Bombardier warns on profit, Airbus A220 writedown
Canadian manufacturer Bombardier Inc warned of lower 2019 profits on Thursday and said it might have to write down significantly the value of its partnership with Airbus on A220 jets.
Bombardier, which sold control of the A220 to Airbus in 2018 as part of a long-running drive to raise cash and put it on a solid footing, said the venture needed more investment and might be subject to a writedown in fourth quarter results next month.
Separately, Airbus said it remained committed to funding the A220 jetliner on its way to profitability.
Air France, which ordered for 60 A220 jets, has expressed interest in a larger variant of the plane, but Reuters reported in November that Airbus had no current plans to do so.
Bombardier said the A220 program was “winning” with airlines, but latest indications were that it would need more cash to ramp up production, would generate lower returns and would take longer to break even.
“This may significantly impact the joint venture value,” the
Canadian company said. “Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results.”
Bombardier is in the middle of a broader restructuring, focusing on its more profitable business jet and rail units.
It said delivery of four of its Global 7500 jets had now slipped into the first quarter of 2020 and that it now expected to deliver 11 Global 7500 in 2019 compared with a previously forecast range of between 15 and 20.
Investors and analysts see deliveries of the business jet, which lists for $73 million, as an important revenue driver for Bombardier.
The company said it also expects the timing of milestone payments and new orders at its Transportation unit to weigh on 2019 results.
Free cash flow for 2019 is expected to be negative $1.2 billion, much lower than previously forecast negative $500 million.
Bombardier now expects 2019 adjusted earnings before interest and taxes (EBIT) to be about $400 million, compared with a previously forecast range of between $700 million and $800 million.
The company added it expects to incur a charge of about $350 million in the fourth quarter related to certain UK projects, negotiations with the Swiss Federal Railways (SBB) and higher production costs in Germany.