Revenues increase 12% year-over-year to $4B, highlighting top-line growth acceleration
Strong order activity drives backlog expansion at Transportation, Business Aircraft, and Commercial Aircraft
Consolidated EBITDA(1) and EBIT before special items(1) of $265M and $201M respectively; EBIT margin(2) increases to 5%
Free cash flow usage(1) of $721M, in line with plan and full year breakeven target
Airbus partnership expected to close before the end of the second quarter, ahead of schedule(3)
Entered into a definitive agreement to sell Downsview property to the Public Sector Pension Investment Board, increasing liquidity by more than $550M
New Centre of Excellence for Global business aircraft planned at Toronto Pearson International Airport
Bombardier (TSX: BBD.B) today reported its first quarter 2018 results, marked by strong top-line growth. Consolidated revenues reached $4.0 billion, a 12% increase over the same period last year, mainly driven by the ramping up of major projects at Transportation and improving market conditions at Business Aircraft.
“We continue to deliver on our financial commitments and make solid progress executing our growth programs and strategic initiatives,” said Alain Bellemare, President and Chief Executive Officer, Bombardier Inc. “We’ve successfully reached the halfway point of our turnaround plan with a strengthened balance sheet and a clear focus on execution and growth.”
Steady order momentum at Transportation led to a book-to-bill ratio(4) of 1.0 for the quarter, while this segment's backlog grew to $35.7 billion. Business Aircraft's order backlog also increased to $14.3 billion in the first quarter. Subsequent to the end of the quarter, Commercial Aircraft announced that it has signed purchase agreements with Ethiopian Airlines for up to 15 Q400 aircraft and with American Airlines for up to 30 CRJ900 aircraft, increasing the CRJ Series and Q400 backlogs to over 50 aircraft each.
Bombardier's EBIT margin rose by 80 basis points to reach 5% for the first time since the launch of the Company's turnaround plan. This expansion was driven by strong revenue growth, including growth in aftermarket activities, and by operational improvements. EBITDA and EBIT before special items stood respectively at $265 million and $201 million for the quarter, reflecting strong earnings power.
Free cash flow usage of $721 million was in line with Bombardier's plan, as major rail projects continue to ramp up and the Global 7000 prepares for certification and entry in service later this year. Investments in working capital during the first quarter amounted to $594 million, mostly attributable to inventories and contract assets as we prepare for an acceleration of deliveries later this year. The Company remains on track to achieve free cash flow breakeven for the full year.
Bombardier also announced that it has entered into a definitive agreement to sell its Downsview property for gross proceeds of approximately $635 million to the Public Sector Pension Investment Board (PSP Investments), subject to customary closing conditions. The transaction is expected to close in the second quarter of 2018, increasing cash by more than $550 million net of transaction and other associated costs. Additionally, pursuant to a lease agreement with PSP Investments, Bombardier will continue to operate from Downsview for a period of up to three years following closing, with two optional one-year extension periods.
In parallel, Bombardier also entered into a letter of agreement with the Greater Toronto Airports Authority (GTAA) for a long-term lease of approximately 38 acres of property at Toronto Pearson International Airport on which Bombardier is planning to open a new centre of excellence and final assembly plant for its Global business jets. Details on this new leased facility will be provided at a future date.
“As part of Bombardier’s five-year turnaround plan, we have been reviewing our facilities worldwide to ensure we have the most efficient and cost effective operations necessary to support our growth objectives,” said Mr. Bellemare. “Today, we only use about 10 percent of a 370-acre site at Downsview and bear the entire cost of operating a 7,000-foot runway. So, we are very pleased to have reached agreements with PSP Investments and the GTAA. Together, they allow us to monetize an underutilized asset, further streamline and optimize our business aircraft operations, and will support further economic development and job growth in the Greater Toronto area.”
SEGMENTED RESULTS AND HIGHLIGHTS
During the first quarter of 2018, Business Aircraft returned to growth with a 9% revenue increase, reaching $1.1 billion through the delivery of 31 aircraft and an increase in aftermarket activities.
EBIT before special items also continued to trend upward, increasing by $16 million year-over-year, to 8.8%. This 20% increase in profitability was driven by an improving mix of aircraft sales and aftermarket services, and a strong discipline in managing costs.
The stronger order activity experienced in the final weeks of 2017 carried on into the first quarter, driving backlog growth to $14.3 billion.
The Global 7000 aircraft continued to perform extremely well and to exhibit a high level of reliability towards its expected entry into service during the second half of 2018. On April 15, 2018, Bombardier revealed that the Global 7000 business jet now boasts an outstanding range of 7,700 nautical miles, connecting more city pairs than any other business aircraft. The Global 7000 aircraft is now the largest and the longest range business jet ever built, and is able to fly a full 300 nautical miles farther than initial commitment.
In the first quarter, Business Aircraft continued to grow its aftermarket portfolio and announced a suite of new products that are available for retrofit, addressing market demand for cabin and cockpit upgrades as well as regulatory compliance among Bombardier’s large installed base of 4,700 jets.
The C Series aircraft ramp-up continues to progress, with 5 deliveries during the first quarter. There are currently 31 C Series aircraft in service with Swiss International Air Lines (Swiss), Air Baltic Corporation AS (airBaltic), and Korean Air Lines.
Nearly all regulatory approvals have been obtained for the announced partnership with Airbus for the C Series aircraft. Completion of the transaction is currently expected before the end of the second quarter of 2018, ahead of originally planned. With the recent increase in Bombardier’s participation in CSALP to 65%, the Corporation is expected to own approximately 33% of the same entity following the closing of the transaction with Airbus.
We also delivered 6 CRJ Series and 2 Q400 aircraft during the quarter, in line with our lower production output for the year.
Subsequent to the end of the quarter, we announced that we have signed purchase agreements with Ethiopian Airlines for up to 15 Q400 aircraft and with American Airlines for up to 30 CRJ900 aircraft, increasing the CRJ Series and Q400 backlogs to over 50 aircraft each.
Aerostructures and Engineering Services
Revenues in the first quarter continued to grow, increasing by 21% year-over-year (or 10% excluding currency impact) to $2.4 billion, driven by the ramp-up of key projects. Revenues increased across all segments, comprising rolling stock and systems, services and signalling.
The major project ramp-up phase initiated mid-2017 continued in the early months of 2018, building working capital to support the increase in production to meet an acceleration of deliveries expected later during the year.
EBIT before special items increased to $189 million in the first quarter, continuing to trend at or above an 8.0% margin.
Supporting future growth, our order intake reached $2.3 billion in the first quarter, bringing our book-to-bill ratio(4) to 1.0 for the period, and our backlog to $35.7 billion. Orders were signed across geographies including Europe, North America and Asia-Pacific, and include significant contract extensions and exercise of options by customers. In addition, the majority of new orders were in support of our strategy to re-use existing technologies, increasing our ability to leverage recent investments and grow margins.