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Bombardier to lay off 1,600, halt Learjet production

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(Reuters) – Bombardier Inc said on Thursday it would halt Learjet aircraft production and slash about 1,600 jobs this year as it becomes a pure-play business jet maker, after reporting an adjusted loss before interest and taxes for the fourth quarter due to the coronavirus pandemic.

After flagging likely layoffs in November, Montreal-based Bombardier announced further cost-cutting efforts to generate $400 million in recurring savings by 2023 and improve earnings this year while increasing its aftermarket business.

“We view 2021 as a transition year,” Chief Executive Éric Martel told analysts.

The layoffs include 800 people in Canada, mostly in Quebec, and 250 in Wichita where Learjet is made, Martel later told reporters.

Bombardier, which had previously planned to break even on free cash flow in 2020, now expects to turn cash flow-positive between 2021 and 2023.

The company’s shares were down 11% to C$0.65 per share in midday Toronto trading.

Bombardier has shed assets in recent years, transforming itself from plane and train maker to business jet manufacturer, to restore profitability and cut debt after facing a cash crunch in 2015.

In 2021, the company expects business jet deliveries in line with 2020, modest revenue growth, and adjusted EBITDA of more than $500 million, as it winds down production of the low-selling Learjet later in the year to focus on more profitable Challenger and Global jet models.

Analysts on average estimated 2021 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be $661.3 million, according to Refinitiv IBES data.

Ahead of its March 4 investor day, Bombardier cited cost improvements on the Global 7500 jet and its growing service business as key earnings drivers.

Bombardier reported a 19.7% fall in business jet deliveries to 114 in 2020, in line with industry trends. But 2020 revenues from corporate aircraft activities rose 3%, helped by year-end deliveries of Global 7500 jets and a rebound in demand.

Bombardier reported 2020 free cash-flow usage from continuing operations of $1.9 billion, but expects to reduce cash burn in 2021 to better than $500 million.

The company said it now has pro forma cash and cash equivalents of about $5.4 billion, including proceeds from the sale of its transportation unit, and a pro forma net debt of about $4.7 billion.

Bombardier reported an adjusted loss before interest and taxes of $165 million for the quarter ended Dec. 31, compared with a profit of $168 million a year earlier.

 

(Reporting by Shreyasee Raj in Bengaluru and Allison Lampert in Montreal; Editing by Alexandra Hudson, Jonathan Oatis and Bernadette Baum)

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BHP delays decision on Jansen potash project

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BHP Group expects to present its board with a decision on whether to proceed with its Jansen potash project in Canada in a few months’ time – rather than mid-year – after choosing between two port options, an executive said on Thursday.

The world’s biggest miner has estimated the project in Saskatchewan province would cost up to $5.7 billion in its first phase. The project offers diversification into agriculture markets given that potash is a key element in plant nutrition that also makes crops more drought resistant.

“We are considering two options in terms of the port. One is a commercial option at the port of Vancouver, one is a greenfield option,” said Ragnar Udd, president of BHP’s Minerals America.

“We would like to have those locked in before we take them to the board,” he said.

“We continue to expect that this (decision) will occur in the next, coming few months.”

The miner expects the project will take five years to develop and have an annual production capacity of around 4.4 million tonnes of potash in its first phase. It will have capacity for an additional 12 million tonnes in stages thereafter for a life of 100 years.

Udd was speaking to investors about the outlook for the potash market, for which BHP expects demand to catch up with supply by late this decade or early next.

BHP estimated global production of potash was 76 million tonnes (Mt) in 2020, which could rise to 86 Mt when factoring in latent capacity.

It expects demand to grow by 15 Mt to around 105 Mt by 2040 or 1.5% to 3% a year, along with the global population and pressure to improve farming yields given limited land supply.

BHP sees operational expenditure at the Jansen potash mine at $100 per tonne and sustaining capital expenditure at $15 per tonne. It sees incentive pricing for new projects at $300 to $500 a tonne, with Canada the main supplier.

(Reporting by Melanie Burton; Editing by Richard Pullin and Christopher Cushing)

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Deutsche Telekom seeks investors to bankroll German internet overhaul

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Deutsche Telekom is offering investors stakes in a company it is creating to overhaul Germany’s internet cables to help foot the bill for much-needed network modernisation, three people familiar with the matter said.

The deal is part of a German bid to catch up with other European countries such as Spain, which has outpaced Europe’s industrial powerhouse by laying high-tech glass fibre cables while Germany is mainly stuck with old-fashioned copper lines.

Deutsche Telekom, Germany’s main telecoms company, has come under increasing pressure to act quickly as the coronavirus pandemic has forced more people to work from home and rely on fast, stable internet connections.

The sources told Reuters that Deutsche Telecom and its adviser Deutsche Bank are targeting investors such as Dutch funds APG and PGGM and Canada‘s Brookfield and CDPQ, as well as sovereign wealth funds.

Deutsche Telekom’s initial plan is to roll out fibre cables to 4 million households and investors will be offered stakes equivalent to up to half of the project’s equity, the sources said. Further extensions of the network are likely.

The German company is following the strategy adopted by rivals, such as Spain’s Telefonica, which have struck similar deals with investors to help pay for network upgrades.

Deutsche Telekom, Deutsche Bank and the prospective bidders all declined to comment.

At the same time, the German telecoms giant is kicking off the sale of its T-Mobile Netherlands business to cut its debt and free up cash for investment in infrastructure.

FOREIGN INVESTORS

Deutsche Telekom is a laggard when it comes to fibre as it bet on improved copper cables to supply internet connections and only switched to focusing on faster fibre cables in 2019.

Its move is part of a trend among German companies of turning to foreign investors to fund parts of the infrastructure that keeps the wheels of industry whirring, such as energy.

Power network 50Hertz, for example, is now majority owned by Belgium’s Elia while gas-power firm Open Grid Europe is part-owned by Australian investor Macquarie.

Investment by China, however, is viewed sceptically. When China’s State Grid wanted to take a stake in 50Hertz in 2018, German state lender KfW prevented the move.

Fibre networks are typically financed with 30% equity and 70% debt and Deutsche Telekom is looking for investors to contribute half of the equity with it providing the rest.

Telefonica struck a deal in October 2020 with German insurer Allianz to develop a fibre optic network in Germany for 2.2 million households in a project valued at 5 billion euros ($6.1 billion).

Assuming a similar valuation, Deutsche Telekom’s project to supply about 4 million households would be worth some 10 billion euros, meaning investors would need to contribute 1.5 billion euros, or half of the 30% equity.

At its capital markets day in May, Deutsche Telekom Chief Executive Tim Hoettges underlined the company’s commitment to accelerating the rollout of fibre in Germany, taking it from 600,000 households last year to 2.5 million in 2024.

He said the company plans to invest 2.5 billion euros a year in fibre infrastructure.

DUTCH MOBILE SALE

Deutsche Telekom’s plan would still leave it trailing countries such as Spain and Sweden, where more than 60% of homes already get their internet via fibre cables. In Germany, only 5% of homes have fibre, slightly lower than Italy.

Deutsche Telekom executive Dominique Leroy has said its goal is to reach 10 million households with fibre by the end of 2024 and that it would seek partnerships where it makes sense.

While Deutsche Telekom is preparing to invest billions, it is also faces a large bill to exercise options to raise its holding in T-Mobile U.S. to more than 50% from 43%.

However, it is already saddled with 130 billion euros of debt and is now selling businesses to reduce the pile.

First in line is its subsidiary T-Mobile Netherlands, which is estimated to be worth up to 5 billion euros. The Dutch mobile business has 6.8 million customers and its sales last year came to 1.9 billion euros.

Deutsche Telekom’s adviser on the deal, Morgan Stanley, has sent out first information packs to prospective bidders asking for offers by the end of July, people familiar with the process said.

Suitors including buyout groups KKR, EQT and Warburg Pincus are expected to take part, as is French telecoms entrepreneur Xavier Niel, the people said.

Warburg Pincus, which employs former Deutsche Telekom CEO Rene Obermann, came close to buying the business in 2015.

Morgan Stanley and the potential bidders all declined to comment.

Once that sale is out of the way, Deutsche Telekom may look to sell its telecom towers division, the people said, adding that while conversations with banks are taking place no decision has been taken.

($1 = 0.8248 euros)

 

(Editing by John O’Donnell and David Clarke)

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Israel strikes Hamas sites in Gaza in first attack since May fighting

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Israeli aircraft struck Hamas sites in Gaza on Wednesday after incendiary balloons were launched from the Palestinian enclave in the first such attacks since the end of 11 days of cross-border fighting last month.

The overnight airstrikes gave way to calm by morning, and there were no reports of casualties on either side.

The flare-up, a first test for Israel’s new government, followed a march in East Jerusalem on Tuesday by Jewish nationalists that had drawn threats of action by Hamas, the ruling militant group in Gaza.

The Israeli military said its aircraft attacked Hamas armed compounds in Gaza City and the southern town of Khan Younis and was “ready for all scenarios, including renewed fighting in the face of continued terrorist acts emanating from Gaza”.

The strikes, the military said, came in response to the launching of balloons laden with incendiary material, which the Israeli fire brigade reported caused 20 blazes in open fields in communities near the Gaza border.

A Hamas spokesman, confirming the Israeli attacks, said Palestinians would continue to pursue their “brave resistance and defend their rights and sacred sites” in Jerusalem.

Hours earlier, thousands of flag-waving Israelis congregated around the Damascus Gate of Jerusalem’s Old City before heading to Judaism’s holy Western Wall, drawing Palestinian anger and condemnation.

Israel, which occupied East Jerusalem in a 1967 war and later annexed it in a move that has not won international recognition, regards the entire city as its capital. Palestinians want East Jerusalem to be the capital of a future state that would include the West Bank and Gaza.

Prior to Tuesday’s march, Israel beefed up its deployment of the Iron Dome anti-missile system in anticipation of possible rocket attacks from Gaza.

But as the marchers began to disperse after nightfall in Jerusalem, there was no sign of rocket fire from the enclave.

The procession was originally scheduled for May 10 as part of “Jerusalem Day” festivities that celebrate Israel’s capture of East Jerusalem.

At the last minute, that march was diverted away from the Damascus Gate and the Old City’s Muslim Quarter, but the move was not enough to dissuade Hamas from firing rockets towards Jerusalem, attacks that set off last month’s round of fighting.

(Reporting by Nidal al-Mughrabi; Editing by Jeffrey Heller, Peter Cooney and Raju Gopalakrishnan)

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