By Allison Lampert
MONTREAL May 2 (Reuters) - Canada’s Bombardier Inc on Thursday shied away from pledges to meet 2020 financial objectives, and shares of the train and plane manufacturer sank as much as 10 percent in morning trading, as company cited headwinds in its rail division and announced new restructuring efforts.
The plane-and-train maker said it would unite its corporate and regional jet units into one aviation division while selling off two aerostructures operations including a wing-making facility in Belfast.
Chief Executive Officer Alain Bellemare called the steps “a strategic move,” as the company continues to shed its commercial aviation businesses to focus on more profitable sales of corporate jets and passenger rail cars.
Bombardier Chief Financial Officer John Di Bert told analysts he would not commit to previously announced objectives for 2020, such as growing revenues to $20 billion, and would review the targets later this year.
Bombardier posted first-quarter revenue and profit in line with revised expectations issued a week ago, when it sharply cut estimates for full-year profit and revenue. Bombardier also cut targets for the transportation division, its largest unit, raising concerns over its five-year plan to improve performance after a cash-crunch in 2015.
While not formal guidance, the 2020 targets were closely watched by investors.
While Bellemare said he still expects higher earnings and revenues in 2020, executives want to first see the company’s progress over the next few months on five delayed rail projects.
“On the train side we had a bit of a setback,” Bellemare acknowledged, while stressing that he is “not losing faith” in the company’s largest business by revenues.
The company had slashed its full-year transportation revenue forecast by almost 8 percent to about $8.75 billion.
Bellemare said the rail division was making progress, but the project delay impacts might dog the company into 2020.
Bombardier’s planned sale of its Belfast wing and structure-making operation, the largest high-tech manufacturer in Northern Ireland which employs 3,600, stunned workers who called on the British government to retain jobs.
Bellemare said the company will be working with Europe’s Airbus SE to find “the next best potential buyer” for the wing-making facility which produces wings for the A220 narrowbody jet.
Industry analysts say the Belfast plant pioneered a leap forward in carbon-fibre wings technology that may be attractive to Airbus for its next generation of planes.
AltaCorp analyst Chris Murray said Airbus, along with other large aerostructures companies like Spirit Aerosystems would be logical contenders.
A separate facility which produces aeronautical-equipment in Morocco will also be sold.
Besides creating a single aviation division headed by business aircraft president, David Coleal, the company said it will consolidate its five aerostructures businesses to focus on facilities in Montreal, Mexico and its newly acquired Global 7500 business jet wing operations in Texas.
Bombardier’s commercial aircraft president Fred Cromer will continue to lead efforts as the company weighs the future of its money-losing regional jet program.
Bombardier said it still expects full-year free cash flow to be breakeven, plus or minus $250 million, with Global 7500 aircraft and key transportation project deliveries accelerating the second half.
Adjusted core earnings rose by $1 million to $266 million in the three months to March 31, while revenue fell 13 percent to $3.52 billion.
$1 = 1.0138 Swiss francs Reporting By Allison Lampert in Montreal. Additional reporting by Arathy Nair in Bengaluru and Tim Hepher in Paris; Editing by Bernadette Baum and David Gregorio