- Earnings(1) up 18% year over year on $4.3B revenues, driven by a strong 11% growth at Transportation
- EBIT margin(1) expands by 80 bps to 6.4%
- Consolidated EBITDA and EBIT before special items(2) of $336M and $271M respectively
- Improved free cash flow usage(2) of approximately $370M(3) supports full year breakeven target
- Backlog expansion across all businesses(4)
- Airbus partnership closed ahead of schedule; significant new orders announced
- $600M cash infusion from Downsview property sale finalized
Bombardier (TSX: BBD.B) today reported its second quarter 2018 results, including strong earnings growth, margin expansion and improving cash usage. The Company continues to make solid progress executing its turnaround plan and confirmed that it is on track to achieve its 2018 guidance and 2020 targets.
“We continue to make solid progress executing our turnaround plan and positioning the company for the future,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “With our heavy investment cycle largely behind us, our focus is now on ramping-up production and improving operational efficiency to accelerate growth. You can see this in our solid second quarter results.”
Bombardier’s revenues stood at $4.3 billion for the quarter, a 3% increase over the same period last year. This increase was largely driven by a strong, 11% growth at Transportation, which saw growth across all segments including rolling stock and systems, services and signaling. The Company’s cash flow usage was approximately $370 million for the quarter, in-line with the full-year plan. The reported free cash flow of $232 million includes approximately $600 million net proceeds from the sale of the Downsview property, which closed on schedule earlier in the quarter.
EBIT before special items grew 18% year over year to $271 million, while EBITDA before special items grew 7% to $336 million. EBIT margin before special items(2) continued to improve, reaching 6.4% on a consolidated basis. Margins were at or above 8.5% for Transportation, Business Aircraft and Aerostructures and Engineering Services.
Order backlogs remain strong across the Bombardier portfolio. Transportation reported a book-to-bill ratio(5) of 1.1 for the quarter, leading to a $34-billion backlog and demonstrating its strong competitive position in markets around the word. Business Aircraft took advantage of an improving business jet market to grow its industry-leading backlog by $200 million during the quarter, to $14.1 billion. Commercial Aircraft won orders for a total of 35 CRJ Series aircraft equipped with the new ATMOSPHÈRE cabin and for 16 Q400 aircraft.
Bombardier also concluded a number of key strategic actions in the quarter, including closing the Airbus partnership ahead of schedule. The partnership combines the best aircraft in the 100-150 seat class with Airbus’ global scale and reach. New orders from JetBlue and the start-up airline led by David Neeleman clearly demonstrate the value-creating potential of the partnership.
Bombardier also solidified its leadership position in large cabin business jets with the launch of the new Global 5500 and Global 6500 aircraft, and by increasing the range, takeoff and landing performance of the Global 7500 aircraft.(6) Certification of the Global 7500 business jet is expected shortly, followed by first delivery and entry-into-service before year-end. With the best product portfolio, market leading deliveries and the largest backlog in the industry, Bombardier is the premium brand in business jet.
“Bombardier delivered strong performance in the first half of 2018, and has strong momentum heading into the second half of the year,” added Alain Bellemare. “In addition to achieving our near-term financial goals, we are also taking the right strategic actions to position the company for strong growth well into the next decade.”
SEGMENTED RESULTS AND HIGHLIGHTS
- Business Aircraft’s second quarter performance demonstrated strong execution on deliveries and sales, sustained progress on new programs, continued growth in aftermarket revenue, combined with the unveiling of two new aircraft that further strengthen Bombardier’s business jets portfolio.
- During the second quarter, revenues totalled $1.3 billion on 34 deliveries, with aftermarket revenue growing 21%, offset by lower aircraft revenues from fewer pre-owned aircraft available. On a year-to-date basis, revenues total $2.4 billion, on track to the $5 billion guidance for the full year.
- Year to date, deliveries reached 65 aircraft, in line with plan and last year, tracking to full year guidance of 135 aircraft deliveries.
- Margins continued to trend above the greater than 8% guidance, with EBIT margin before special items reaching 8.5% and 8.7% for the three- and six-month periods ended June 30, 2018, respectively.
- Aircraft backlog at the end of the second quarter increased to $14.1 billion, reflecting strong market activity for the third consecutive quarter. Demand continues to be fuelled by North America while Asia Pacific, Greater China and Europe are exhibiting good momentum.
- The Global 7500 aircraft continues to exceed expectations with the announcement on increased range and improvements made to takeoff and landing performance commitments. The Global 7500 aircraft now boasts a 7,700 nautical miles range and is the largest, longest range business jet available on the market. With more than 2,400 hours of flight testing accomplished, demonstrating significant maturity and reliability, the class-defining aircraft is on track to enter into service later this year.
- In addition, on May 28, 2018, Business Aircraft unveiled the new Bombardier Global 5500 and Global 6500 aircraft featuring an all-new Rolls-Royce engine and a newly optimized wing, increasing the aircraft fuel burn advantage by up to 13%. Building on the success of the Global 5000 and Global 6000 aircraft, these new aircraft have top speeds of Mach 0.90, and offer an additional range of 500 and 600 nautical miles or up to 1,300 nautical miles when operating out of hot-weather and high-altitude conditions. These aircraft are expected to enter into service at the end of 2019.
- Following the sale of the Downsview property, Bombardier announced its plans to build a new centre of excellence and final assembly plant for its Global family of aircraft at Toronto’s Pearson International Airport.
- On July 1, 2018, we closed the C Series partnership formed by Airbus (50.01%), Bombardier (33.55%) and Investissement Québec (16.44%). The partnership brings together two complementary product lines, and the benefit of Airbus’ global reach creating significant value for the C Series. Accordingly, starting in the third quarter, CSALP will be deconsolidated from Commercial Aircraft’s results and replaced by Bombardier’s share of its net earnings on an equity pick-up basis.
- During the quarter we delivered 18 commercial aircraft, consisting of 8 C Series, 5 CRJ Series and 5 Q400aircraft. With year to date deliveries of turboprops and regional jets totalling 18, Commercial Aircraft is on track to meet annual guidance of 35 deliveries for the regional aircraft platforms.
- With year-to-date revenues of $1.1 billion and EBIT loss before special items of $139 million, we are reintroducing Commercial Aircraft’s full year revenue guidance of approximately $1.7 billion and EBIT loss before special items guidance of approximately $250 million. This reflects the deconsolidation of CSALP from Commercial Aircraft’s results starting in the third quarter, replaced by the equity pick-up.
- The second quarter saw significant order activity with a book-to-bill ratio(10) of 4.2:
- The CRJ Series backlog grew to 60 aircraft, with two CRJ900 aircraft orders totalling 35 aircraft from American Airlines and Delta. These orders are the first with the new ATMOSPHÈRE cabin, setting the new standard of passenger experience in the regional jet market segment.
- Other orders included 16 Q400 aircraft from Ethiopian Airlines and African Aero Trading bringing the backlog to 56 aircraft.
- CSALP continued to demonstrate order momentum with three recent orders from marquee customers:
- On May 28, 2018, airBaltic entered into a firm purchase agreement for 30 CS300 aircraft with options and purchase rights for an additional 30 aircraft. The all-C Series fleet is the backbone of airBaltic’s new business plan and this significant reorder from our CS300 launch operator is a strong testimony to the aircraft’s exceptional in-service performance.
- Subsequent to the end of the quarter, CSALP received a letter of intent from JetBlue for 60 aircraft and 60 options, and a memorandum of understanding for 60 aircraft from a future U.S. airline with majority investor David Neeleman.
Aerostructures and Engineering Services
- Aerostructures and Engineering Services is poised for growth as it continues the production ramp-up of C Series and Global 7500 aircraft; activities are progressing well, with a large share of 2018 and 2019 component production underway.
- Revenues for the quarter were slightly above last year’s, while EBIT before special items more than doubled, yielding a margin of 12.5% for the quarter. This strong performance is largely the result of operational efficiencies and a one-time positive intersegment settlement associated with the closing of the C Series Partnership.
- Revenues in the second quarter continued to grow, increasing by 11% year over year (or 6% excluding currency impact) to reach $4.6 billion for the six-month period, driven by the ramp-up of key projects. Revenues increased across all segments, comprising rolling stock and systems, services and signalling, tracking to full year revenue guidance of $9.0 billion.
- The major project ramp-up phase initiated mid-2017 continued in the first half of 2018, building $471 million in working capital to meet an acceleration of deliveries and cash flow in the second half of the year.
- EBIT before special items reached $207 million in the quarter, or a margin of 9.2%. Year-to-date margin of 8.6% continued to trend towards the greater than 8.5% margin guidance for the year.
- Supporting future growth, our order intake reached $2.4 billion in the second quarter, bringing our book-to-bill ratio(5) to 1.1 for the period, and our backlog to $34.0 billion. In the first half of the year, orders were signed across geographies including Europe, Asia-Pacific and North America, and include exercise of call-offs by customers and a strong order intake of service contracts.
- In June, we inaugurated our new final assembly building in Bautzen, Germany. Being our most advanced and efficient assembly site, this new facility makes increased use of digital technologies in line with our industrial strategy.
- During the quarter, Jim Vounassis was appointed Chief Operating Officer for Transportation. Jim will help drive operational excellence as we execute on our rail backlog.