1st Quarter Profit @ Bombardier

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Bloomberg.com

Bombardier Has 1st-Qtr Profit on Cost Cuts, Jet Sales (Update4)

June 1 (Bloomberg) -- Bombardier Inc., the world's third- largest commercial-plane maker, posted a first-quarter profit as deliveries of business jets soared and the company cut costs.

Net income was $55 million, or 3 cents a share, compared with a net loss of $174 million, or 10 cents, a year earlier, Montreal-based Bombardier said today in a statement. Sales in the quarter ended April 30 rose 8.7 percent to $3.8 billion.

Bombardier boosted deliveries of private jets, used by corporations and wealthy individuals, by 71 percent in the quarter. Profit rose in both the aerospace and rail businesses. After three straight years of losses, Chief Executive Officer Laurent Beaudoin has predicted a return to profit in fiscal 2006 after the company fired workers and slowed production of lower-margin regional jets.

``Business jet deliveries were predictably good; however, as historical backlogs draw down, we need to see better margins,'' Peter Rozenberg, an analyst with UBS AG in Toronto, wrote in a note to investors. ``Orders picked up, but not enough.'' Rozenberg has a ``reduce 2'' rating on Bombardier.

Excluding one-time items and discontinued businesses, Bombardier said profit would have been 2 cents a share. On that basis, earnings met the average forecast of 10 analysts surveyed by Thomson Financial.

Bombardier's widely traded Class B shares rose 10 cents to C$2.51 at 10:53 a.m. in Toronto Stock Exchange composite trading. Before today, the stock had dropped 49 percent in the past year.

Regional Jets

Bombardier's aerospace unit had earnings before interest, taxes, depreciation and amortization, or Ebitda, of $151 million in the first quarter, compared with $122 million a year earlier.

The company in March began marketing the C Series plane, which would seat more than 100 passengers and cost about $2.1 billion to develop. It has lined up about $700 million in government financing and expects to decide this year whether to build the aircraft.

Talks with engine manufacturers over the C Series are continuing even after two joint ventures said last month they wouldn't take part in the project. Pierre Beaudoin, who runs Bombardier's aerospace unit, told reporters on a conference call the company still wants a new engine, which would be 15 percent more efficient than competing models, to be developed for the new aircraft.

Bombardier, which expects aircraft deliveries this year to be unchanged at about 329, delivered 81 planes in the first quarter. That's up from 71 a year earlier.

``Airline operating conditions in North America remain difficult,'' James David, an analyst with Scotia Capital in Montreal, wrote in a note to investors May 24. ``Future order potential remains opaque.''

Rail

Delta Air Lines Inc., one of Bombardier's biggest commercial- plane customers, is struggling to avoid bankruptcy.

Bombardier has scaled back its production of regional jets twice since the start of October ``and may have to do so again should Delta be unable to take delivery of its orders,'' David wrote.

Excluding one-time items, Ebitda in the rail business was $72 million, compared with a loss of $81 million a year earlier. Bombardier is the world's biggest maker of train equipment.

Bombardier booked $1.6 billion of rail orders in the quarter, more than double the amount a year earlier.

The company cut about 4,000 jobs from its rail business last year, trimming the workforce to 31,570. Andre Navarri, who runs the unit, has said that another 3,000 jobs would be cut this year.

Asset Sales

Bombardier yesterday sold its financing business for equipment such as boats and snowmobiles to General Electric Co. for about $1.3 billion to pay down debt. The company said today it would book a gain on the transaction in the second quarter because the price paid by General Electric includes a pretax premium of $225 million over the carrying value of the assets.

``Bombardier is in better shape with the sale of this business,'' said Andre d'Amours, a fund manager at MacDougall, MacDougall & MacTier Inc. in Quebec City, which oversees about $2 billion, including Bombardier shares. ``Their financial security has improved.'' D'Amours spoke before the earnings were released.

Bombardier also said today it's in the process of selling its financing business for prefabricated-house builders, which has assets of about $160 million. Chief Financial Officer Pierre Alary said discussions have begun with potential buyers, which he didn't identify, adding that Bombardier expects to conclude a transaction in the second quarter.

In March, Bombardier suspended its annual dividend for the first time in 32 years to conserve cash after demand from airlines slumped and the company's debt rating fell below investment grade. Bombardier had long-term debt of about $5.7 billion as of April 30.

Bombardier had $31.6 billion of future orders as of April 30, up from $31.5 billion a year earlier.

Airbus SAS and Boeing Co. are the world's top two commercial- jet makers, respectively.

(Bombardier will hold a conference call with financial analysts to discuss the results today at 11 a.m. New York time. To listen in, dial (1) (866) 546-6145. A replay will be available at http://www.bombardier.com .)

To contact the reporters on this story:
Frederic Tomesco in Montreal at tomesco@bloomberg.net;

Last Updated: June 1, 2005 10:54 EDT