Newspaper article The Canadian Press

Bombardier Says CSeries Delays Pushing Program Cost Up to US$4.4 Billion

Newspaper article The Canadian Press

Bombardier Says CSeries Delays Pushing Program Cost Up to US$4.4 Billion

Article excerpt

Bombardier CSeries to cost US$4.4 billion

--

MONTREAL - Bombardier insists its CSeries commercial aircraft will be a financial success even though the airplane's cost will rise to about US$4.4 billion as delays in first deliveries add about US$1 billion in development costs and capitalized interest.

The Montreal-based aerospace and rail equipment manufacturer disclosed the higher costs Thursday on the same day it report quarterly adjusted earnings that came in well below estimates.

Investors responded with a major sell-off that saw Bombardier (TSX:BBD.B) shares knocked down 36 cents, or 8.91 per cent, to $3.68 on massive volume of some 49.2 million shares, almost six times their daily average.

The shares had hit a new 52-week low of C$3.44 in morning trading on the Toronto Stock Exchange.

Bombardier -- which has delayed entry of its CS100 plane to the second half of 2015, with the larger CS300 six months after that -- said Thursday that it now epects to spend $750 million on development costs through 2016 and about $300 million in interest.

It previously estimated the CSeries would cost US$3.4 billion under GAAP accounting standards and US$3.9 billion under new IFRS rules.

Despite the delays and higher costs, chief executive Pierre Beaudoin said he remains bullish about the new plane.

"With the investments we are showing you on the CSeries, we feel very good about the business case for the (airplane)," he said during a conference call to discuss fourth-quarter and 2013 results.

Beaudoin declined to say how many aircraft need to be sold to break even, but said the CSeries program will generate US$5 billion to US$8 billion a year in revenues at maturity and help to improve the company's overall profitability.

"Our potential is enormous and we're excited about our future. Our investments are about to pay off," he said.

The sell-off came as Bmbardier reported adjusted net income fell 29 per cent to US$129 million in the fourth quarter, down from US$181 million a year earlier.

That translated into seven cents per share, compared to 10 cents per share in the prior year and four cents less than the 11 cents analysts surveyed by Thomson Reuters expected.

Despite the miss on earnings, revenue was slightly better than expected, rising to US$5.3 billion for the three months ended Dec. 31 from US$4.6 billion a year earlier.

Reporting in U.S. dollars, the company's net income under standard accounting, before adjustments, was $97 million or five cents per share, which compared with a year-earlier loss of $4 million or one cent per share.

The results are the first since the company again delayed the entry into service of the 110- to 160-seat CSeries by up to two years from the original date and announced the layoff of 1,700 aerospace workers in North America.

The aircraft has flown 100 hours of testing, well short of the 2,400 required to receive Transport Canada certification. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.