Concerns over negative cash flows and delays with the CSeries programme prompted Fitch Ratings to lower its outlook on Bombardier to “negative”.
The Chicago-based financial ratings agency had expected Bombardier to start improving its cash flow position by the end of this year.
But development delays on the CSeries programme, a “difficult market” for regional and business jets and execution problems in Bombardier Transportation combined to change the ratings service’s opinion.
“These developments could extend the negative cash cycle and prevent leverage from improving as soon as originally expected,” Fitch says in a media release.
Though Fitch maintained Bombardier’s long-term rating at the BB level, it downgraded the company’s outlook from “stable” to “negative”.
Free cash flow, which sank to negative $1.9 billion through the first nine months of 2013, should start to improve in the fourth quarter and in 2014, Fitch says.
But that improvement “depends on [Bombardier’s] ability to avoid significant further delays in its CSeries and other aircraft development programmes and to improve overall margins”, Fitch says.
The ratings agency also noted several positives about Bombardier’s position. The agency likes the company’s "strong" position in two markets – aerospace and transportation. The development programmes driving the negative cash flows also refreshes the products portfolio, which can make the company more competitive, Fitch says.