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Bombardier’s Q4 results don’t reflect potential: Beaudoin

"Our results in 2012 are not reflective of our potential as we faced some execution issues,'' CEO Pierre Beaudoin said Thursday during a conference call to discuss the Montreal-based company's latest financial report.

Beaudoin said Bombardier is at a "turning point'' and "forging ahead with breakthrough products and expanding our reach in pivotal growth markets.''

He pointed to a drop in transportation revenue generated from China, a traditionally strong market that he said will significantly increase in 2013.

He also noted that the company had nearly US$67 billion of orders booked at the end of 2012.

However, Beaudoin told analysts that margins and aircraft deliveries will be weaker than thought in 2013.

The Montreal-based company said net income for the fourth quarter fell by US$200 million in 2011 to just US$14 million for the three months ended Dec. 31 – mostly due to weak results from its rail division.

The 2012 fourth quarter included a US$119-million charge for restructuring related to the closure of a Bombardier Transportation plant in Aachen, Germany, and the previously announced reduction of 1,200 employees worldwide.

Bombardier, which reports in U.S. dollars, said its adjusted profit, which excludes the restructuring and other special items, was also down year-to-year but less dramatically.

Adjusted earnings were down $39 million or 17 per cent to $188 million or 10 cents per share. Bombardier's rail division was
responsible for most of the decline.

Analysts had expected Bombardier to earn 10 cents per share in adjusted profits in the quarter, according a consensus estimate compiled by Thomson Reuters.

The adjusted earnings excluded seven cents per share in restructuring charges, and two cents per share in other special
charges that were included in the net income results.

Overall revenue for the quarter rose to $4.7 billion from $4.3 billion a year earlier, with all due to Bombardier Aerospace.

Revenue at Bombardier Transportation fell from a year earlier to $2.16 billion from $2.3 billion in the fourth quarter of 2011.

Cameron Doerksen said the weak margins in both divisions are disappointing but investors will be more concerned by the "soft'' margin guidance for 2013.

"While we believe that the street had relatively low expectations for margins in 2013, the guidance in aerospace is lower
than our current forecast and likely below consensus,'' he wrote in a report.

"The push-out of transportation's margin target to 2014 should not be a surprise as most forecasts (including ours) were not
assuming the level of profitability for 2013 anyway.''

However, he noted that the margin guidance for 2014 is consistent with his forecast and the new CSeries regional jet for commercial airlines seems to be on track for first flight by June.

Bombardier expects to deliver 245 planes in 2013, including 190 business jets, 55 regional planes, lower than his expectations of 254 deliveries (183 business jets, 67 regional planes and four amphibious planes).

The company expects aircraft program development costs to decline by $500 million in 2014 and another $500 million in 2015.

While it says the CSeries is on schedule, it has delayed the entry into service of the composite Learjet 85 by about six months
to mid-2014.

Benoit Poirier of Desjardins Capital Markets said that although the results were weak, the long-term outlook is strong.

"We continue to believe that Bombardier's shares represent attractive value for long-term investors,'' he wrote in a report.

Bombardier It has 33,600 employees and production facilities in 24 countries. It is the world's third-largest commercial aircraft
manufacturer, largest maker of business jets and trains.