September 4, 2008 / 11:35 AM / in 9 years

Bombardier profit, aircraft deliveries grow

TORONTO (Reuters) - Bombardier Inc BBDb.TO reported a stronger fiscal second quarter on Thursday as demand for its aircraft grew and its backlog rose to a record, buoying hopes that the company can ride out a softening market.

The high level of new orders and deliveries for its business aircraft offset declines in regional jets as commercial carriers focused on weathering the impact of economic slowdown on passenger traffic, the Montreal-based maker of aircraft and rail equipment said.

But the company said it expected business jet orders to weaken in the next two quarters, and the shares sank 7.5 percent, as Toronto stocks retreated broadly for a third day in row.

“We suspect that the second quarter will prove to be the business-jet order peak for the current cycle,” Cameron Doerksen, an analyst with Versant Partners, wrote in a research note. “Bombardier’s backlog remains very strong, which should shield the company from a market slowdown.”

Indeed, the Montreal-based company said it fully expected to weather the coming months because of its strong backlog.

“The (regional) market is a bit softer - we’re not concerned,” said Guy Hachey, chief operating officer of the aerospace division, in a conference call, noting that airlines are restructuring and passenger travel is down in some markets.

“We have a good, healthy backlog and we should be able to maintain that backlog,” said Hachey, adding that he expects the regional market will normalize in the third and fourth quarters.

The retreat in Bombardier shares on Thursday to C$7.77 came after a 14 percent rise in the past week. The stock is still up about 30 percent for the year.

Net income came in at $246 million, or 14 cents a share, in the second quarter ended July 31, compared with a loss of $71 million, or 5 cents a share, a year earlier.

The results beat expectations, with analysts on average forecasting earnings at 11 cents a share before exceptional items, according to Reuters data.

The 2007 results included a $162 million charge from the write-off its investment in Metronet Rail BCV Ltd.

Revenue in the latest quarter rose 22 percent to $4.93 billion from $4.04 billion, with revenue of $2.5 billion at its aerospace division, and $2.4 billion at its transportation segment.

Bombardier said it was seeing strong orders for its fuel-efficient turboprops, although deliveries were slightly lower in the quarter as it faced challenges in the supply chain.

Bombardier’s turboprop line has seen a resurgence as carriers look for more efficient planes as they grapple with soaring fuel prices.

Chris Sears, analyst at MacDougall, MacDougall & MacTier in Montreal, said fuel efficiency gives Bombardier an edge over rivals Boeing BA.N and Embraer EMBR3.SA.

“People are looking to cut costs and if you can get a plane that will bring you from Montreal to Toronto in the same amount of time but will be 20 percent more efficient, that’s the kind of thing you’re going to look for,” Sears said.

“Anyone replenishing their fleet will certainly look to save money and improve their own margins by buying a Bombardier product.”

Aircraft orders for the quarter totaled 175, compared with 187 a year earlier. Deliveries totaled 89, compared with 78 last year.

In the business segment, the Montreal-based company booked 162 orders, compared with 103 in the last fiscal year, and 66 deliveries completed compared to 49 in the same period the year earlier.

Aerospace backlog was $26.1 billion at the end of July, compared with $22.7 billion at the end of January, reflecting the strong orders in business aircraft.

Bombardier, the world’s No. 1 passenger train maker and No. 3 in civil aircraft, said that it continued to see interest from customers over its newly launched CSeries and hopes to announce more contracts by the end of the year.

The 110-130 seat passenger jet, which the company launched in July, represents a branching out from Bombardier’s current lines of regional jets and turboprops and is touted as using more fuel-efficient and green technology.

German airline Lufthansa LHAG.DE has provisionally ordered 30 planes with an option for 30 more.

($1=$1.06 Canadian)

Reporting by Leah Schnurr and Scott Anderson; Editing by Frank McGurty

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