Bombardier sees 2012 dip in plane deliveries, margins

Thu Mar 1, 2012 11:58am EST
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By Susan Taylor

(Reuters) - Bombardier Inc said plane deliveries will dip in 2012 and the world's third biggest commercial plane maker forecast lower than expected profit margins for its key aerospace unit, news that drove its shares in down nearly 8 percent on Thursday.

The Montreal-based plane and train maker, which faces sluggish demand for its regional jets, said higher costs will hurt its margins, including a $100 million hit from a stronger Canadian dollar and further $100 million for pension expenses.

"A lot of focus will be on aerospace margin guidance of 5 percent," said Canaccord Genuity analyst David Tyerman. "A lot of people might think it's too low and they are being too conservative."

By mid-session, the stock had dropped 37 Canadian cents to C$4.38 on the Toronto Stock Exchange. TD Securities downgraded the stock to "hold" from "buy", citing the weak outlook.

Bombardier competes with Brazil's Embraer in the smaller plane sector and is seeking to tread on the turf of giants like Airbus and Boeing with its yet-to-launched C-series jet. That plane, promised by the end of 2013, will be Bombardier's largest jet to date.

Bombardier said its closely watched margin for earnings before interest and taxes is expected to decline to about 5 percent in 2012 from 5.8 percent in 2011. It withdrew its 2013 forecasts, blaming the poor economy and regional jet weakness.

The company, whose fourth-quarter profit came in slightly above estimates, also said it expects to deliver about 235 planes this year, down from 245 in 2011, reflecting strength for big aircraft and soft demand for its smaller commercial planes.

"On the commercial side it's very weak," said Morningstar analyst Neal Dihora. "Bombardier's commercial aircraft strength is more in North American and Europe and those markets aren't really growing. Growth in Asia has been dominated by other players like Embraer."   Continued...

A Bombardier q400 airplane is seen being assembled at the Bombardier aircraft manufacturing facility in Toronto, November 25, 2010.    REUTERS/Mark Blinch