Close X
Thursday, December 12, 2024
ADVT 
National

Bombardier stock plunges in heavy trading amid revised Aerospace outlook

Darpan News Desk The Canadian Press, 15 Jan, 2015 10:19 AM

    MONTREAL — Bombardier stock plunged in heavy trading Thursday following a revised outlook for its aerospace business, including plans to put development of the Learjet 85 business jet on hold due to weak customer interest — a move that will result in the elimination of 1,000 jobs in the United States and Mexico.

    The Montreal-based company's shares were down about 20 per cent with an unusually heavy 25.5 million traded before noon on the Toronto Stock Exchange. The stock dropped to a multi-year of $3, down about 25 per cent from the previous close of $4.14 before the company's early-morning announcement.

    The aerospace and rail equipment manufacturer said before markets opened that it will "pause" development of the Learjet 85, but continue to sell other models and focus on two other aircraft programs — the Global 7000/8000 business jet and the CSeries passenger jet for commercial airlines.

    Bombardier also trimmed its 2015 guidance, including a significant drop in the amount of cash flow it expects from its aerospace division. At least one analyst said this raised the possibility that Bombardier may resort to selling stock to improve its financial cushion — a move that would be negative for current shareholders.

    The new cashflow estimate for Bombardier Aerospace is US$800 million, down from the previous estimate of between US$1.2 billion to US$$1.6 billion in the prior forecast. Cash flow from the rail division is expected to increase slightly.

    David Tyerman of Canaccord Genuity said the credibility of Bombardier's management is likely to take a major hit from Thursday's announcement.

    "We already perceive that investors have a poor opinion of management and this will likely make it worse. It also will likely lessen investor/analyst confidence in management's forward looking guidance. We regard this as a major issue with potential negative implications for the company's valuation multiple," Tyerman wrote in a report.

    He added that the company could breach its minimum short-term liquidity threshold of US$3 billion, raising the risk of it issuing more shares.

    Bombardier's decision to shelve the Learjet 85 and to cut jobs follows last year's elimination of 2,900 positions around the world — 2,000 non-union administrative jobs at Bombardier Aerospace and 900 at Bombardier Transportation, the company's rail equipment division.

    Bombardier (TSX:BBD.B) said Thursday will also write down the value of its Learjet 85 program, resulting in a pretax charge of about US$1.4 billion in the company's fourth quarter.

    The company will also record US$25 million for severance in its first quarter of 2015.

    Bombardier said its operations in Wichita, Kansas and Queretaro, Mexico remain important to the company for both the Learjet and other types of aircraft that it makes.

    The Wichita operation does final assembly for Learjet 70 and Learjet 75 aircraft and has a flight test centre and service centre.

    The Queretaro operation makes a major component for the Global 7000 and 8000 business jets.

    Bombardier also trimmed its 2015 guidance, reducing its pre-tax operating earnings (EBIT) outlook for aerospace and transportation by one percentage point — to four and six per cent respectively.

    The aerospace cut was due to lower customer advances, pricing pressure on new aircraft sold, lower fair value for used aircraft and reduced assumptions for some railway contracts._

    As of Dec. 31, Bombardier has US$3.8 billion in available finances, including about US$2.4 billion cash and equivalents.

    Cameron Doerksen of National Bank Financial said the Learjet 85 pause will have an impact on companies like Heroux-Devtek (TSX:HRX), which is developing landing gear for the plane.

    He added that a delay in the business jet program was widely anticipated and could have a $10 million impact on Heroux in fiscal 2018.

    MORE National ARTICLES

    Man set to argue driving while black led to vehicle stop, gun conviction

    Man set to argue driving while black led to vehicle stop, gun conviction
    TORONTO — A man convicted of a gun offence takes his case to Ontario's top court on Tuesday to argue he was a victim of driving while black.

    Man set to argue driving while black led to vehicle stop, gun conviction

    Woman pleads guilty to assault for giving illegal buttock enhancement injections

    Woman pleads guilty to assault for giving illegal buttock enhancement injections
    TORONTO — A Toronto-area woman who injected silicone into the buttocks of nine women — in some cases using syringes attached to a caulking gun — has pleaded guilty to aggravated assault.

    Woman pleads guilty to assault for giving illegal buttock enhancement injections

    Quebecer Frederic Dion returns to Canada after solo trip to Antarctic

    Quebecer Frederic Dion returns to Canada after solo trip to Antarctic
    MONTREAL — Frederic Dion's biggest challenge on his solo trip to the Antarctic had nothing to do with the solitude, the bitterly cold temperatures or the howling winds.

    Quebecer Frederic Dion returns to Canada after solo trip to Antarctic

    Lac-Megantic settlement is just a fraction of what's needed, town says

    Lac-Megantic settlement is just a fraction of what's needed, town says
    MONTREAL — The funds earmarked for those affected by the Lac-Megantic train disaster represent just a fraction of what's needed, a town official says.

    Lac-Megantic settlement is just a fraction of what's needed, town says

    Robert Latimer appeals parole board decision restricting international travel

    Robert Latimer appeals parole board decision restricting international travel
    The lawyer for Robert Latimer says his client is appealing a parole board decision that prevents him from travelling freely outside Canada.

    Robert Latimer appeals parole board decision restricting international travel

    A milestone for Keystone XL: Controversial pipeline clears hurdle in U.S. Senate

    A milestone for Keystone XL: Controversial pipeline clears hurdle in U.S. Senate
    WASHINGTON — The Keystone XL pipeline has passed a major procedural hurdle in the United States Congress.

    A milestone for Keystone XL: Controversial pipeline clears hurdle in U.S. Senate