Bombardier Reports $2.7B in Q2 Revenue, Lower Production Due to COVID-19



Bombardier reported financial results for Q2/20 and provided an update on the actions the company is taking to manage the business through the COVID-19 pandemic. Bombardier also provided an update on the status of previously announced divestitures undertaken to reshape the company’s capital structure.

“Bombardier continues to take the right actions to manage the impact of the ongoing public health crisis while protecting the business for the long-term,” Éric Martel, president and CEO of Bombardier, said. “We begin the second half of the year with our global operations safely and successfully resumed and our production rates and workforce realigned to current market conditions and customer requirements. We’ve also improved our liquidity position with solid cash management, cost reduction actions and a new secured credit facility, providing additional flexibility as we work to address our balance sheet challenges and close the sale of Bombardier Transportation and our aerostructure business.”

On July 31, the European Commission provided conditional approval of the sale of Bombardier Transportation to Alstom. Bombardier and Alstom continue to work together to obtain the remaining approvals and complete the Works Councils consultations required prior to executing the definitive sale and purchase agreement. Bombardier expects the sale of its aerostructure business to Spirit AeroSystems Holdings to close this fall.

Bombardier began Q3/20 with pro-forma liquidity of approximately $3.5 billion, including approximately $1.7 billion of cash on hand, access to the undrawn amount of $738 million on Bombardier Transportation’s revolving credit facility as of June 30, 2020, and the new $1 billion senior secured credit facility announced on July 22, 2020, which is expected to close in Q3/20.

Bombardier reported revenues of $2.7 billion during Q2/20, reflecting a lower level of production activity and deliveries in the quarter as operations at sites across North America and Europe were temporarily suspended due to the global COVID-19 pandemic.

Adjusted EBITDA loss and adjusted EBIT loss were $319 million and $427 million, respectively, for the quarter. These results reflected an additional charge of $435 million at Bombardier Transportation, largely related to incremental engineering, certification and retrofit costs associated with a number of late-stage projects mainly in the UK and Germany. At Bombardier Aviation, earnings were lower year over year primarily as a result of disruptions from the global COVID-19 pandemic. Reported EBIT was $26 million for the quarter and reflects the $496 million accounting gain on the disposal of the CRJ program to Mitsubishi Heavy Industries, which closed on June 1.

Free cash flow usage and cash usage from operating activities were $1 billion for the quarter. Bombardier noted that this was better than anticipated as the company resumed operations faster than expected and took additional actions to mitigate the full COVID-19 impact. These actions resulted in higher than expected customer deliveries both at Bombardier Aviation and Bombardier Transportation, lower inventory intake as production rates were realigned with market conditions, and reduced discretionary spending across the business. The impact on free cash flows of the COVID-19 pandemic during the quarter was estimated at $700 to $900 million.

Based on backlogs and the near-term production and delivery outlook, Bombardier currently expects business activity to gradually recover in the second half of the year with improving cash usage in the third quarter and with the seasonal release of working capital in the fourth quarter.

Bombardier also reported that Beatrice Weder di Mauro expressed her intention to resign from the company’s board of directors for personal reasons.

Aviation

  • Revenues reached $1.2 billion during the second quarter, reflecting a lower level of production activity and deliveries as Bombardier suspended business aircraft operations in Canada and aerostructures operations in Mexico and Belfast due to the COVID-19 pandemic.
  • Starting in the last weeks of April and through the month of May, operations gradually resumed with new safety measures in place, allowing Bombardier Aviation to deliver 20 business aircraft during the quarter, including five Global 7500.
  • Bombardier’s worldwide customer service operations have continued to operate largely uninterrupted throughout the pandemic.
  • Adjusted EBITDA and adjusted EBIT margins of 4.5% and 1.6%, respectively, reflected lower volumes during the quarter as a result of disruptions from the global COVID-19 pandemic, combined with a low contribution of early Global 7500 units. Reported EBIT of $442 million during the quarter reflected the $496 million accounting gain on the disposal of the CRJ Series aircraft program to Mitsubishi Heavy Industries.
  • On June 5, Bombardier Aviation reduced its workforce by approximately 2,500 employees to align production with current market conditions, forecasted to be down approximately 30% year over year. The reduction resulted in a special charge of $41 million in the second quarter.
  • A significant share of the Bombardier’s free cash flow usage during the first two quarters of 2020 is related to the impact of the COVID-19 pandemic on Bombardier Aviation, mainly driven by a shortfall in deliveries and lower than anticipated advances associated with the low order intake environment.
  • Bombardier noted that as operations recover in the second half of the year, aircraft deliveries are set to accelerate relative to the first half of the year toward a seasonal peak in the fourth quarter supported by Bombardier Aviation’s $12.9 billion backlog.

Transportation

  • Revenues for the quarter of $1.5 billion reflected a lower level of production activity as operations at sites across Europe and the Americas were temporarily suspended due to the global COVID-19 pandemic and the impact of revised estimates on a number of late-stage projects mainly in the UK and Germany.
  • Bombardier said production is expected to accelerate in the second half, peaking seasonally in the fourth quarter and generally in line with 2019 levels. The engineering and production delays tied to the COVID-19 pandemic are expected to be recovered in 2021 and beyond, supporting future free cash flow generation.
  • Adjusted EBIT loss for the second quarter of $383 million was below expectations, reflecting an additional charge of $435 million at Bombardier Transportation, largely related to incremental engineering, certification and retrofit costs associated with a number of late-stage projects mainly in the UK and Germany. More than two thirds of this charge is expected to impact 2020 free cash flows as Bombardier Transportation reaches engineering and entry-into-service milestones. Reported EBIT loss for the quarter was $377 million.
  • During the quarter, a new project team was mandated to conduct deep dives into challenging legacy projects, evaluating both project management processes and talent resources with a goal of fully understanding the causes of excessive costs and taking corrective actions.
  • The outlook for Bombardier Transportation is supported by its $33.7 billion backlog.
  • Order intake of $1.6 billion for the quarter reflects project wins across geographies, with contract awards with SNCF’s repeat order in France and India’s flagship Delhi–Meerut regional rapid transit system project in Asia.

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