Bombardier still pushing for federal funding
CEO Bellemare still hopes the feds will kick in $1 billion in funding, despite having enough cash to achieve to its turnaround plan.
MONTREAL — Bombardier says it’s still looking for federal financial assistance despite having enough cash to achieve to its turnaround plan.
Chief executive Alain Bellemare told investors Thursday that the request made a year ago for US$1 billion in funding would add financial flexibility to manage unexpected risks or to develop its next aircraft program.
“Obviously things have changed a lot over the past 12 months so the discussions are taking a different path,” he said during an investor day in New York.
Bombardier’s CSeries jet entered commercial service this year after years of delays and cost overruns.
With the focus on ramping up CSeries production, Bellemare said the company has not yet decided if its next aircraft program will be to develop a new business jet or a commercial aircraft.
Meanwhile, he said the company is not expecting any negative impact on its British operations from Brexit and is optimistic about the election of Donald Trump.
He said the new president-elect’s approach could help to spur demand, especially for business jets.
Bellemare said painful restructuring and job cuts have put it on the runway to achieve solid growth in 2017 and its five-year turnaround plan.
The company announced two waves of jobs cuts this year to eliminate 14,500 employees and reduced its financial risk by growing its cash and credit to an expected level of more than US$4.5 billion in 2016.
“We have made huge progress in 2016,” Bellemare told analysts. “Our turnaround plan is in full motion.”
The goal is to generate more than US$1.75 billion in pre-tax profits by 2020 and expand revenues to US$25 billion from US$16.5 billion projected in 2016.
In 2017, consolidated revenue is forecast to grow by one to three per cent, driven by growth in the rail business and the ramp up of the CSeries.
Cash flow use is expected to improve and range between US$750 million to US$1 billion.
Earnings before interest and tax are expected to be in the range of US$530 million to US$630 million, which represents a year-over-year improvement of about 50 per cent at the mid-point of the range.
Industry analysts said the 2017 guidance announced after markets closed Wednesday was in line with expectations, but the profit margins in all four divisions is stronger than expected.
“Combined with a solid liquidity position and free cash flow expected to become breakeven by 2018, we believe Bombardier remains in a decent (and improving) operating position,” analyst Walter Spracklin of RBC Capital Markets wrote in a report.