Bombardier sees 2Q earnings slide as economic challenges bite

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Continued economic challenges in the aerospace industry hit Bombardier Aerospace's fiscal second quarter earnings ended 31 July, although the Canadian airframer says it is seeing "some signs of stabilization" in the business aviation industry.

Bombardier Aerospace, which produces both commercial and business aircraft, recorded fiscal second quarter revenues of $2.4 billion compared to $2.5 billion in the year-earlier period.

Earnings before financing income, financing expense and income taxes (EBIT) reached $154 million translating into an EBIT margin of 6.4%, down substantially year-over-year from EBIT of $243 million and a 9.7% margin.

"During the second quarter, business aircraft cancellations continued to exceed the level of new orders. However, there are some signs of stabilization in the business aircraft industry, though historically, a lag exists between economic recovery and its positive impact on revenue," says Bombardier.

On the commercial side, it says, lower passenger traffic and airline profitability "remain a concern, affecting the level of new orders for regional jets".

As of 31 July Bombardier Aerospace's backlog totalled $19.6 billion versus $23.5 billion at 31 January.

Consolidated revenues for Bombardier's aerospace and transportation units in the fiscal second quarter totalled $4.9 billion, the same as the corresponding period last fiscal year. EBIT dropped to $313 million from $371 million.

Bombardier says net income for the three-month period amounted to $202 million, down $57 million from the same period last fiscal year.

"We are taking the necessary actions to face the current difficult economic environment, which continues to have an impact on our results", says Bombardier president and CEO Pierre Beaudoin. "The aerospace industry as a whole continues to experience challenging conditions, nevertheless, Bombardier Aerospace delivered 80 aircraft during the quarter, compared to 89 last year, and increased its market share position in business aircraft."

Adds Beaudoin: "Overall, we have strong fundamentals, a large backlog, a solid liquidity position, and we remain focused on reducing costs and improving cash flow generation."

On 1 September, Bombardier's board of directors approved a $500-million two-year unsecured revolving credit facility with a syndicate of commercial banks and other institutions, arranged by National Bank Financial. This facility will be available for the general working capital needs of the corporation.