Canada’s Bombardier Inc. on Thursday reported slightly weaker-than-expected quarterly results and a sharp jump in spending, which sparked some analyst concern about the company’s liquidity as it continues to pour money into its CSeries aircraft program.
Shares of the aircraft and train maker sank as much as 8.2 percent, reversing Wednesday’s big gains, before paring losses.
Bombardier, which has pumped billions of dollars into its CSeries program, said free cash flow usage during the first quarter rose more than 35 percent to $915 million from $590 million a year ago.
“We don’t anticipate to have to go back to any sources to increase our liquidity. We have ample liquidity to meet our plan,” chief executive Pierre Beaudoin said, noting the company was reaffirming its full-year capital expenditure of between $1.6 billion and $1.9 billion.
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“We don’t think we need to borrow government money on this program, that’s already been done,” he said.
Montreal-based Bombardier, the parent company of Learjet, said it had short-term capital resources of $3.9 billion, including cash and cash equivalents of $2.5 billion as of March 31. Last month, Bombardier issued $1.8 billion in notes, with some proceeds going to refinance about $1.3 billion of existing debt.
Beaudoin reiterated the company’s expectation it will reduce investment spending as the year progresses and have good cash flow by the fourth quarter, a typically strong delivery period.
“The cash burn has been a topic of concern for some time,” said Raymond James Ltd analyst Steve Hansen.
“They’ve done a good job at assuaging some of the concerns here over the short term, although whenever you see a headline number as large as it was in the quarter, it probably brings those concerns back to the surface,” Hansen said.
Though Hansen said he did not have any near-term liquidity concerns, “It’s just when you start looking over a longer period of time, over the next year or two, if they continue at high rates without some sort of offset, that’s where people start to get concerned.”
Bombardier posted lower-than-expected first-quarter revenue, which some analysts attributed in part to weaker pricing in business aviation.
Revenue in the aerospace division fell 9 percent to $2.1 billion in the first quarter.
Total revenue rose about 2 percent to $4.35 billion, but fell short of the average analyst estimate of $4.58 billion, according to Thomson Reuters I/B/E/S.
Revenue in the transportation business rose nearly 10 percent to $2.3 billion.
Bombardier said it was making progress with the CSeries program, with 280 hours of flight testing so far. The fourth test plane was expected to complete its first flight in the coming weeks.
The company said results, which included climate tests, reaching maximum operating altitude and speed, were in line with expectations.
The costly CSeries, which has 203 firm orders so far, could be Bombardier’s ticket to the big leagues, competing with the smaller planes made by rival Boeing Co and Airbus Group.
Beaudoin said he was “very confident” that the CSeries will still reach its target of 300 firm orders by the time the first plane enters service and that it had quite a few very active campaigns.
When asked whether the CSeries would make an appearance at the Farnborough International Airshow this summer – where big, splashy industry deals are often made – Beaudoin said plans were not yet finalized, but that flight testing was the priority.
Bombardier Aerospace’s backlog totaled $38.5 billion, higher than the $37.3 billion at the end of December. Order backlog in the transportation business totaled $38.4 billion, up from $32.4 billion at the end of December.
The company delivered a total of 56 aircraft in the quarter, compared to 53 a year earlier.
Bombardier, which announced in January it would cut 1,700 aerospace positions, said it has downsized by about 1,430 and that rest of the cuts would occur over the next couple of quarters.
The company’s net income fell to $115 million, or 6 cents per share, in the quarter, from $148 million, or 8 cents per share, a year earlier.