Bombardier CEO says CSeries on track despite only four test flights in six weeks
Nov 1, 2013 / 8:34 am
MONTREAL - Bombardier's CSeries testing program remains on track even though the next-generation airliner has had only three more test flights since the jet flew for the first time in mid-September, the company says.
Bombardier, which reported disappointing third-quarter financial results Thursday and saw its stock fall more than 10 per cent, said the latest flight took place on Wednesday and lasted 90 minutes.
Chief executive Pierre Beaudoin assured analysts on a conference call that the CSeries testing is "happening exactly as predicted."
"That sounds pretty tame, but this is the best news we can have in a flight test program is that we learn the minimum," he said.
Beaudoin said the company (TSX:BBD.B) continues to target the first delivery of the CS100 in about a year, but is holding discussions with suppliers, customers and other partners to solidify its schedule.
The inaugural flight was delayed for months, finally occurring to much fanfare on Sept. 16 rather than late in 2012, leaving analysts to believe that CSeries deliveries will be delayed into early 2015.
Bombardier's (TSX:BBD.B) shares closed down more than 10 per cent, wiping out nearly two months of gains as they were down 54 cents to C$4.74 on the Toronto Stock Exchange, with more than 27 million shared traded.
Earlier Thursday, Bombardier announced weaker-than-anticipated results in both of its divisions amid low aircraft deliveries and "execution" issues for new large rail contracts.
"Aerospace financial results in the third quarter were in line with our guidance, but the level of orders and the overall market conditions were a disappointment," Beaudoin said in a conference call.
He acknowledged the company needs to win new orders for regional and turboprop planes to maintain its production levels, but said he's confident given discussions with potential customers.
"If you look at the level of orders in the third quarter you see it's kind of low, but we're upbeat with the amount of opportunities in front of us."
With a US$65.5-billion order backlog representing four years of revenues and continued investment in new products, he said the company is well-positioned for years of growth.
Bombardier, which reports in U.S. dollars, said its net profit decreased 14.5 per cent to $147 million in the quarter on a 3.6 decrease in revenues to $4.06 billion.
Adjusting for one-time items, it earned $165 million or nine cents per share, one penny below analyst expectations. That compared to $173 million or nine cents per share a year earlier.
Aerospace revenues for the period ended Sept. 30 decreased 12 per cent to $2 billion, while railway revenues were up six per cent to $2.06 billion.
Forty-five planes were delivered during the quarter (36 business aircraft and nine commercial planes), compared to 57 for the same period last fiscal year. It received 26 net orders.
Analysts were largely disappointed with the results even though they had predicted the seasonally slow quarter would be soft due to fewer aircraft deliveries.
"Overall, the quarter was much worse than we expected. Both segments had weak sales and margins," David Tyerman of Canaccord Genuity wrote in a report.
He attributed much of the decrease to timing of deliveries but said he expects improvements in the rail division through 2013 and 2014 and better aerospace results in the fourth quarter and especially next year.
Cameron Doerksen downgraded Bombardier and trimmed his target share price to $5 from $5.50, saying it has limited upside over the next one to two quarters. He said the slow pace of CSeries flight tests increases risks of a delay.
"If no new orders are announced in the coming months, we suspect that the market will become more skeptical of the program," he wrote, adding that competition is heating up as Boeing announced plans Thursday to increase the production rate of its 737.
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