Bombardier sees Q1 earnings plummet after coronavirus pandemic shutters factories

Bombardier Inc. took a major earnings hit last quarter — with more losses to come — as fallout from the COVID-19 pandemic blocked aircraft deliveries and shut down operations across dozens of plants.

The company, which keeps its books in U.S. dollars, reported a $200 million loss in its first quarter and burned through $1.6 billion in cash as borders and factories closed in March when all non-essential work ground to a halt.

Though plants are gradually ramping up again, the plane-and-train maker expects business activity to hit a low point in the second quarter before mounting a slow comeback in the second half of the year.

“At a certain point, all our facilities were closed,” said chief executive Eric Martel on his first conference call as head of the company.

“We saw a significant impact in Q1, with more to come in Q2, as a large part of our operations have been shut down for the past eight weeks.”

Meanwhile travel restrictions meant that “we got caught with a whole bunch of airplanes that logistically we just couldn’t deliver,” said chief financial officer John Di Bert.

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Bombardier expects delivery of business jets to drop between 25 and 35 per cent this year. The second quarter alone could see another $1.6 billion in cash burn, Martel said.

Helping to offset the losses are the expected completion of a pair of divestitures amounting to more than $1 billion.

The US$550-million sale of Bombardier’s CRJ jet program to Mitsubishi is expected by June 1, Martel said. The US$500-million sale of its aerostructures business in Belfast and Morocco to Spirit Aerosystems — initially anticipated in the first half of 2020 — should close “in the coming months.”

It has become a penny stock with junk-status credit ratings as it slims down to a single revenue stream — private planes — just as the economy plunges into a downturn.

“We have a very, very solid backlog in the (Global) 7500 and we don’t see that moving a lot,” Martel said. The market for the smaller Learjet and Challenger airplanes, however, looks “a little bit more volatile,” he said.

Bombardier shuttered operations and sent 12,400 employees _ 70 per cent of its Canadian workforce _ on unpaid leave on March 24 as non-essential services ground to a halt across the country. About 11,000 furloughed staff _ 9,000 of them in Quebec _ will return to work over the next few weeks, benefiting from the federal wage subsidy that funds 75 per cent of an employee’s pay up to a maximum of $847.

For the first quarter, Bombardier lost 11 cents per diluted share compared with a profit of $239 million or eight cents per share a year ago.

Revenue totalled $3.69 billion in the three-month period ended March 31, up from nearly $3.52 billion in the first quarter of 2019.

On an adjusted basis, Bombardier says it lost $169 million or 10 cents per share in the first quarter compared with an adjusted loss of $122 million or seven cents per share a year earlier.

Analysts on average had expected an adjusted loss of seven cents per share for the quarter, according to financial markets data firm Refinitiv.

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