(Reuters) - Canada’s Bombardier Inc expects margins to improve in 2019, its chief financial officer said on Thursday, after the plane- and train-maker reported better than expected quarterly earnings, lifting its shares more than 5 percent.
The Montreal-based company said it improved operational efficiencies during the second quarter and used less cash as it transitions from an investment cycle to one focused on rising plane production.
Bombardier’s cash burn, a metric closely watched by analysts, was about $370 million in the second quarter, putting it on track to meet its 2018 break-even goal. It was a big improvement over expectations of $532 million, BMO Capital analysts said.
Bombardier shares were up 5 percent in midday trading at C$5 a share.
Bombardier is in the middle of a five-year turnaround plan through 2020, after spiraling investments in its CSeries jetliner led to a cash crunch in 2015. Bombardier sold a majority stake in the money-losing CSeries to Europe’s Airbus, which has pledged to boost sales and cut costs of the plane that has been renamed the A220.
It reported a 7 percent rise in earnings before interest, taxation, depreciation and amortization (EBITDA) to $336 million, beating the average analyst estimate of $287 million, according to Thomson Reuters I/B/E/S.
Chief Financial Officer John Di Bert told analysts he expects “margins to continue to improve into (20)19,” without elaborating further.
Chief Executive Alain Bellemare said the company is focused on growing margin-rich businesses including aftermarket services for its corporate jets, along with rail signaling in its transportation division.
Bellemare said Bombardier’s plan to grow aftermarket services for business jets would allow it to service “above 40 percent” of the planes it has sold over the years. The company has previously said it expects to maintain 35 percent of its 4,700 in-service business jets by year’s end.
Bellemare said the company’s flagship Global 7500 business jet is in the final phase of certification with entry into service expected in 2018.
The company’s transportation unit, its largest division, posted an 11 percent rise in revenue. That drove its total revenue to $4.26 billion, up 3 percent from a year earlier.
Adjusted EBITDA margin was up 7.9 percent from 7.6 percent last year.
Last month, Bombardier raised its 2018 forecast for consolidated earnings before interest and tax by $100 million to a range of $900 million to $1 billion, to reflect the separation of the loss-making CSeries.
“With Bombardier now through the midway point of the year, it should comfortably meet or exceed its 2018 guidance,” CIBC Capital Markets analyst Kevin Chiang said.
Reporting By Nivedita Bhattacharjee and Allison Lampert; Editing by Bernard Orr and Susan Thomas
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