Bombardier Inc. said it’s still not certain on the date for the maiden takeoff of its CSeries jetliner and will need to review the proposed delivery schedule for the model, its largest-ever plane.
The world’s third-biggest aircraft maker is working toward the CSeries debut takeoff within the next few weeks, after three delays since November. The Montreal-based company said today in a filing that it will provide an update on the plane’s planned 2014 entry into service after assessing first-flight activities.
“Given that Bombardier has so far been unable to hit its targets for first flight, one must also acknowledge the likelihood that the flight test program will take longer than one year,” Cam Doerksen, an analyst at National Bank Financial in Montreal, said today in a note to clients. He advises investors to buy the stock.
Bombardier has struggled in developing its first full-size airliner, a challenger to the dominance of Boeing Co. and Airbus SAS in narrow-body planes. The company abandoned plans for a December flight almost nine months ago because of unspecified supplier issues and said today that final testing on the CSeries is “taking more time than initially anticipated to validate the overall systems and ongoing software integrations.”
“What we have to do is really complex,” Chief Executive Officer Pierre Beaudoin said on a conference call for Bombardier’s second-quarter earnings. “As we see issues come up, we correct them, and sometimes it takes more time than anticipated. What we are saying is that we are weeks away from the first flight, not being able yet to pin a date.”
Beaudoin has said he expects the CSeries to be a key contributor in almost doubling annual revenue in the next decade, garnering $5 billion to $8 billion a year.
The time spent preparing the first prototype for takeoff “does not necessarily affect the flight tests,” Beaudoin said.
“It’s a busy test schedule for one year, but we’ve planned it and it’s doable,” the CEO said. “As we learn and achieve milestones, we will keep our customers informed of how we make progress. Of course we’ll adjust if we need to adjust. But I’ve got no reason this morning to say the 12 months is not realistic.”
His comments followed Bombardier’s release of second-quarter earnings that matched the average of analysts’ estimates compiled by Bloomberg. Excluding some costs and gains, profit fell to $158 million, or 9 cents a share, from $167 million, or 9 cents, a year earlier, the company said in a statement.
Bombardier’s widely traded Class B shares fell 0.2 percent to C$4.95 at the close in Toronto. They have gained 32 percent this year, as Canada’s benchmark Standard & Poor’s/TSX Composite Index climbed 1.3 percent.
“The slipping CSeries schedule remains an overhang,” Joe Nadol, an analyst at JPMorgan Chase & Co. in New York, said today in a note to clients. He has a neutral rating on Bombardier stock.
Revenue rose 8.1 percent to $4.43 billion, beating the $4.31 billion average estimate, while the backlog climbed to $65.5 billion from $64.9 billion at the end of last year.
Bombardier used $566 million of free cash flow in the quarter, down from $608 million a year earlier. Most of the spending, $459 million, was at the aerospace unit, compared with $21 million for the trainmaking business and $86 million in interest and taxes.
The company is investing about $2 billion on new aircraft programs for the second straight year in 2013 and predicted in March that the figure will drop to $1 billion in 2015. Along with the CSeries, Bombardier is developing planes such as the Learjet 85, Global 7000 and Global 8000 business aircraft.
“Cash burn tied to CSeries remains a concern long-term, but short-term sentiment favors upside given the current schedule,” Peter Arment, an analyst at Sterne, Agee & Leach Inc., said today in a report to clients. Arment, who is based in New York, rates Bombardier shares buy.
Bombardier delivered 57 planes in the quarter, five fewer than a year earlier. That included 45 business jets, such as the Challenger 300, and 12 commercial aircraft, such as the Q400 turboprop.
The company had available short-term capital resources of $4.5 billion as of June 30, an amount that includes $3.1 billion in cash and equivalents. That compares with $4 billion and $2.6 billion, respectively, a year earlier, Bombardier said.
Net retirement benefit liabilities dropped to $2.35 billion by June 30 from $2.96 billion six months earlier, mostly because of pension-fund returns and an increase in discount rates.