Bombardier posts a profit despite rail project woes
Train issues continue as delay and repair problems result in financial penalties
MONTREAL — Bombardier Inc. turned a profit in 2018 for the first time in five years as its business jet unit delivered, catapulting its share price despite the derailment of several train projects — including Toronto’s — and weak transportation results.
The plane-and-train maker said it pocketed a net income of $318 million (U.S.) in 2018, compared to annual losses that ranged from $525 million to $5.34 billion in the four preceding years. The business jet division saw its earnings margin before interest and taxes spike to 8.6 per cent from 8 per cent.
Chief executive Alain Bellemare said Thursday the overall improvement comes as the company is nearing the end of its five-year turnaround plan that saw it add new business jets, sell two commercial aircraft programs and streamline costs by reducing the number of employees.
Bombardier said it is still on track to deliver between 50 and 60 of its flagship Global 7500 in the next two years, with the goal of pushing up business aircraft revenues more than 40 per cent to about $8.5 billion in 2020.
With 137 deliveries last year and an order backlog of $14.3 billion, the business jet division aims to send up to 155 more planes to customers in 2019, including the $73-million Global 7500, that entered into service in December.
“In the long-term, this program is set to represent an important growth vector for the aerostructure division,” wrote analyst Benoi t Poirie r of
Desjardins Securities.
Bombardier’s train unit raked in $8.9 billion of the company’s $16.2 billion in revenues in 2018, with a margin of 7.7 per cent on earnings before interest and tax, below last year’s 8.4 per cent. Fourth-quarter rail revenues dropped 10 per cent to $2.16 billion from a year ago.
The drab rail results triggered a decrease in Bombardier’s stake of its train business by 2.5 per cent to 70 per cent. That means “there’s no immediate urgency” to buy back the Caisse de depot’s now-30 per cent stake — valued at more than $2 billion — in the rail segment, said CFO John Di Bert.
Delays and repair problems have plagued Bombardier train contracts over the past decade. Earlier this month, Metrolinx announced it would impose fi- nancial penalties on the company after it delivered only half of a promised six vehicles for Toronto’s Eglinton Crosstown LRT by deadline. Last year, Bombardier revealed the majority of the TTC streetcars it had delivered would have to be taken out of service to correct a serious welding defect. Repairs aren’t expected to be completed until 2022. Last month, three international public transit agencies in New York, Switzerland and France opted to stop taking trains from the company until it fixes the ones already in service.