Montreal Gazette

Bombardier unveils plan, asks investors for patience

- KRISTINE OWRAM

Bombardier Inc. asked investors for a little more patience on Tuesday, acknowledg­ing that 2016 will be another “difficult year” while outlining plans for a significan­t turnaround by 2020.

At the company’s first investor day since early 2014 — the last, scheduled for March, was postponed — Bombardier detailed its five-year financial plan under a new management team.

The goals are ambitious: revenue of US$25 billion, an EBIT margin of seven to eight per cent and free cash flow that will equal at least 80 per cent of net income, all by 2020.

By comparison, Bombardier’s 2014 revenue was US$20.1 billion, adjusted EBIT margin was 4.6 per cent and free cash flow was negative US$1.1 billion. Those numbers are likely to be worse this year.

“We believe these targets are realistic and achievable,” CEO Alain Bellemare told analysts and investors in New York.

“Despite some of our short-term challenges that we’re addressing, the potential for Bombardier is great and we’re turning the business around.”

The entire management team, which has undergone a wholesale transforma­tion since Bellemare was hired in February, was on hand to present plans for their individual segments and answer questions from the audience.

Bombardier’s stock has fallen more than 70 per cent this year.

The company’s woes are well known by now. Developmen­t of the troubled CSeries aircraft is nearly complete after multiple delays and cost overruns, but it’s not expected to generate positive cash flow until 2020.

In the meantime, orders for Bombardier’s other aircraft have slowed and the train-making division is struggling to boost margins.

In the past month, the company has received a US$1-billion lifeline from the Quebec government, which took a 49.5 per cent stake in the CSeries program, and a US$1.5billion injection from Quebec’s pension fund in exchange for 30 per cent of the transporta­tion unit.

These investment­s have eased short-term liquidity concerns — Bombardier is expected to end the year with US$6.5 billion of cash — and the company is now focused on cutting costs, improving efficiency and boosting margins.

“Now that the liquidity has been addressed, it’s all about executing our programs, delivering our transforma­tion plan and creating a culture of performanc­e across the organizati­on,” Bellemare said.

First, though, Bombardier and its stakeholde­rs will need to make it through next year, which is expected to see a further decline in revenue and earnings.

This is due to lower production of the Global 5000 and 6000 business jets, which Bombardier cut earlier this year due to slowing demand, as well as the ongoing costs associated with the CSeries production ramp-up.

By 2017-18, the “transforma­tion will build momentum and affect results more profoundly,” chief financial officer John Di Bert said.

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