Bombardier Backs Away From 2020 Forecast, Plans Belfast Sale

(Bloomberg) -- Bombardier Inc. backed away from its 2020 forecast and said it would sell a Northern Ireland wing factory as the company extends a revamp to focus primarily on making luxury jets and trains.

The manufacturer is unable to provide any “precision’’ on its financial goals for next year, Chief Financial Officer John Di Bert said on an earnings call Thursday. Bombardier also announced the formation of a new aerospace division that will oversee private aircraft and CRJ regional jets.

The cloudy outlook underscores the challenges still facing Chief Executive Officer Alain Bellemare, who began a five-year turnaround of the debt-laden company in 2015. While the planned divestiture in Belfast would further his overhaul, the potential sale will face uncertainty around Britain’s planned split from the European Union.

It still isn’t clear whether barriers will be erected between Northern Ireland and mainland Britain after a divorce. The exit has been postponed until Oct. 31, and a chaotic no-deal scenario that would snarl trade -- the worst-case for businesses -- hasn’t entirely been ruled out.

Bombardier fell 5.8 percent to C$2.21 at 10:02 a.m. in Toronto. That came on the heels of a 15 percent one-day decline a week ago, when Bombardier cut its 2019 sales and profit forecast, denting an advance earlier in the year.

‘Potential Buyers’

Bombardier last year handed control of its C Series jetliner to Airbus SE, which Airbus renamed the A220. The Belfast factory makes wings for the single-aisle plane.

“The government will work with potential buyers to take this successful and ambitious business forward,” U.K. Business Secretary Greg Clark said in a statement about the Belfast plant.

The biggest players in aircraft parts include U.S.-based Spirit AeroSystems Holdings Inc. and Triumph Group Inc., plus Britain’s GKN, acquired last year by Melrose Industries Plc in a $10 billion hostile takeover.

“Selling Belfast would further distance Bombardier from the A220,” JPMorgan Chase & Co. analyst Seth Seifman said in a note to clients. “This makes it a prized asset and with Airbus still ramping production of a young program, we imagine it will have an opinion about who owns this integral piece of it.”

Spirit said Wednesday that it was looking for acquisitions to diversify away from its dependence on Boeing Co. and the 737 Max, which has been grounded since March after two fatal crashes in five months.

“If Airbus does not want the asset itself, another possibility is Spirit AeroSystems,” Seifman said.

Beyond Bombardier

Belfast plant chief Michael Ryan told Bloomberg in November that he planned to look beyond Bombardier for growth as the company shrank its aerospace business, adding that all options would be considered, with “nothing out of the question.”

There are “no new workforce announcements as a result of this decision,” the Northern Ireland operation said.

Bombardier said it would also look to sell an aerostructures plant in Morocco.

A new division called Bombardier Aviation will oversee the Global, Challenger and Learjet private aircraft, the manufacturer said in a statement. Bombardier said the unit will also “maximize the value of its proven CRJ regional jets,” a business for which the company has been exploring strategic options.

Geographic Footprint

Bombardier Aviation will retain a geographic footprint stretching from Montreal to Texas and Mexico. The division will be led by David Coleal, the head of Bombardier’s business-jet operations. Bombardier expects to close a sale of its turboprop operations this year.

The Montreal-based company burned through $1.04 billion on a free cash flow basis in the first quarter, more than the expected outflow of $947.2 million. Sales fell 13 percent to $3.52 billion. That fell short of the $3.67 billion expected by analysts.

Bombardier last week pared its 2019 outlook for sales and profit, citing challenges in its rail-equipment business.

--With assistance from Emma Ross-Thomas and Christopher Jasper.

To contact the reporter on this story: Brendan Case in Dallas at [email protected]

To contact the editors responsible for this story: Brendan Case at [email protected], Tony Robinson

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