Bombardier profit falls short as CSeries costs rise

Thu Feb 13, 2014 11:03am EST
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By Susan Taylor

TORONTO (Reuters) - Bombardier Inc (BBDb.TO: Quote) reported a quarterly profit that fell well short of expectations on Thursday and cut its 2014 earnings forecast as it spends heavily on developing its new CSeries jetliner, and its shares fell sharply in reaction.

The Montreal-based plane and train maker is spending billions to develop the CSeries, a high tech narrow-body plane that will compete with smaller passenger jets made by Boeing Co (BA.N: Quote) and Airbus Group (AIR.PA: Quote), but the program has been delayed four times and costs are rising.

Bombardier said on Thursday it was increasing the $3.9 billion price tag for the CSeries by $1.05 billion: $750 million for tooling and $300 million in borrowing costs.

As well as the CSeries costs, fourth-quarter results at Bombardier's plane division were weighed down by tough competition in the commercial jet market and sales of low-margin sales business jets, executives said on a conference call.

RBC Capital Markets analyst Walter Spracklin said the quarter was weak "on many different levels," with free cash flow and spending in the aerospace unit of particular concern.

Fadi Chamoun, an analyst at BMO Capital Markets, also raised a flag about cash resources, which he said were "not at a comfortable level" at around $3.4 billion.

"Although expectations were muted going into the quarter and the stock has sold off in recent weeks, we expect Bombardier to come under pressure today," he wrote in a note.

Bombardier shares dropped more than 10 percent to C$3.61 in morning trade on the Toronto Stock Exchange.   Continued...

Employees leave work at a Bombardier plant in Montreal, January 21, 2014. REUTERS/Christinne Muschi