Via Financial Times

Shares in the Canadian jet and train maker Bombardier suffered one of its steepest one-day declines on Thursday after the company slashed guidance for the fourth-quarter and warned it may withdraw from a joint venture with Airbus to make the A220 aircraft.

Shares in Montreal-based Bombardier initially fell 38 per cent before some losses were pared back after it highlighted continuing problems with its rail unit and said deliveries of several of its Global 7500 aircraft would be delayed.

The company said it now expects its adjusted earnings before interest and taxes for 2019 to come in at $400m when it reports in February, down sharply from a previous forecasted range of $700m to $800m.

It said it expected to deliver just 11 Global 7500 aircraft in 2019, whereas it had earlier planned to ship 15 of the aircraft. The remaining four planes are set for delivery in 2020.

Bombardier added that free cash flow for the fourth quarter had fallen short of earlier forecasts by $650m to stand at $1bn, blaming the timing of cash inflows from some of its large rail transport projects.


the lifeline extended by the provincial government of Quebec to Bombardier in 2015

Additionally, it warned that Airbus Canada’s plans for the A220 aircraft project, previously known as the C Series, now calls for more cash to support the ramp-up in production.

Bombardier will disclose the scale of a possible writedown on the project when it reports its results for 2019 on February 13.

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In 2018 Bombardier sold 50.01 per cent control of the project to Airbus in an effort to reduce debt as part of chief executive Alain Bellemare’s five-year turnround strategy, launched in 2015.

Today Bombardier holds a 33.58 per cent stake in the venture while the government of Quebec holds 16.36 per cent stemming from a $1bn lifeline extended to Bombardier in 2015.

Over the years, federal and provincial governments in Canada have provided billions of dollars in subsidies and interest-free loans to the company, drawing criticism from taxpayer groups.

Bombardier said it was “actively pursuing options” to strengthen its balance sheet and said it would provide details on those efforts next month.

“The final step in our turnround is to de-lever and solve our capital structure,” said Mr Bellemare. “We are actively pursuing alternatives that would allow us to accelerate our debt paydown.”