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Bombardier stock sinks on profit warning, chance of exit from Airbus joint venture – The Globe and Mail

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Bombardier Inc. has once again slashed its financial estimates for 2019 on the back of continuing struggles in its rail unit, deepening investor concern that chief executive Alain Bellemare’s five-year turnaround can stay on track.

The Montreal-based plane and train maker also said it is weighing whether to pull out of its joint venture with Airbus and the Quebec government on the A220 airliner because of what could be onerous funding requirements. And it said it is pursuing further strategic options to speed up debt repayment, which could mean selling more real estate or other assets.

Bombardier shares tanked 33 per cent as they opened for trading Thursday on the Toronto Stock Exchange, to $1.20. The last time they were this low was March of 2016.

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Mr. Bellemare is trying to get Bombardier back on course by making it a smaller and more profitable company focused on jets and rail equipment as part of a five-year turnaround effort that started in late 2015. Those business lines are more profitable and offer more growth prospects as the number of billionaires increases globally and cities seek more rail transit solutions for congestion, Bombardier executives have said.

Under the CEO’s leadership, Bombardier has already raised more than US$7-billion from governments and public markets, sold several businesses and cut thousands of jobs. After some encouraging signs of progress in 2017 and the first half of 2018, the company’s stock was starting to climb higher.

But the effort has hit some major stumbles since. Pushed to the brink by the cash-sucking development of its C Series airliner, Bombardier is now dealing with the completion of several legacy rail contracts that are wreaking havoc with its financial projections.

For the second time in 12 months, Bombardier issued a profit warning on Thursday that pinned much of the shortfall on trouble with big train contracts. It said it would record a fourth quarter loss of about US$230-million in its train unit, which includes a special charge related to certain projects in the United Kingdom as well as commercial negotiations with Swiss Federal Railways and increased production and manufacturing costs for projects in Germany.

“This is a significant setback,” BMO Capital Markets analyst Fadi Chamoun said in a note to clients. He noted that company executives had said in the summer that the worst might be behind the train unit, known as Bombardier Transportation.

The company now says adjusted earnings before interest and taxes will come in at about US$400-million for fiscal 2019, down significantly from the US$700-million to US$800-million it projected during its third quarter earnings report in August. Revenue should come in at about US$15.8-billion, down from a previous estimate of US$16.5-billion to US$17-billion, Bombardier said. The company now expects to burn through US$1.2-billion of cash for the year, more than twice as much cash as previously forecast.

At its annual investor meeting in December 2018, Bombardier highlighted five big rail contracts that were proving problematic in different ways. They included the US$630-million contract for New York’s Metropolitan Transportation Authority (MTA) in which Bombardier experienced production-related delays at its factories, and a US$1.8-billion contract with Swiss Federal Railways in which the company faced regulatory authorization issues.

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Earlier this month, the MTA pulled about 300 Bombardier subway cars out of service because of unreliable door mechanisms. “Bombardier sold us lemons,” the city’s comptroller, Scott Stringer said at the time.

Despite the challenges, Bombardier insists it is making progress completing the legacy rail projects and taking the right actions for its future success. The business is led by Danny Di Perna, former head of Bombardier’s engineering and aerostructures unit.

While Bombardier has exited commercial aviation, its joint venture with Airbus on the A220, formerly the Bombardier C Series, also poses a lingering challenge. Airbus is winning orders for the plane but the latest information of the joint venture’s financial plan calls for additional cash investments to support production increases while pushing out the break-even point and generating lower return over the life of the program, Bombardier said.

“This may significantly impact the joint venture value,” Bombardier said, adding it could take a write-down on the business when it reports fourth quarter results next month. The company said is weighing its continued participation in the joint venture but provided no other details.

Bombardier sold control of the A220 to Airbus in 2018. It holds a 33.58 per cent stake in the venture, while Airbus holds a 50.06 per cent stake and Quebec holds 16.36 per cent.

Bombardier is contractually committed to investing US$925-million over three years in the joint venture, spokeswoman Jessica McDonald said. Any investments required in the business beyond that is shared by the three partners according to their weight in the joint venture, she said.

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Quebec is not required to put any additional funds into the venture but its share in the business would shrink accordingly, Ms. McDonald said. A spokesman for Quebec Economy Minister Pierre Fitzgibbon declined to comment Thursday on the government’s plans for the investment.

The final step in Mr. Bellemare’s turnaround plan is to cut Bombardier’s indebtedness and solve its capital structure. The CEO said Bombardier is “actively pursuing alternatives” that would allow the company to speed up debt repayment and strengthen its balance sheet but did not provide any more details.

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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