Bombardier Inc. officially abandoned its multi-billion dollar dream to compete in commercial aerospace and is reportedly nearing a deal to sell off its troubled rail division, meaning the business jet division could soon be all that’s left of the storied Quebec plane and train manufacturer that’s shedding assets to pay off debt.
The Montreal-based company announced Thursday it sold its remaining stake in the A220 program to Airbus SE for about $600 million in cash, letting it off the hook for $700 million in future spending on the program. The company will take a $1.6-billion charge on the jet program.
Airbus has promised to keep the program’s 3,300 jobs in Quebec. The provincial government will increase its stake to 25 per cent from 16 per cent in the venture with no cash.
The Bombardier stock, which had been rallying over the past week on news of asset sales, was volatile on the Toronto Stock Exchange as investors digested the latest effort by management to jettison parts of the business in what is the final year of a five-year turnaround strategy.
“I’m actually very confused about what the strategy of the company is,” Goldman Sachs analyst Noah Poponak said during the company’s conference call with analysts after it announced its quarterly results
. “It’s starting to look like an asset liquidation more than a turnaround. Has this always been the plan?”
Chief executive officer Alain Bellemare responded that the commercial aerospace business “was a cash drain,” insisting an exit from the program was always part of his turnaround plan. “The strategy was always to exit commercial aircraft and we’ve done that very successfully, while protecting jobs.”
It’s starting to look like an asset liquidation more than a turnaroundGoldman Sachs analyst Noah Poponak
The $6-billion commercial jetliner program, once seen as a moonshot to compete against giants Boeing Co. and Airbus with the help of government loans, was beset with delays and cost overruns. Bombardier, which required government bailouts in recent years as it struggled to fund the program, finally sold a majority stake to Airbus in 2017 for one Canadian dollar, partly to avert a potentially devastating trade challenge from Boeing.
Over the past year, Bombardier has ditched its turboprop, regional jet and aerostructures businesses for total proceeds of about $1.6 billion (including the A220) as it works to repay upwards of $9 billion in debt.
Despite the financial cushion from the commercial aviation sales and guidance that the company will have a positive cash flow in 2020, Bellemare repeated that Bombardier is still exploring options to pay off debt faster. But the CEO wouldn’t reveal what’s next on the chopping block, current discussions or timing of a sale.
“We have options. We are going to continue looking at our options to see if there’s ways we can accelerate the deleveraging phase of the turnaround,” he said.
Bombardier is seeking to reduce its debt to about $4 billion by the end of this year, chief financial officer John Di Bert said on the conference call.
With positive free cash flow and the A220 divestiture, there are some positive elements for this “show me” story, Stephen Trent and Brian Roberts, analysts at Citigroup Global Markets, said.
“Assuming that this smaller company now generates cash, it remains to be seen whether Bombardier further monetizes its remaining businesses, a potential positive catalyst — and a $52.1-billion firm order book might be a good place to start the conversation,” the analysts said.
Bombardier’s two largest divisions left standing are rail and business jets.
The company is in talks to sell its rail division to France’s Alstom SA, with Bloomberg reporting a deal could come as early as this week, and its business jet unit to U.S.-based Cessna maker Textron Inc., according to the Wall Street Journal.
Bellemare’s remarks hinted Bombardier is more bullish on aviation.
“Our future in aerospace is with our industry-leading business jet franchise and we see tremendous opportunities,” he said.
Our future in aerospace is with our industry-leading business jet franchise and we see tremendous opportunitiesAlain Bellemare
As for the transportation division, he stated Bombardier is “focused on completing the transformation.”
The smaller business jet division has flown under the radar during Bombardier’s five-year turnaround strategy compared to rail and commercial aviation.
The company sees 35-40 deliveries of its flagship Global 7500 business jet in 2020, which list for $73 million each.
BMO Capital Markets analyst Fadi Chamoun questioned whether the business aircraft division “can survive longer-term as a standalone” given the cyclical nature of the business.
Bellemare didn’t comment on going solo, but said Bombardier has the “best business aircraft in the world.”
“This is a very good business and we’re very excited by this business,” he said.
The company’s private jet business is smaller than its rail division, with revenue of $7.5 billion last year compared to $8.2 billion and an order backlog of $14.4 billion versus $35.8 billion for trains. The aviation division employs roughly 24,000 people versus 36,000 at the rail division, according to Bombardier’s annual report.
But aviation’s adjusted profit margin for 2019 was 10.8 per cent compared to 2.6 per cent for the rail division, which has been plagued by delayed deliveries and malfunctions of a handful of problem contracts.
The challenging rail projects, including in New York where officials have accused Bombardier of selling it a lemon, have captured more attention than business jets given public backlash from both transit users, including in Toronto.
While the business jet division is a popular brand with the global elite, the Canadian public has been more consumed with A220 news given the government loans that floated the program.
Airbus Canada Ltd. chief executive Philippe Balducchi said in an interview that Airbus is committed to keeping the program in Quebec as it ramps up production. Since Airbus took control in July 2018, orders for the plane have been rolling in and Airbus hired 700 additional workers to keep up with demand.
“There is a lot of recognition round this as a company about what has been done by Bombardier in the past and lots of recognition of the talent that exists in Quebec,” he said. “The idea is not to kill it and bring it somewhere else. We’re ready to grow.”
Quebec, which acquired half of the program in 2015 for $1 billion, said it would not invest further in the joint venture.
Economy Minister Pierre Fitzgibbon conceded Quebec’s investment in the A220 — originally valued at $1.3 billion in Canadian funds — is now worth far less, adding that the government is creating a contingency fund of about $600 million to cover the shortfall. By the time Quebec exits the A220, “I am confident we will get our money back,” he said.
For Québec solidaire MNA Vincent Marissal, the A220 transaction spells the end of Bombardier as it was.
“It’s not a great day for Quebec,” Marissal told reporters. “There’s nothing to crow about.”
What we have today is the dismantling of Bombardierinterim Liberal leader Pierre Arcand
Interim Liberal leader Pierre Arcand went further, saying: “What we have today is the dismantling of Bombardier.”
On Thursday, Bombardier also forecast a 2020 adjusted earnings before interest, taxes, depreciation, and amortization margin of 7 per cent, missing analyst expectations for an EBITDA margin of more than 8 per cent.
The company’s loss before interest and taxes was $1.70 billion in the fourth quarter ended Dec. 31, compared to a profit of $342 million a year earlier, partly due to charges related to some rail contracts in Europe.
With files from Frédéric Tomesco, Bloomberg and Thomson Reuters
3 new COVID-19 outbreaks declared in Calgary | CTV News – CTV Toronto
Three new COVID-19 outbreaks were declared in Calgary on Friday, including 13 cases being reported from a private gathering, five cases at a Cargill meat processing facility and five at a childcare centre in the southwest.
An outbreak was also declared in the community of Fort Mackay in northeastern Alberta, with five cases being reported at CNRL Albian.
Alberta Health Services would not comment on where or when the private gathering was held but said of the 13 cases, nine are considered active and four recovered.
Five active cases were reported at the Cargill plant in the 0-100 block of Freeport Way N.E.
Two active cases and three recovered cases were reported at Fledglings Educare Centre in the 1100 block of Canterbury Drive S.W.
An outbreak is declared in acute and long-term care facilities when there are two or more cases, and in a community setting when there are five or more cases. The outbreak is considered over when four weeks passes without any new cases being declared.
A total of 84 new cases were reported by the province on Friday, with 20 of those in the Calgary Zone and 52 in the Edmonton Zone.
There are now 12,053 cases of COVID-19 in Alberta, with 1,036 of those active and 10,796 recovered. There are 48 people in hospital with 13 of those in ICU.
One additional death was reported Friday, bringing the provincial total at 221.
COVID-19 outbreak declared at new Cargill plant as Alberta reports 84 new cases province-wide – Calgary Herald
Article content continued
“This plant in terms of the pre-existing conditions was better,” Hesse said. “But the question is what Cargill does now.”
Alberta also announced two other new Calgary outbreaks Friday. One is at Fledglings Educare Centre, where two staff and three children were infected with COVID-19. Two of the children have now recovered. As well, an outbreak at a private gathering is linked to 13 cases, nine of which remain active.
Also Friday, Alberta reported 84 new cases of the novel coronavirus, bringing the province’s total to 12,053.
The new cases came from about 8,200 tests, a one per cent positive rate. More than 800,000 tests have now been conducted in Alberta.
Both active cases and hospitalization rates stayed stagnant from Thursday. There are 1,036 active coronavirus cases in Alberta, while 48 Albertans remain in hospital with the virus, including 13 receiving treatment in intensive-care units.
One new death from COVID-19 in Alberta, a woman in her 60s from the AHS South zone, was reported Friday, bringing the province’s total to 221.
Elsewhere Friday, Calgary’s public and Catholic school boards each announced that they were mandating masks for all students in schools. Previously, Alberta Education only required students in Grades 4 to 12 to wear masks.
Trump says 'whatever' to concerns about WeChat ban hurting Apple – AppleInsider
During a press conference Friday, President Donald Trump appeared unconcerned with the possible impact that a WeChat ban could have on Apple’s business.
Earlier in August, Trump signed a pair of executive orders that would bar any transactions between U.S. companies and Chinese-owned TikTok and WeChat. That, in effect, would ban both apps from the U.S., though it’s unclear what impact it might have globally.
On Friday, Apple joined a growing number of other major companies calling for the president to end the executive orders. That includes Disney, Ford, and Walmart.
When asked by a Bloomberg reporter at a White House press conference Friday morning about whether he was concerned about the effect the ban could have on iPhone sales in China and other markets, Trump simply responded “whatever.”
“Gotta do what’s good in terms of the security of our country,” Trump said. “We’ve been very badly let down by China.”
WeChat is a wildly popular app among Chinese users. And in a Bloomberg survey conducted in August, 95% of respondents in China said that they would rather give up their iPhones for Androids than lose out on WeChat.
On Monday, analyst Ming-Chi Kuo cautioned than an outright ban on WeChat could cut global iPhone shipments by about 30%.
It isn’t clear whether the U.S. ban would only bar WeChat’s use in the country, or if its vague wording could force Apple to pull it from the global App Store. WeChat parent company TenCent said that it is seeking clarity.
Trump’s order to ban TikTok could be stopped if a U.S. company acquires the social media platform — which Microsoft is in talks to do. Such an acquisition has not been discussed for WeChat.
Fortnite’s ‘safety and fairness’ ban actually hurts users and developers – VentureBeat
Ventilator supply starts to increase as Tam warns of possible surge of COVID-19 – National Post
News You Might've Missed on 8/13/20: Epic Games Sues Apple, New Hitman 3 VR Details, & More – The Escapist
Silver investment demand jumped 12% in 2019 – report – MINING.com
Iran anticipates renewed protests amid social media shutdown
Richmond BBQ spot speaks out about coronavirus rumours Vancouver Is Awesome
- Investment24 hours ago
Contrasting Consumer Investment and Finance Outlooks – GlobeNewswire
- Health18 hours ago
No COVID-19 cases at Deerhurst – My Muskoka Now
- Health19 hours ago
More than 500 people may have been exposed to COVID-19 at Toronto strip club – CTV Toronto
- Politics18 hours ago
Opinion: The U.S. unraveling of science insulation from politics – The Mercury News
- Politics13 hours ago
Facebook’s Hate-Speech Rules Collide With Indian Politics – The Wall Street Journal
- News24 hours ago
Canadian tour boats entering U.S. waters lead to turbulence during COVID-19 border closure – CBC.ca
- Health23 hours ago
Video shows partiers breaking COVID-19 rules at Vancouver nightclub – CTV News
- Media13 hours ago
Media Advisory: Stripped of Their Rights, Front Line Workers to Hold a Political Protest in Pembroke at MPP John Yakabuski's Office – Business Wire