August 5, 2016 / 10:45 AM / 3 years ago

Bombardier posts loss, says business jet demand weak; stock down

MONTREAL (Reuters) - Canadian plane and train maker Bombardier Inc (BBDb.TO) on Friday reported a bigger-than-expected quarterly loss as it delivered fewer business jets and warned of weakness in the market for smaller corporate planes.

A Bombardier flag flutters amidst storm clouds at the Singapore Airshow at Changi Exhibition Center February 18, 2016. REUTERS/Edgar Su

The results showed Montreal-headquartered Bombardier faces pressure in its higher-margin business jet segment because of a downturn in global demand, even as it works to win customers for its new CSeries program of narrow body aircraft.

“Business jet weakness is a source of concern to us and has the potential to materially slow down the pace of restructuring progress if it worsens,” said an analyst following the company who asked not be identified.

Bombardier shares dropped 1.26 percent to C$1.97 in Toronto.

Business jets revenue declined nearly 19 percent in the second quarter. The sector, a key source of cash flow, accounted for more than a third of total revenue.

Chief Executive Alain Bellemare said on a conference call there had been “significant softness” in the market for smaller size business aircraft.

“It’s a very competitive segment of the market so there’s significant pricing pressure,” he said.

Chief Financial Officer John Di Bert said the company would scale back investment in the CSeries next year, even as it boosts spending on the high-end Global 7000 business jet, which is expected to enter service at the end of 2018.

Bellemare said there is a strong backlog for the new long-range business jet and Bombardier is working to get the Global 7000’s production up to 50 aircraft a year as quickly as possible.

Commercial jets revenue rose more than a quarter, but margins weakened as the company spent heavily on the CSeries.

Following two recent pivotal CSeries orders from Air Canada (AC.TO) and Delta Air Lines (DAL.N), Bombardier said on Friday Russia’s Ilyushin Finance Co reduced the number of CSeries planes it ordered from 32 to 20 of the 150-seat CS300 aircraft.

Bombardier, which has secured $1 billion for the program from Quebec, said it is still in talks with the Canadian government about further investment.

Bombardier reported a net loss of $490 million, or 24 cents per share for the quarter ended June 30. A year earlier, it had a profit of $125 million, or 6 cents per share.

Excluding items, the company reported a loss of 6 cents, bigger than the 5 cents analysts on average had expected, according to Thomson Reuters I/B/E/S.

With additional reporting by Amrutha Gayathri in Bangalore and Matt Scuffham in Toronto; Editing by Kirti Pandey and Phil Berlowitz

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