Bombardier 1Q Commercial Sales Stagnant
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By Darren Shannon
For the second consecutive quarter, Bombardier has failed to sell a single regional jet, and the latest financial figures show interest in the company’s Q400 turboprop also has slumped.
The complete lack of demand (apart from Adria Airways shifting a single CRJ1000 order to its CRJ900 backlog), however, will have no immediate effect on the Canadian manufacturer’s aerospace operation, which still has a regional jet backlog of more than two years at the current production rate of 15 units a quarter – and that is to be reduced later this fiscal year.
Bombardier’s turboprop production line, which has been boosted 10% this year (DAILY, Feb. 6), also has a backlog of at least one and one-half years, and a possible rate reduction in 2011 hinted at during a June 3 conference call should offset any changes that could at the least see Horizon Air defer 11 Q400 orders.
In addition, Bombardier continues to push forward with its 110- to 130-seat CSeries family, which logged 50 firm orders in the first quarter, and the company expects to book at least one or two more orders this fiscal year.
Yet this past quarter’s decline is indicative of a greater malaise in aerospace, and Bombardier’s own fiscal first-quarter results clearly illustrate the problem: In the three months to April 30, customers canceled 61 business jet orders, while Bombardier’s sales force closed deals on just 20 new airframes. The company is also holding 25 whitetails, and in the first quarter had to log negative orders on two green Challenger 800s because they were reversed before the interiors were completed.
The book-to-bill ratio (the calculation of net orders over deliveries) for executive jets was minus one in the quarter, while the commercial division’s ratio was 1.6. Combined, Bombardier Aerospace’s first-quarter book-to-bill ratio was in effect zero.
This depression is reflected in Bombardier Aerospace’s first-quarter results. Revenue for the three months was down 6.8%, hurt by a major dip in spare parts sales, and this could have been worse if commercial production had not ramped up in the period.
Earnings before interest and taxes fell from $206 million to $110 million, marking a 3.7-percentage-point decline in the margin to 5%, and that was boosted by a payment from the Canadian Government for the CSeries’ development.
Despite this difficult month, Bombardier is confident it can survive the current downturn, and not just by relying on the Bombardier Transportation rail division.“We are taking action to cope with the present economic situation and we continue to invest in new products such as the CSeries, the Learjet 85, the ZEFIRO high-speed train and the ECO4 suite of technologies.
At $47.4 billion, our large and well diversified backlog [$22.4 billion of which is in aerospace], combined with our strong balance sheet, high level of liquidity, and the cost-cutting measures already in place, will enable us to weather the storm,” said Bombardier President and CEO Pierre Beaudoin.
Aerospace President and Chief Operating Officer Guy Hachey in the conference call also noted that the cost of the production cuts – and the loss to 4,400 jobs – have to be accounted for early, and should weaken as the year progresses. Cost of sales in the fiscal first quarter stood at $1.86 billion, 1.7% below the same period last year.
Photo: Bombardier
