Bombardier: Q2 Profits Drop on Lower Deliveries of Business Aircraft

by: Proactive Investor

The world`s third largest commercial plane maker Bombardier (OTCQX:BDRAF) [TSX: BBD.A, TSX: BBD.B] saw a 27% decline in its second quarter fiscal 2011 profits, as it reported net income of $148 million, compared with $ 202 million for the same period last year, largely due to poor performance of its aerospace segment.

The company`s other financial results suffered as well, as consolidated revenues dropped to $4.1 billion for the quarter versus $ 4.9 billion last year, while EBITDA fell by 24% to $331 million. Diluted earnings per share were also $0.08, compared to $0.11 a year earlier.

Earnings met analyst expectations, while sales did not, according to Bloomberg.

Bombardier Aerospace had a difficult quarter, as its revenues amounted to $2 billion for the three-month period ending July 31 2010, compared to $2.4 billion for the same period the previous year - representing a 17% decline. The fall was due to a decrease in manufacturing revenues on account of lower deliveries of business aircraft. EBIT totalled $91 million, translating into an EBIT margin of 4.6% for the second quarter, compared to $154 million, or 6.4%, last fiscal year.

For the quarter, aircraft deliveries totalled 46, compared to 80 for the same period the previous year. The 46 deliveries consisted of 27 business, 18 commercial and one amphibious aircraft, versus 51 business, 28 commercial and one amphibious aircraft for the corresponding period last fiscal year.

"The uncertain economic environment continues to be reflected in Aerospace's financial results. However, the group is starting to see signs of recovery as shown by the significant reduction in business aircraft order cancellations," said president and CEO Pierre Beaudoin.

Bombardier`s Transportation segment also saw its revenues drop to $2.1 billion from $2.5 billion last year. The decrease is mainly due to rolling stock's lower activities in locomotives in Europe, as a result of the low level of order intake in fiscal year 2010.

However, the segment also reported $4.3 billion of new orders compared to $3 billion last fiscal year, leading to a book-to-bill ratio of 2.0, compared to 1.2 a year earlier, and an order backlog of $30.3 billion.

The orders included a $1.6 billion contract to supply 59 TWINDEXX double-deck trains to SBB, the Swiss Federal Railways. This constitutes the largest vehicle order in SBB's history, said Bombardier in a statement.

"Overall, our long-term prospects are strong, our new product developments on track and we remain focused on managing our cost structure and improving our cash flow generation," concluded Beaudoin.

The company declared a quarterly dividend of $0.025 per share on Class A and B shares, payable on October 31, 2010.

Bombardier`s free cash flow usage was $508 million for the quarter, compared to free cash flow of $18 million last fiscal year. Its cash position dropped from $3.4 billion as at January 31, 2010, to $2.8 billion on July 31.

The company`s backlog of orders improved, however, to $47.4 billion from $43.8 billion in January.

It has been reported that Bombardier has a "full pipeline" of potential CSeries jet customers, a jet that aims to compete with larger planemakers Airbus SAS and Boeing Co., and expects order announcements by year-end.

Bombardier is a global manufacturer of various transportation solutions, from commercial aircraft and business jets to rail transportation equipment, systems and services.

Its stock rose 3.15% to $4.58 as of a little after noon on Wednesday on the Toronto Stock Exchange.

Disclosure: No position