MONTREAL – Bombardier has posted a US$4.9-billion loss for the third quarter, mostly tied to its CSeries and Learjet 85 aircraft programs, and turned in operating results that were substantially below expectations that were already low.
The Montreal-based company also announced that the province of Quebec will invest US$1 billion in the CSeries program, which is about two years behind schedule, and it’s continuing to look for new investment money for its rail business.
The investment community had widely expected that Bombardier (TSX:BBD.B) would have a weak quarter and receive financial assistance from its home province when its financial report was released Thursday morning.
However, Bombardier’s results were even softer than expected — with revenue and adjusted earnings well below estimates.
The biggest news, however, is Bombardier’s plan to transfer its CSeries aircraft program to a new partnership that’s 50.5 per cent owned by the company and 49.5 per cent owned by the province.
The CSeries has been an expensive and difficult project for Bombardier, which says the jetliner is about 97 per cent of the way through final testing — one of the last steps before the planes can be put into service at airlines around the world.
“This partnership (with Quebec) comes at a pivotal time, with the CSeries on the verge of certification,” Bombardier chief executive Alain Bellemare said in a statement ahead of the company’s conference call with analysts.
“The market is there, our leadership is in place, we have the best product and with the support of the government, we are ready to make this aircraft a commercial success.”
Bombardier says it will continue to operate the CSeries business and include its revenues and losses in the company’s overall financial reports.
The Learjet 85 program — already put on hold so Bombardier could focus more resources on the CSeries — has now been cancelled completely due to a lack of sales, the company said.
It’s also continuing efforts to sell a minority stake in its rail equipment business, Bombardier Transportation, which sells subway cars and other mass transit systems.
Bombardier is the only company in the world that is a major player in both the aerospace and rail industries, each with global operations.
Bellemare was brought into the company as president and CEO earlier this year with a mandate to lead Bombardier through a difficult transformation.
“After just a few months, we have strengthened the management team, we have conducted in-depth reviews of our business and have a much clearer picture of what we need to do,” Bellemare said. “We are taking the right actions and we have solidified our liquidity position, giving us the confidence to execute our long-term strategic plan.”
The third-quarter results includes a number of items related to the transformation, as well as an accounting of how Bombardier’s overall business has performed from July through September.
The US$4.9 billion net loss — which amounts to $2.20 per share — includes a $3,2 billion accounting item related to the CSeries program. The loss also includes a US$1.2 billion charge related to the Learjet 85 program, which was working on a new jet for non-airline customers.
Adjusting for the CSeries and Learjet 85 losses and other items, Bombardier would have had a $2 million profit — essentially break-even, down from US$222 million or 12 cents per share a year earlier.
Revenue for the three-month period ended Sept. 30 fell to US$4.1 billion, down $800 million from a year earlier.
Even without the massive writedowns, Bombardier’s results were weaker than expected. Excluding one-time items, adjusted net earnings had been forecast to drop only to US$55.5 million. Revenue had been estimated at just under US$4.6 billion, according to Thomson Reuters.