Bombardier says lower jet production to hurt revenue in 2016

MONTREAL (Reuters) - Canada's Bombardier Inc BBDb.TO warned on Tuesday a previously announced business jet production cut will drive down revenue in 2016, but said its long-delayed CSeries jet program will help sales at the plane and train maker top $25 billion by 2020.

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

The Montreal-based company, which posted revenue of $20.1 billion last year, also said it expects its liquidity position to be strong in 2016, helped by recent cash infusions from Quebec’s public pension fund and the provincial government.

Executives told shareholders and analysts at its investor day in New York City that its 2016 earnings before interest and tax (EBIT) would be hurt due to the CSeries passenger jet program ramp-up.

But it sees EBIT margins rising back into the 7 to 8 percent range by 2020 and said it plans to start reducing debt starting in 2019 and 2020.

The plan’s goal is to “rebuild earnings and cash flow,” Chief Executive Alain Bellemare said.

Certification for the narrow-body, medium-range CSeries jets was “very close”, but no new orders were imminent, Reuters reported on Tuesday, citing sources familiar with the matter.

Bombardier said last week it had finished flight testing of the aircraft, due to enter service with Lufthansa LHAG.DE subsidiary SWISS in the first half of 2016.

Quebec-based Bombardier has long been struggling with the delayed CSeries jet program.

The jet program is already billions of dollars over budget and has left Bombardier saddled with over $9 billion in debt. The planemaker expects the program to turn a profit by around 2020.

But it faces the uphill task of ramping up production and dealing with any cost overruns or snags on entry to service as it tries to recover lost momentum.

The Quebec government agreed to inject $1 billion into the CSeries program last month, while Caisse said last week that it would buy a 30 percent stake in Bombardier’s rail business for $1.5 billion.

Bombardier’s business jets have also been hit by weak demand from China, Latin America and Russia. The company said in May it would cut production of Global 5000 and 6000 jets.

The business jet division has been a key source of cash flow for the company, helping it keep up spending to develop the CSeries jets.

Up to Monday’s close, the stock had lost 70 percent of its value this year.

Reporting by Sneha Banerjee in Bengaluru; Editing by Sriraj Kalluvila, Sayantani Ghosh and Nick Zieminski