Bombardier reported its third quarter 2017 results, highlighting continued progress transforming the company and building earnings power. The company now expects consolidated full-year EBIT before special items to be at least $630 million, the high end of its previous guidance.
“This was a very exciting quarter for Bombardier as we welcomed Airbus to the C Series program,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “This is a game-changing step for Bombardier. It positions the C Seriesprogram for long-term commercial success and will generate new and sustainable value for our customers, suppliers and shareholders.”
“We also continue to make solid progress executing our turnaround plan, and are very much on track to achieve the goals we set out in November 2015,” Bellemare continued. “We have clearly demonstrated our ability to reduce costs, improve productivity and grow margins. We have executed on our growth programs and we are taking big strategic steps necessary to unlock the full value of our portfolio.”
For the quarter, Bombardier reported revenues of $3.8 billion. EBIT before special items grew to $165 million, nearly doubling the third quarter 2016 amount. EBIT margins before special items were 8.5% for Transportation; 8.8% for Business Aircraft; and 9.3% for Aerostructures. Commercial Aircraft recorded EBIT before special items in line with the C Series ramp-up plan. Free cash flow usage was also in line with guidance at $495 million for the quarter.
Along with its third quarter results, Bombardier announced that a European customer has signed a letter of intent (LOI) for up to 61 C Series, including 31 firm aircraft and options for an additional 30 aircraft. The LOI is subject to the execution of a purchase agreement which is expected before year end. Based on the list price, a firm order would be valued at approximately $2.4 billion. This amount would increase to nearly $4.8 billion should all 30 options be exercised.
“This significant new order confirms the increasing confidence customers have in the C Series,” said Bellemare. “Looking forward, as Airbus joins the program, and with the C Series continuing to prove itself in service, we expect sales momentum to accelerate quickly.”
Other highlights of the Company’s performance in the third quarter include a 20% revenue growth at Transportation compared to the same period last year, along with margin expansion and strong orders. Business Aircraft also delivered margin expansion as it continues to improve productivity and operational efficiency, demonstrating its ability to perform in any market environment. The Global 7000 made progress toward its certification with the fourth test aircraft entering flight-testing in the quarter. This new ultra-long range aircraft remains on schedule to enter service in the second half of 2018.
Bombardier also announced the appointment of Douglas R. Oberhelman to its Board of Directors. Mr. Oberhelman spent 41 years at Caterpillar Inc., where he held various executive positions, including Executive Chairman, a role he held until his retirement in March 2017. Mr. Oberhelman replaces Patrick Pichette, who expressed his intention to resign from Bombardier’s Board of Directors for personal reasons. The Board accepted Mr. Pichette’s resignation and thanks him for his four years of dedicated service and the insight and energy he brought to the Company during his tenure.
Bombardier reported consolidated revenues of $3.8 billion in the quarter and $11.5 billion in the nine-month period, relative to $3.7 billion and $12.0 billion for the same periods last year, mainly as a result of continued growth in Transportation and previously announced adjusted volumes in Aerospace segments, consistent with market demand. EBIT before special items was $165 million and $457 million respectively for the quarter and nine-month period, up 90% and 41% for the same periods last year. This growth was driven by continued significant margin improvements at Transportation, Business Aircraft and Aerostructures, which all reached 8.5% or above in the quarter. Free cash flow usage was $495 million in the quarter and $1.7 billion in the nine-month period as a result of an increase in Transportation’s ramp-up in production ahead of deliveries coupled with the production ramp-up in aerospace for the Global 7000 and C Series programs. The financial performance year-to-date supports consolidated EBIT guidance before special items for the full year of at least $630 million, the upper end of our previous guidance range. Consolidated revenue and free cash flow usage guidance for the year are revised to approximately $16.3 billion and $1.0 billion respectively to align with approximately 20 to 22 C Series deliveries due to engine delivery delays from Pratt & Whitney. Certain engines originally designated for production aircraft in the fourth quarter will be redirected to support spare engine requirements of current C Series customers.
SEGMENTED RESULTS AND HIGHLIGHTS
Aerostructures and Engineering Services
Warrants in connection with the Airbus partnership
In connection with the private placement to Airbus of warrants to acquire up to 100,000,000 Class B shares (subordinate voting) of Bombardier, the TSX has determined to accept notice of the private placement of such warrants and has conditionally approved the listing of the Class B Shares issuable pursuant to the terms of the warrants on the TSX. Listing will be subject to Bombardier fulfilling all of the listing requirements of the TSX. Security holder approval is required under TSX rules due to the fact that the warrants will be issued later than 45 days from the date upon which the exercise price was established, as set out in Section 607(f)(i) of the TSX Company Manual. Such approval has been obtained, as agreed with the TSX and in reliance on the exemption contemplated by Section 604(d) of the TSX Company Manual, by way of written consent of shareholders holding more than 50% of the voting rights attached to all of Bombardier’s issued and outstanding shares.
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