Bombardier Inc. has dismissed the potential impact of a Trump presidency on its operations as it reported a narrower third-quarter loss and said profitability for the full year would be better than previously expected.
The shares jumped 9.5 per cent to close at $1.96 in Toronto trading on Thursday, their biggest one-day gain since April.
“We still have a lot of work ahead of us, but Bombardier today is a much better and stronger company than it was a year ago,” Bombardier chief executive Alain Bellemare said in a conference call.
Mr. Bellemare is one year into a five-year comeback effort for Bombardier, which faced a cash crunch in 2014 when it was trying to bring multiple products to market. He has since reduced the company’s risk by securing more liquidity and concentrating resources on the C Series airliner. Now, the focus is on rebuilding earnings and cash flow with an aim of generating EBIT margins of 8 per cent companywide by 2020.
Those plans probably will not be derailed by decisions Donald Trump makes when he is U.S. president, at least as they relate to Bombardier’s supply chains and operations, Mr. Bellemare said.
Among the questions investors are asking is how a Trump presidency will affect companies with operations in Mexico. That includes many auto makers as well as Bombardier, which has both rail and aerospace manufacturing facilities there. Mr. Trump directed significant hostility towards the country during the campaign, pledging to build a wall along the Mexican-U.S. border and scrap the North American free-trade agreement among other moves.
“I think it would be too early to speculate about what that would imply from a trade perspective,” Mr. Bellemare said, noting that Bombardier is a global player with manufacturing power on several continents. “But I feel, you know, that it shouldn’t impact our operations at all.”
There are other questions about what a Trump administration would mean for aerospace companies and rail equipment manufacturers. Bombardier is the only company in the world that is in both camps, because it makes planes and trains.
In aerospace, a key question is the future of the Export-Import Bank of the United States, a government corporation that finances foreign purchases of U.S.-made goods such as aircraft. Boeing Co. has historically been the biggest beneficiary of the bank, with its commercial airliners representing the majority of Ex-Im deals as measured in dollars, said Scott Hamilton, an aerospace consultant with Leeham & Co.
Mr. Trump has sided with those who see the bank as a poster child for corporate welfare. If he closes it, Boeing rivals including Bombardier would gain an advantage, Mr. Hamilton said. “Bombardier would be able to offer Canadian export financing support in [sales] campaigns where Boeing would not.”
In trains, Bombardier also could benefit from Mr. Trump’s campaign pledge to spend $1-trillion (U.S.) on infrastructure over the next five years, one analyst says. Macquarie Capital Markets analyst Konark Gupta notes that 16 per cent of Bombardier’s train-unit sales currently come from North America. However, the company has struggled to deliver streetcars on time to Toronto.
Montreal-based Bombardier reported a net loss of $94-million, or 4 cents a share, for its most recent quarter. That is a dramatic improvement from the $4.9-billion, $2.20-a-share loss a year ago when it booked a charge on the C Series and Learjet 85 programs. Revenue fell 9 per cent to $3.74-billion.
Not including special items, Bombardier broke even on a per-share basis. Cash burn was $320-million, better than analysts predicted. This marks the third straight quarter the company has generated margins on earnings before interest and taxes, excluding special items, topping 6 per cent in each of its business units. It now expects full-year EBIT of between $350-million and $400-million, at the high end of previous guidance.Report Typo/Error