Thursday, regional and business aircraft maker Bombardier Inc. (BBD-B.TO, BBD-A.TO) posted a higher profit in the fourth quarter, but said it would reduce about 10% of Aerospace's total workforce to embark upon the ongoing challenges perturbing the aviation industry.
The Learjet maker's fourth-quarter net income was US$309 million or US$0.17 per share, compared to US$218 million or US$0.12 per share in the prior year quarter.
Revenues for the latest quarter ascended to US$5.43 billion from US$5.27 billion reported in the corresponding quarter of the previous year.
The effective income tax rate was 18.5% for the recent quarter compared to a statutory income tax rate of 31.5%. The lower effective tax rate is mainly due to a net change in the recognition of tax benefits relating to operating losses and temporary differences, partially offset by permanent differences and a write-down of deferred income tax assets.
Bombardier Aerospace generated fourth-quarter revenue of US$2.8 billion, down from the previous year's revenue of US$2.9 billion, dented by a downturn in service revenues, primarily due to lower fractional ownership and hourly flight entitlement programs' service activities, resulting from fewer hours flown by customers. Lower revenues from product support activities, mainly due to lower maintenance revenue from business aircraft customers as a result of lower flight activity and the current economic context, also impacted the revenues.
In addition, Bombardier Aerospace is revising down all of its business and regional jets production rates and implementing measures to meet the continuing challenges facing the aviation industry. This tweaking would result in a further reduction of about 10% of Aerospace's total workforce, or about 3,000 employees, at its facilities in Canada, United States, Mexico and Northern Ireland by the end of calendar year 2009.
The recent job cuts is in addition to the 1,360 layoffs announced last February, when Bombardier adjusted the production rates of its Learjet and Challenger aircraft. Severance costs associated with these layoffs are expected to total about US$30 million, the company added.
Bombardier Transportation's revenues amounted to US$2.7 billion for the three-month period ended January 31, 2009, up from US$2.4 billion reported a year earlier. The company attributed the revenue growth largely to increased activity in the rolling stock division, reflecting higher activity in the regional train segment, mainly in the Netherlands, the U.K. and France, and in the locomotive segment, mainly in Germany and Spain. The increase was partially offset by a negative currency impact.
For the full year, locomotive, railcar and rail related products manufacturer reported net income of US$1.01 billion or US$0.56 per share, compared to US$317 million or US$0.16 per share last year.
Annual revenues for the year ended January 31, 2009 totaled US$19.7 billion, an increase of 13%, compared to US$17.5 billion in the previous year.
Pierre Beaudoin, President and Chief Executive Officer of Bombardier said, During the past year, we more than held our own as the world's financial markets tumbled and the global economy weakened. In fact, we reached a milestone with net income rising to US$1 billion, for the first time in our history and our EPS more than doubled to reach US$0.56 from US$0.16 last fiscal year.
As of January 31, 2009, Bombardier 's overall backlog stood at US$48.2 billion, compared to US$53.6 billion as at January 31, 2008. The decrease is due to the impact of the weakening of foreign currencies compared to the U.S. dollar on Bombardier Transportation's backlog.
Future On Focus
Looking ahead, the company said Transportation is well on its way to achieving its 6% target for fiscal year 2010, anchored in a 6.2% EBIT margin reported in the fourth quarter, and 5.3% for the full fiscal year.
As the business aircraft demand has exacerbated rapidly during the second half of calendar 2008 and is expected to remain weak for the foreseeable future, Aerospace unit currently expects to deliver about 25% less business aircraft this fiscal year, compared to fiscal year 2009, while still expecting to increase deliveries of its commercial aircraft by 10% compared to last fiscal year.
Beaudoin added, There is no doubt that we are going through challenging times and our business environment is changing fast. There's a need for prudent execution, clear priorities and decisive action in the current context.
Last December, a 3.75 billion euros letter of credit facility agreement was negotiated for Bombardier Transportation with a syndicate of first quality international financial institutions.
Expansion of Bombardier's newly launched aircraft the CRJ1000, the Learjet 85 and CSeries aircraft programs are progressing as scheduled. In March 2009, Deutsche Lufthansa AG signed for 30 CS100 aircraft with options for an additional 30 CSeries aircraft and Lease Corp. International for three CS100 and 17 CS300 jetliners with options for a further 20 CSeries aircraft.
These new product developments will enable Bombardier to re-allocate as many employees as possible who meet the requirements of open positions, thereby reducing the number of layoffs resulting from the decrease in production rates, the company said.
Deal with Lloyds TSB, London Eastern Railways
In a separate communiqué, Bombardier Transportation has announced signing an order valued about EUR 188 mln or US$249 mln with Lloyds TSB and London Eastern Railways, a subsidiary of National Express, for 30 four-car BOMBARDIER ELECTROSTAR Electrical Multiple Unit or EMU trains plus a three year maintenance agreement.
The company noted that the new EMUs would operate on the Stansted Express services between Stansted Airport and London city. The new ELECTROSTAR trains are designed for service speeds of up to 160 km/h and are equipped with large luggage racks, saloon air conditioning, comprehensive Closed Circuit Television or CCTV coverage for greater passenger security, and a WiFi system to enhance the level of passenger communication and information to and from the trains.
Additionally, Bombardier stated that all 120 coaches would be delivered between March and June 2011. The new ELECTROSTAR fleet would replace the older Class 317 fleet. Further, Bombardier would maintain the fleet using the operator's Maintenance Depot at Ilford.
BBD-B.TO shares, which have been trading between C$2.22 and C$8.97 in the past 52 weeks, closed Wednesday's trading session at C$3.04. BBD-A.TO closed Wednesday's trading at C$3.11.
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