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Bombardier Tumble Is Biggest on Record After Sales Warning – Yahoo Canada Finance

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Bombardier Tumble Is Biggest on Record After Sales Warning

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(Bloomberg) — 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.

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 writedown 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 continued woes in the company’s rail business to undermine a once-great name in manufacturing. Walking away from the A220 would close the book on Bombardier’s involvement in an aircraft program in which the company invested more than $6 billion.

Profitability and free cash flow are “significantly lower than previously anticipated,” amounting to a big setback for the company, Fadi Chamoun, an analyst at Bank of Montreal, said in a note to clients. Bombardier’s reassessment of its participation in the A220 program is likely to result in a writedown, he said.

Bombardier plunged 36% to C$1.14 at 10:09 a.m. in Toronto after sliding as much as 39% for the biggest intraday tumble on record. That dragged shares to the lowest level in almost four years.

Yields on Bombardier’s $1.5 billion in notes due 2025 rose to 7.7%, the highest since Nov. 1. Bond yields move inversely to prices.

Disappointing Sales

Bombardier said fourth-quarter sales would be $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 rail division. Bombardier said it would take a $350 million accounting charge because of problems in London, Switzerland and Germany.

The timing of milestone payments and the slippage of four business-jet deliveries into the first quarter of 2020 also clipped results late last year, Bombardier said.

Liquidity remains strong, with year-end cash on hand of roughly $2.6 billion, Bombardier said. But the company is considering alternatives to accelerate its deleveraging and strengthen its balance sheet.

“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.”

The company is scheduled to report full earnings Feb. 13.

Commercial-Jet Retreat

The potential end of Bombardier’s involvement in the A220 would cap a retreat that began in 2018 when the company ceded control of the platform to Airbus for no upfront cash. The plane won praise for its fuel-efficient engines, composite wings and larger than usual windows. But the program ran more than two years late and about $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% stake in the regional jet, with Bombardier retaining 31% and state-backed Investissement Quebec holding some 19%.

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.

To contact the reporters on this story: Siddharth Philip in London at sphilip3@bloomberg.net;Paula Sambo in Toronto at psambo@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, ;Brendan Case at bcase4@bloomberg.net, Christopher Jasper, Tony Robinson

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U.S. Oil Producers Take Their Crude Back From The Government – OilPrice.com

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U.S. Oil Producers Take Their Crude Back From The Government | OilPrice.com

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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    U.S. oil companies have started pulling their crude oil back from government storage tanks, suggesting that the glut that forced them to stash it there in the first place is now easing.

    Companies have taken out some 2.2 million barrels of crude since the start of the month, Reuters reports, citing government figures. That’s out of some 23 million barrels that oil producers had to store at government tanks when they ran out of storage space after the slump in demand.

    Storage space was leased in April after oil prices tanked below zero for the first time in history as traders rushed to offload their positions before the contract expired. Despite the brevity of this particular mini-crisis, fundamentals remained difficult as companies were just beginning to cut production, which left them saddled with a lot of oil they could neither sell nor store.

    President Trump tried to help by ordering the Energy Department to buy some 77 million barrels from the struggling industry. That order, however, was never fulfilled. Renting out storage space was the only viable alternative.

    At the time, there were worries that this additional flow of oil into the Strategic Petroleum Reserve would push its occupancy rate too high, leaving nothing available and sending oil prices downward again. While this did not happen thanks to the production cuts that U.S. producers made, prices remained depressed for quite a while because of these storage space availability concerns.

    This makes the news that Exxon, Chevron, and the other six companies that rented SPR storage space are taking it back all the better. However, those watching the Energy Information Administration’s weekly inventory report might want to bear it in mind in case one of the next reports does not feature a hefty drawdown.

    By Irina Slav for Oilprice.com

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      BC Ferries will be eligible for federal bail-out funds – CBC.ca

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      Officials say BC Ferries will be eligible to receive federal financial assistance from Ottawa, adding it to the list of other struggling transit agencies eligible for millions in bail-out funds.

      The money comes from the $1 billion already set aside for transportation by both the federal and provincial governments under Ottawa’s Safe Restart Agreement. TransLink and B.C. Transit, facing staggering financial losses, are set to receive a portion of that funding.

      “We are working … to make sure they are able to provide service as they rebuild,” said B.C. Transportation and Infrastructure Minister Claire Trevena.

      The federal government announced last month it would be providing $19 billion to the provinces and territories to help fund a “safe restart” of the Canadian economy. Prime Minister Justin Trudeau said the agreement is meant to help governments pay for a variety of needs, including transit, paying for child care, bailing out financially strapped cities, and increasing contact tracing.

      A total of about $2.2 billion in federal transfers will go to B.C., meant to keep people afloat as the economy reopens and to bolster provincial support programs.

      How much each transit authority receives is yet to be decided.

      A statement said the province is working with the agencies “to fully understand the operational and financial challenges resulting from the pandemic before determining what level of relief may be considered.”

      BC Ferries will be required to bring forward a comprehensive relief proposal to the province to ask for the funding, with “all necessary information made available to support the government’s decision.”

      Trevena said restoring ferry service to pre-pandemic levels and “keeping fares reasonable” will be priorities.

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      Canada Goose speeds up e-commerce spending, restricts manufacturing of new clothing as pandemic impact continues – The Globe and Mail

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      Canada Goose jackets are stacked up at a factory in Toronto, on April 2, 2015.

      Nathan Denette/The Canadian Press

      Canada Goose Holdings Inc. is speeding up its investments in e-commerce, restricting its manufacturing of new clothing, and cutting back on new store openings, as the effects of the COVID-19 pandemic continue to affect its business.

      The company reported on Tuesday that its first-quarter revenue plunged 63 per cent compared to the same period last year, to $26.1-million. In June, Canada Goose projected that sales this quarter would be “negligible” as it was forced to shut down its own stores, and wholesale shipments of its products to other retailers were frozen in the midst of widespread business closures.

      Canada Goose’s net loss widened in the quarter ended June 28, to $50.1-million or 46 cents per share, compared to a net loss of $29.4-million or 27 cents a share in the same period last year.

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      While 21 of Canada Goose’s 22 own stores have now reopened and performance is improving, the Toronto-based outerwear brand said on Tuesday that it also expects a “significant” decline in revenue in the second quarter. The company cut $90-million in costs in the first quarter.

      As Canada Goose prepares for its busiest fall-winter selling season, it is speeding up investments in e-commerce improvements, including a “cross-border solution” to reach international customers in more countries.

      “The online world is becoming increasingly important,” chief executive officer Dani Reiss said on a conference call to discuss the results on Tuesday.

      Canada Goose is shifting its investments in new retail store openings to focus mostly on China, where the economy opened up earlier than in other parts of the world and shopping traffic has begun to recover. With more people around the world staying home rather than traveling this year, the company is hoping to serve Chinese shoppers closer to home rather than counting on its usual sales to Chinese tourists at its stores abroad. Canada Goose will double its store count in China this year with four new stores, and will open three in other markets in North America and Europe.

      While Canada Goose has begun manufacturing jackets again, it plans to produce just one-third of the fall-winter goods it made in the same season last year, and is aiming to “significantly” cut back on its inventory by the end of this fiscal year.

      The company is continuing to take a “brand-first” approach to its inventory, focusing on its direct-to-consumer sales through its website and its own stores, and expecting lower wholesale revenue this year. However, Mr. Reiss said on the call that the company has “enough inventory to chase orders as needed,” and that its wholesale business continues to be important. 

      While many apparel companies cleared out inventory through online promotions over the spring and summer, Mr. Reiss said on the call that the danger of this strategy is that it could “dilute the value” of some products.

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      “We’re a full-price brand,” he said. “Many brands became more promotional, and we did not.” 

      Manufacturing products in Canada gives the company more flexibility to manage its inventory compared to other relying on offshore suppliers, chief executive officer Dani Reiss said in an interview with the Globe and Mail last month.

      “We can react faster. If there’s a shift in demand, we’re able to make smaller runs of styles, closer to the season,” Mr. Reiss said. “We’re self-reliant, that’s the biggest thing. We’re not reliant on a third party to bring us goods.”

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