Bombardier Q2 profit soars 53 per cent

Montreal–Bombardier’s net profits soared by nearly 53 per cent in the second quarter but economic uncertainty reduced aircraft order deposits and trimmed its free cash.

The Montreal-based transportation giant, which reports in U.S. dollars, said earnings for the three months ended July 31 rose to US$211 million compared with $138 million in same period last year.

Per share earnings were 12 cents compared with seven cents last year as quarterly revenues increased 17 per cent to $4.7 billion from cents per share in adjusted profits on US$4.5 billion of revenues, according $4 billion.

Bombardier was expected to earn 10 cents per share, according to analysts polled by Thomson Reuters.

“We delivered good results for the second quarter with increased revenues, profitability and EPS,” company president and CEO Pierre Beaudoin said in remarks accompanying the results.

The company beat analyst expectations mainly from higher revenue and aerospace margins and lower financing expenses. Beaudoin said the transportation division’s level of activity remained strong and were a “clear indication of the strength of this segment.”

“While Bombardier Aerospace’s level of new orders in both business aircraft and CSeries commercial aircraft improved substantially year-over-year, we continue to monitor the economic uncertainty and market volatility in the U.S. and Europe,” he added.

The manufacturer expects lower advances from aircraft orders for the year, mainly due to the postponement of orders in the regional aircraft market.

Both aerospace and transportation divisions used free cash flow in the quarter, lowering its total available cash by $1 billion since January to $3.2 billion. Analysts had expected the company to generate cash in the quarter.

“Although we were disappointed by the miss, we do not view free cash flow as a major concern at this point, given most of the cash drag came from the lumpy transportation division, which saw its revenue increase 26 per cent,” noted Benoit Poirier of Desjardins Capital Markets.

The total backlog increased eight per cent to $56.9 billion, which Beaudoin said positions the company well for the years ahead.

Bombardier Aerospace’s revenues in the quarter totalled US$2.1 billion, compared with $1.9 billion last fiscal year, and Bombardier Transportation increased its revenues by 26 per cent to US$2.7 billion from $2.1 billion. A total of 56 aircraft were delivered, compared with 49 for the same period last fiscal year.

It received 86 net plane orders during the quarter, compared to 29 a year earlier. Orders included 43 net orders for business aircraft (56 orders and 13 cancellations) and 43 orders for commercial planes.

Bombardier Aerospace’s backlog increased by 20 per cent reaching US$23 billion as at July 31 compared with $19.2 billion on Jan. 31. The 20 per cent increase was mainly attributable to an increase in large business aircraft and CSeries family of aircraft orders, partially offset by a lower order backlog for turboprops and regional jets.

The commercial aerospace business has been affected by slow orders for regional jets and Q400s, which industry observers said could lead to production rate decreases and layoffs.

They forecasted that any rate decrease would likely be focused on regional jets, since Bombardier has already announced a slowdown for turbos later this year.

The company didn’t announce any production rate changes but noted that it continues to “align production rates to reflect market demand.”

“The backlog of Q400 turboprops is down to nine months and CRJs down to 15 months so Bombardier needs new orders for these models soon to sustain current rates,” Cameron Doerksen of National Bank Financial wrote in a report.

Overall, the results were positive, but he said a key investor concern is whether the business jet market can continue to recover in a weaker macro-economic environment.

Business jet orders had been expected to be solid in the quarter but could come under pressure in the third quarter because of declining confidence in the economy and unsolved sovereign debt issues.

Fundamentals for this key part of Bombardier’s business are continuing to improve. Aircraft use is up and the number of used planes is decreasing. Rivals such as Gulfstream, Dassault, Cessna and Embraer have all pointed to higher orders in the second quarter, particularly in the large cabin segment.

The order activity in the transportation industry continues at a high level across large European customers, the company said. During the second quarter, Bombardier Transportation reported $3.9 billion of new orders, representing a book-to-bill ratio of 1.5, compared with $4.3 billion of new orders last fiscal year.

Bombardier Transportation’s backlog stood at US$33.9 billion as at July 31 compared with $33.5 billion on Jan. 31. The $400-billion increase is due to the strengthening of most foreign currencies, mainly the euro, versus the U.S. dollar, it said.
© 2011 The Canadian Press