Mr. Alain Bellemare reports
BOMBARDIER REPORTS FOURTH QUARTER AND FULL YEAR 2018 RESULTS
Bombardier Inc. has released its fourth quarter and full-year 2018 results, highlighting solid margin growth, improved cash flows and continued progress executing its turnaround plan. The successful entry into service of the Global 7500 business jet in the fourth quarter also marked the completion of Bombardier's heavy investment cycle, a key milestone in the company's turnaround plan.
All amounts in this press release are in U.S. dollars, unless otherwise indicated.
"Two thousand eighteen was a year of solid progress," said Alain Bellemare, president and chief executive officer, Bombardier. "We continued to strengthen our business and set a strong foundation for growth. A foundation that includes a refreshed portfolio of best-in-class products, industry-leading backlogs and a more streamlined cost structure, all of which gives us a clear path to achieve our 2020 objectives.
"As we begin the fourth year of our turnaround journey, Bombardier is a much stronger company," continued Mr. Bellemare. "Our major program risks are retired, our heavy investment cycle is behind us and our franchises are well positioned for growth. For 2019, we are focused on flawless execution of our rail projects, the ramp-up of the Global 7500 and entry into service of the Global 5500 and Global 6500. We will also continue to drive financial performance through disciplined capital allocation and improved productivity and efficiency across the organization."
Bombardier's 2018 consolidated revenues reached $16.2-billion, reflecting 3-per-cent average year-over-year growth across transportation, business aircraft and aerostructures, excluding currency impact. Book-to-bill ratios at transportation and business aircraft both equalled 1.1 for the year, demonstrating strong demand for Bombardier's products and services. Bombardier's consolidated backlog reached $53.1-billion at the end of 2018, supporting future growth targets.
EBIT (earnings before interest and tax) before special items continued to improve in 2018, increasing 42 per cent year over year from $725-million to more than $1.0-billion, the top end of the company's guidance. The 6.3-per-cent EBIT margin before special items in 2018 represents a strong 330-basis-point increase since the start of the turnaround plan in 2015, well above the 5-to-6-per-cent range originally targeted. On a reported basis, EBIT increased 235 per cent year over year to $1.0-billion, representing a margin of 6.2 per cent.
Bombardier generated $1.0-billion of free cash flow in the fourth quarter of 2018. Full-year free cash flow generation equalled $182-million, at the high end of the company's revised guidance. This amount includes aggregate net proceeds of approximately $750-million from the sale of the Downsview property and the monetization of royalties associated with the previously announced CAE transaction. Cash flows from operating activities amounted to $597-million for the full year, and to $1.3-billion in the fourth quarter. Bombardier ended the year in a solid cash position, with $3.2-billion in cash and cash equivalents.
RESULTS FOR THE FISCAL YEARS ENDED DEC. 31
(in millions except per-share amounts, unless otherwise indicated)
Revenues $16,236 $16,199
EBIT 1,001 299
EBIT margin 6.2% 1.8%
EBIT before special items 1,029 725
EBIT margin before special items 6.3% 4.5%
EBITDA before special items 1,304 1,046
EBITDA margin before special items 8.0% 6.5%
Net income (loss) 318 (525)
Diluted EPS (loss) (in dollars) 0.09 (0.24)
Adjusted net income 438 91
Adjusted EPS (in dollars) 0.14 0.04
Cash flows from operating activities 597 531
Net additions to PP&E
and intangible assets 415 1,317
Free cash flow (usage) 182 (786)
As at Dec. 31 2018 2017
Cash and cash equivalents $3,187 $3,057
Available short-term capital resources 4,373 4,225
RESULTS FOR THE FOURTH QUARTERS ENDED DEC. 31
(in millions except per-share amounts,
unless otherwise indicated)
Revenues $4,303 $4,611
EBIT 342 73
EBIT margin 7.9% 1.6%
EBIT before special items 286 139
EBIT margin before special items 6.6% 3.0%
EBITDA before special items 370 228
EBITDA margin before special items 8.6% 4.9%
Net income (loss) 55 (188)
Diluted EPS (loss) (in dollars) 0.02 (0.09)
Adjusted net income (loss) 149 (28)
Adjusted EPS (loss) (in dollars) 0.05 (0.02)
Cash flows from operating activities 1,289 1,237
Net additions to PP&E and
intangible assets 248 365
Free cash flow 1,041 872
Segmented results and highlights
Business aircraft achieved a historical milestone in December, 2018, with the on-plan service entry of the largest and longest-range industry flagship Global 7500 aircraft. With a strong backlog and unsurpassed performance in its category, the Global 7500 is expected to be business aircraft's key growth driver for years to come.
- Revenues, EBIT before special items and deliveries were in line with guidance for 2018.
- The segment achieved industry-leading deliveries at 137 aircraft for 2018, including 42 Global, 83 Challenger and 12 Learjet aircraft.
- Continued progress on the aftermarket strategy drove a 14.3-per-cent revenue increase year over year. Further expansion of the company's service network was also announced with the groundbreaking for a new centre in Miami, Fla., to service U.S. and Latin American customers.
- During the year, business aircraft unveiled the new Global 5500 and Global 6500 aircraft featuring an all-new Rolls-Royce engine and a newly optimized wing, increasing the aircraft range and fuel burn performance. With flight testing at advanced stages, these performance-leading aircraft are expected to enter into service at the end of 2019.
- In 2018, commercial aircraft significantly reshaped its portfolio, focusing on the CRJ Series program and its aftermarket business, while also participating in the growth of the A220 through its partnership with Airbus:
The C Series partnership (CSALP) with Airbus closed on July 1, 2018, bringing together two complementary product lines and the benefit of Airbus's global reach, creating significant value potential for the newly rebranded A220.
- A definitive agreement was reached with Longview Aircraft Company of Canada Ltd. for the sale of the Q Series aircraft program assets, including aftermarket operations and assets, for gross proceeds of approximately $300-million, on Nov. 7, 2018. The transaction is expected to close by the second half of 2019, subject to customary closing conditions and regulatory approvals. Net proceeds for this transaction are expected at approximately $250-million net of fees, liabilities and normal closing adjustments.
- Revenues and aircraft deliveries for 2018 were in line with guidance on the basis of the deconsolidation of CSALP results from commercial aircraft since July 1, 2018.
- EBIT loss before special items was $157-million reflecting for the most part losses on the C Series program in the first half of the year and the postclosing CSALP equity pickup. EBIT loss of $755-million includes a $616-million pretax accounting charge related to the closing of the CSALP transaction.
- Commercial aircraft continues to actively participate in the regional aircraft market with the established scope-compliant CRJ Series aircraft, with a focus on reducing costs and increasing volumes while optimizing the aftermarket for the large installed base in service around the world today. As the focus is to return the program to profitability, Bombardier also announced in 2018 it is exploring strategic options for the program.
Aerostructures and engineering services:
The aerostructures and engineering services segment is positioned as a key supplier on early life cycle growth programs, including the new A220 and Global 7500 aircraft, expected to drive sustainable growth.
- In 2018, the segment revenues grew 21 per cent year over year to $2.0-billion in line with guidance.
Focused execution during the ramp-up of these programs and a one-time favourable item (approximately 50 basis points) associated with the closing of the C Series partnership have enabled to deliver 9.6-per-cent EBIT before special items, above its guidance. EBIT margin for the segment was 7.5 per cent.
- On Feb. 6, 2019, the corporation acquired the Global 7500 aircraft wing program operations and assets from Triumph Group Inc., for a nominal cash consideration. This transaction is expected to strengthen Bombardier's position as a leading aerostructures manufacturer, to enable the company to leverage its extensive technical expertise to support the ramp-up of the Global 7500 aircraft, and to enhance its long-term success. Bombardier will continue to operate the production line and integrate the employees currently supporting the program at Triumph's Red Oak, Tex., facility.
- On Feb. 7, 2019, Paul Sislian was appointed president, aerostructures and engineering services. Mr. Sislian brings more than 20 years of aerospace and industrial experience, including serving most recently as chief operating officer for Bombardier Business Aircraft.
On Feb. 7, 2019, Danny Di Perna was appointed president, Bombardier Transportation. Mr. Di Perna brings more than 30 years of industrial experience to this new role. He has a proven record of success leading complex industrial projects and organizations, driving operational efficiency, and improving quality. Most recently, Mr. Di Perna led Bombardier's aerostructures and engineering services segment.
- In 2018, transportation recorded orders totalling $9.9-billion, fuelled by a $3.3-billion order intake in the fourth quarter. Book to bill reached 1.5 for the fourth quarter, resulting in a 1.1 ratio for the full year, continuing to position the segment for growth in revenues and profitability, supported by strong industry fundamentals:
- Order intake for the year reflects project wins across geographies, with notable contract awards in Europe, led by SNCF's repeat order in France, in Asia led by the Singapore Metro contract, and North America with airport and mass transit mobility solutions for Phoenix and Los Angeles.
- The backlog reached $34.5-billion as at Dec. 31, 2018. The backlog growth (excluding currency fluctuations) was supported by a stronger mix of platform projects and increasing signalling and service contract orders, consistent with transportation's strategy to increase speed to market; provide customers with end-to-end solutions; derisk project execution while also growing margins.
- Subsequent to the fourth quarter, in January, 2019, transportation was awarded a contract to supply 113 new generation passenger rail cars valued at $669-million with options for up to 886 additional cars, by the New Jersey Transit Corp.
- Financial performance for 2018 positions transportation to reach 2019 guidance:
Revenues grew 4 per cent year over year to $8.9-billion, in line with guidance, supported by a favourable currency impact in the first half of the year (2-per-cent growth excluding currency impact). Services and signalling grew to over 34 per cent of revenues for the year, as increasing focus turns to integrated customer solutions.
- EBIT before special items grew to $750-million for the year, representing an 8.4-per-cent margin (EBIT of $774-million, or 8.7-per-cent margin). Fourth quarter margins before special items were 7.7 per cent (10.9-per-cent EBIT margin), as a result of contract estimate adjustments largely associated with a legacy project, resulting in full-year margins before special items slightly below the 8.5-per-cent guidance.
- As discussed at the company's December, 2018, investor day, transportation continues to advance a number of legacy projects. The company has plans in place and is taking actions to finalize system integration, obtain homologation and align delivery schedules with customers. Bombardier expects to substantially complete deliveries on most of these projects and significantly recover working capital through 2019.
- As the portfolio continues to improve, transportation anticipates growing EBIT margins before special items to approximately 9 per cent for 2019, in line with guidance.
CDPQ investment in BT Holdco
The company also announced that transportation's results in 2018 did not reach the performance targets underlying Caisse de depot et placement du Quebec's (CDPQ) investment in BT Holdco. Accordingly, for the 12-month period starting on Feb. 12, 2019, Bombardier's percentage of ownership on conversion of CDPQ's shares will decrease by 2.5 per cent, returning to the original 70 per cent; and the preference return entitlement rate on liquidation of its shares will increase from 7.5 per cent to 9.5 per cent for this period. Any dividends paid by BT Holdco to its shareholders during this period will be distributed on the basis of each shareholder's percentage of ownership upon conversion, being 70 per cent for Bombardier and 30 per cent for CDPQ. These adjustments will become effective once the audited consolidated financial statements of BT Holdco are duly approved by its board of directors.
With over 68,000 employees across four business segments, Bombardier is a global leader in the transportation industry, creating innovative and game-changing planes and trains.
Headquartered in Montreal, Que., Canada, Bombardier has production and engineering sites in 28 countries across the segments of transportation, business aircraft, commercial aircraft and aerostructures, and engineering services.
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