Bombardier delays business jet, shares sink as cash burn rises

Thu Jul 30, 2015 10:33am EDT
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(Reuters) - Canadian plane and train maker Bombardier Inc (BBDb.TO: Quote) reported lower earnings and sharply higher cash use on Thursday, and pushed back delivery of its new Global business jet, driving down its share price.

Bombardier, which has been spending heavily to bring its new CSeries jet into service, used $808 million in free cash flow in the quarter, up from $424 million a year earlier. It had $3.1 billion in cash and equivalents at the end of the quarter.

The stock dropped 11 percent to C$1.74 on the Toronto Stock Exchange.

Bombardier is preparing an initial public offering of a minority stake in its rail unit, which would help shore up its balance sheet, but on a call with analysts and investors Chief Executive Alain Bellemare said other options are still on the table.

"We continue to explore strategic options for our rail business, given the ongoing industry consolidation," he said. Later, he said listing the unit could help in "getting ready for a strategic play" but selling the entire business is off the table.

The company said its Global 7000 business jet, previously scheduled to go into service in 2016, is now expected to do so in the second half of 2018.

Some analysts had suggested a delay was likely as the plane has yet to make its first flight. Bellemare said developing the large new jet has been challenging, but he is confident of the new schedule.

The company also announced a "Bombardier transformation plan" focused on reducing product cost, controlling working capital and using cash effectively.

The business jet division has been a key source of cash flow for the company, which is spending heavily to develop the narrow-body, medium-range CSeries. But in May Bombardier said it would cut production of Global 5000 and 6000 jets, citing weak demand from China, Latin America and Russia.   Continued...

A new Bombardier CS100 passenger jet of Swiss airline flies over Zurich airport near the town of Kloten June 17, 2015. REUTERS/Arnd Wiegmann