Bombardier reported a $200 million loss in its first quarter earnings, citing disruptions due to COVID-19 as leading factors.
Citing a "significant slowdown" in the month of March when the pandemic hit, the plane and train-making company was forced to stop all non-essential manufacturing in its plants and factories. As a result, this led to a $13.6 billion business aircraft backlog at the end of the quarter.
Aviation’s production rates are being aligned to market demand, which is expected to be down by 30 to 35 per cent year-over-year.
The company also confirmed that all of the previously announced divestitures are continuing to progress towards closing.
“Bombardier is taking the right actions to manage the impact of the COVID-19 pandemic,” said Éric Martel, president and CEO, Bombardier Inc. “As the crisis unfolded, we acted swiftly to protect the health and safety of our employees and support our customers to the best of our ability. We also managed our operations to reduce costs, preserve cash and ensure sufficient liquidity to operate our business as we complete the ongoing divestitures necessary to address our balance sheet. This includes an ongoing dialogue with governments where we have major operations regarding additional support programs, should they be necessary, to navigate through an extended crisis.”
In the last week of March 2020, Canadian operations, where Global and Challenger aircraft are assembled and delivered, were temporarily suspended due to the global COVID-19 pandemic.
Free cash flow for the quarter was negatively impacted by delayed aircraft deliveries caused by travel restrictions and production shutdowns, as well as a slowdown in order intake tied to the economic uncertainty. This resulted in an estimated $400 million to $500 million free cash flow shortfall for the quarter.
The revenues and earnings impact of the production slowdown, supply chain shortages and other disruptions is expected to increase as the situation extended into April and May 2020.
Bombardier has pro forma liquidity of approximately $3.5 billion, which includes $2.1 billion of cash on hand, access to the undrawn amount of approximately $860 million on Transportation’s revolving credit facility at March 31, 2020, and approximately $550 million of proceeds from the sale of the CRJ program, which is set to close June 1, 2020 as all closing conditions have been met.
Notwithstanding the impact of reduced activity and travel restrictions in the second half of March due to the global COVID-19 pandemic, Bombardier reported consolidated revenues of $3.7 billion in the quarter, increasing by eight per cent and five per cent year-over-year.
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