Bombardier Inc. fell the most on record after warning of disappointing fourth-quarter sales and revealing that it may exit a joint venture with Airbus SE that makes the A220 jetliner, potentially triggering a major writedown.
A ramp-up in A220 production will require additional cash investment, pushing back the break-even point and generating lower returns across the lifetime of the project, Bombardier said in a statement Thursday. The value of the A220 joint venture is likely to be diminished and the amount of any accounting charge will be disclosed with full 2019 results next month, the company said.
The potential end of Bombardier’s involvement in the A220 program is combining with new stumbles in the company’s rail business to undermine a once-great name in manufacturing — just when investors thought they were poised to reap the rewards of a difficult turnaround effort. Walking away from the A220 would close the book on Bombardier’s involvement in an aircraft program in which the company invested more than US$6 billion.
“The joke continues. Anyone involved with the story has a gun to their head,” said John O’Connell, chief executive officer of Davis Rea Ltd., who doesn’t hold Bombardier shares or bonds. “This company has been a disaster my whole career and I’m almost ready to retire.”
Bombardier plunged 30 per cent to US$1.25 at 12:56 p.m. in Toronto after sliding as much as 39 per cent for the biggest intraday tumble on record. That dragged shares to the lowest level in almost four years.
The company’s 7.85 per cent bonds due 2027 fell 6.2 cents, the most on record, to 96 cents on the dollar, yielding 8.6 per cent, according to Trace data. The US$1.5 billion in notes due 2025 dropped 3.9 cents to 98.1 cents on the dollar to yield 8 per cent, the highest since Oct. 31.
Bombardier needs to ‘just deliver’ what they promise: McGill’s Karl Moore
Karl Moore, professor of business strategy at McGill University, joins BNN Bloomberg to react to Bombardier slashing its outlook, warning on cash burn and considering pulling out of the A220 partnership with Airbus. He says that CEO Alain Bellemare has done an excellent job in a tough turnaround for the business.
Disappointing Sales
Bombardier, which is refocusing its operations on rail equipment and business jets, said fourth-quarter sales would be US$4.2 billion, trailing the lowest analyst estimate in a survey by Bloomberg
The results were dragged down in part by new challenges in the company’s faltering rail division, which generates about half of sales. The business got a black eye this month when New York removed 300 Bombardier-made subway cars from service because of door glitches. For the fourth quarter, the manufacturer said it would take a US$350 million accounting charge because of problems in London, Switzerland and Germany.
The timing of milestone payments also clipped results late last year, Montreal-based Bombardier said. So did the delay of some deliveries of the Global 7500 business jet into the first quarter of 2020.
Liquidity remains strong, with year-end cash on hand of roughly US$2.6 billion, Bombardier said. But the company is considering alternatives to accelerate debt reduction and strengthen its balance sheet. Full results are scheduled for Feb. 13.
“The final step in our turnaround is to de-lever and solve our capital structure,” Chief Executive Officer Alain Bellemare said in the statement. “We are actively pursuing alternatives that would allow us to accelerate our debt paydown.”
Trouble is, Bombardier may be running out of sizable assets to sell to meet its cash needs, said Bloomberg Intelligence analyst George Ferguson.
“Bombardier needs to get its rail business — the earnings and cash-flow driver — on track, while restructuring its aviation division in a soft business-jet market,” he said in a report.
Commercial-Jet Retreat
The potential end of Bombardier’s involvement in the A220 program would cap the company’s broader retreat from commercial-plane manufacturing.
Bombardier ceded control of the A220 last year to Airbus for no upfront cash. The plane — originally known as the C Series — won praise for its fuel-efficient engines, composite wings and large windows. But the program ran more than two years late and about US$2 billion over budget, and Bombardier had trouble finding buyers in an industry dominated by Airbus and Boeing Co.
Airbus said it would continue funding the A220 program “on its way to break-even.” The European aerospace giant owns a 50.01 per cent stake in the regional jet, with Bombardier retaining 31 per cent and state-backed Investissement Quebec holding some 19 per cent.
The jet added 63 orders in 2019, with 105 currently in service and a backlog of close to 500 planes. Airbus will begin producing the A220 on a second assembly line this year at its factory in Mobile, Alabama.
Bombardier agreed last year to sell a plant in Belfast, Northern Ireland, that makes wings for the A220. The buyer, Spirit AeroSystems Holdings Inc., is seeking to boost its exposure to Airbus programs after suffering as a supplier to Boeing’s grounded 737 Max.
The Canadian company also agreed to sell its regional-jet program to Mitsubishi Heavy Industries Ltd.
VANCOUVER – West Fraser Timber Co. Ltd. says it’s indefinitely curtailing its sawmill in Lake Butler, Fla., by the end of the month.
The Vancouver-based company says the decision is because of high fibre costs and soft lumber markets.
West Fraser says the curtailment will affect about 130 employees, though it will mitigate the impact by providing work opportunities at other locations.
The company says high fibre costs at Lake Butler and the current low-price commodity environment have made it difficult to operate the mill profitably.
It expects to take an impairment charge in the third quarter associated with the curtailment.
At the beginning of this year, West Fraser said it was closing a sawmill in Maxville, Fla., and indefinitely closing another in Huttig, Ark.
This report by The Canadian Press was first published Sept. 19, 2024.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
