaluru and Fergal Smith in Toronto; Editing by Arun Koyyur and Bernadette
Baum)
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