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The 1st Quarter results are out for Bombardier, but the most important news is that Executive Chairman, Pierre Beaudoin is stepping down after numerous problems and Revenue declines. The man I refer to as the “Destroyer” of Bombardier was at the helm from June 2008 to February 2015, and in that time period, the company’s share price went down by $6.32 per share (TSX:BBD.B) for a market cap loss of $11.8B to investors, plus a net loss to Bombardier Inc, of $6.5B in 2014 and 2015 alone, mostly on the back of writing down the poorly managed Learjet 85, CRJ-1000 and CSeries airliner programs.
Last month Beaudoin was pushing for him and 4 other top executives to get 50% pay increases at Bombardier Inc. for a “Exceptional 2016” ? A year net income loss was $981M, a year they sold 120 CSeries to Delta Airlines and Air Canada on very low prices, in fact way below cost (est. $1.0B loss on Delta alone according to Boeing’s numbers, and Air Canada another $+300M), 7,500 more announced lay offs, 320 orders for CSeries after 9 years ? criminal investigations into bribery in Sweden, Boeing complaining to US Commerce Dept. about “price dumping” on the US market in the case of the Delta Air Lines deal, and since June, 2016 only 1 order for 2 x CS300’s (11 months).
No, 2016 was NOT an “Exceptional” year, and the executives deserved no raise, as the company is alive today, only thanks to $2.4B from Quebec in 2016, as that was 73% of total cash and equivalents on hand on Dec 31, 2016, without that Quebec money they would have $+900M and serious liquidity issue.
Yes, $18.4B at least lost under his watch as President/CEO of Bombardier Inc. which was very close to filing for bankruptcy in late 2015, and today is alive thanks to $2.4B from Quebec for a 49.5% stake in the struggling CSeries (which was for sale in 2015, no takers), and 30% in Transportation (trains, trams).
We had 2016 revenue down to $16.33B down $3.78B from 2014 (-18.7%) as the company struggles with planes and trains now, and shows little sign of it reaching its $25B revenue target by 2020 (+53% increase in revenue in 4 years ??).
Pierre Beaudoin is part of the 2 family’s that control 53% of the voting shares and yet have only 13% of equity, through special shares that have 10 times the voting rights (TSX:BBD.A), and only god why he was left in the company so long, a walking breathing disaster for the company, that now President/CEO Alain Bellemare must fix, but its not going too good.
The past weeks, many major institutional investors in Bombardier Inc.s said they would NOT vote for re-wlection of Pierre Beaudoin, and he gone ! but will be on the board of Directors to look after the family business he almost destroyed, and that is not out of the woods.
So, 1st Quarter shows revenue down again by 7.6% to 1Q/2016, to just $3.6B, EBIT of $128M, down by just 1.5% (and just 3.55% EBIT margin), and free cash flow of minus $593M as its spends on CSeries and G7000 business jet, but better than 1Q/2016 of minus $750M FCF.
The BBA (Bomabardier Business Aircraft) numbers show 29 deliveries, skewed to light aircraft as the big end of the market is struggling and that has to be worrying for margins as Global G5000/6000 and the future G7000 are now in a weak market.
The G7000/G8000 has just 63 orders and no one knows if it will be a success, its range is now being matched by the new ACJ319/320neo’s and BBJ-7/8’s with 100 to 150% more cabin space/volume, which equates to much greater cabin comfort for flights that can be as long as 15 hours, in that segment comfort is #1 criteria, and the G7000/8000 will struggle for orders as well.
BBA Revenue was just $1.0B, EBIT of $77M for a 7.6% margin, still a struggle in a tough market environment.
The BCA (Bombardier Commercial Aircraft) numbers show just 15 deliveries, ouch ! with 6 x Q400’s, 8 x CRJ’s (7 x CRJ900 and 1 x CRJ1000) and 1 x CS300 delivery ouch !
The Q400 is now down to 26 orders in backlog (was 31 on Dec 31, 2016), so still declining, and production 1Q was down to 2.0 per month, down from 2.75 per month in 2016, so slowing down production by 28% to stretch the production, which a the current rate will be at zero backlog (assuming no new orders) in just 13 months (April, 2018), as the aircraft struggles competing with ATR-72-600 which just won an order for 50 with Indigo (India) and 10 being leased by DAE to Alliance (India).
As a comparison, ATR has a backlog of 227 ATR-42/72 not counting the latest 50 x ATR-72-600’s for Indigo (India), so a backlog of 277 aircraft vs 26 x Q400’s (10.6 to 1).
The CRJ is down to just 54 orders in backlog (was 52 on Dec 31, 2016), so up slightly on CityJet order (for SAS), production cut back to just 2.7 per month 1Q/2017, from 3.8 per month in all of 2016, again like the Q400 they are stretching out production with a 29% reduction in production, now current backlog is good for 20 months (assuming no new orders) or January, 2019, as the CRJ line struggles to compete with the E175 mainly and soon it will become un-competitive with the new E175-E2’s, and pretty much done.
As a comparison, Embraer has 157 Ejets in backlog (88 x E175, 56 x E190, 10 x E195 and 3 x E170’s) vs 54 CRJ’s (2.9 to 1). Plus 275 orders for the E2’s (100 x E175-E2, 90 x E195-E2’s and 85 x E190-E2’s).
The CSeries, of god, well it is obvious that Bombardier’s forecast of 7,000 new airliner deliveries in the 2015-2034 period (20 years) for 100 to 150 passenger jet airliners was horribly wrong, 350 aircraft a year has never been achieved (330 was peak in 1991), now in decline for 10 years to just an average of +/-70 deliveries per year, by Airbus, Boeing, Embraer and Bombardier. In fact, the forecast for CSeries by Flight Ascend shows just 1,343 deliveries over 20 years (yes, 67 per year), its a niche aircraft in a niche market segment that no one will win in.
Only 1 CS300 was delivered in 1Q/2017, making the total of CSeries deliveries just 8 (5 x CS100’s for Swiss and 3 x CS300’s for airBaltic), and just 360 orders after 9 years (with 40 for Republic and another +40 “questionable), the program is by now evidently no “game changer”.
With 352 deliveries to make (assuming all published orders are real) deliveries will continue well into 2021 of these aircraft unless Bombardier ups it delivery plans which called for 2016 to 2020 delivery of 255 (min.) to 315 (max). and 90-120 by 2020.
By 2020, they will not reach their $25B revenue target, as most of the aerospace products today will not be around, and the whole futre of Aerospace falls on the struggling CSeries and the unknown G7000/8000 business jet market, an yet the plan calls for $15B in revenue (60% of total) in 2020 to come from Aerospace ?
The plan calls for $6B from BCA, which at today’s prices means +/- 150 CSeries deliveries in 2020 ?? and $9B from BBA, which at current G7000/8000 prices means +/- 125 deliveries in 2020 ??
Come on, be serious ! Its all absurd, just fantasy, or BS for the ill-informed ? but so far investors are still “hoping” for a miracle, goof luck, its role of the dice.
Lastly, “price dumping” is about offering lower prices on exports than in home market, so Bombardier if its not “price dumping” just needs to show what price they offered Canada’s Porter Airlines on April, 2013 when 120 x CS100 conditional orders were signed for and 18 options, worth $2.08B or 69.3M each list price, if they offered Porter close to the reported Delta price of $19.6M each then they are clear.
If its +50%, say $+29.4M then yes, Bombardier is “price dumping” and price dumping tariff of $13.4M per aircraft impose don the Delta deal, those are rules, you can cheat, but if you get caught, you have to pay the price, so show me the money on the Porter Airlines CS100 deal ?
Till next time thank you.