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Bombardier lifts 2025 financial targets, production amid strong business jet market

Published 03/23/2023, 07:06 AM
Updated 03/23/2023, 05:06 PM
© Reuters. A Bombardier Global 6500 aircraft is pictured during the European Business Aviation Convention & Exhibition (EBACE) in Geneva, Switzerland, May 23, 2022. REUTERS/Denis Balibouse

By Allison Lampert and Abhijith Ganapavaram

MONTREAL (Reuters) -Business jet maker Bombardier (OTC:BDRBF) Inc on Thursday raised 2025 revenue and free cash targets at its investor day and said it would produce more planes, despite broader economic headwinds.

Corporate jet makers have reported swelling order backlogs on persistent strong demand for private flying in the U.S. But flatter global traffic, supply chain snags and the possibility of a recession remain concerns.

Bombardier shares were up about 6.5% in afternoon trading.

Bombardier Chief Executive Eric Martel told investors he expects tailwinds such as a growing backlog and few pre-owned planes available for sale to overcome headwinds like delays on parts.

Supply chain "is improving, but certain issues are persisting," Martel said. On the order side "it's a little slower" compared with 2022, but Bombardier remains comfortable with its backlog, he said.

Martel said the company expects to produce about 150 business jets by 2025, and is targeting more than $9 billion in annual revenue for that year, up from $6.9 billion in 2022.

Bombardier has been paying down debt and is targeting stronger free cash flow generation of more than $900 million in 2025 after being hit by a cash crunch while bringing new planes to market a decade earlier. It had a debt of about $5.6 billion as of Thursday.

Speaking later with reporters in Montreal, Martel added that while recent turmoil in the banking world had not led to buyers failing to make payments or to take deliveries, the company was seeing "hesitation."

Bombardier did not disclose a 2025 capital expenditures target, raising questions over the timing of company plans for a new, clean-sheet plane to market.

Martel said he does not see how the company could produce a new clean-sheet jet without spending billions of dollars.

Higher free cash flow in 2025 and an expected improvement in the company's credit rating to near investment grade levels would give Bombardier options for allocating capital. That could include reinvestment in its existing product lines, deals, or launching a new aircraft, the company said.

"We will only make investment decisions with the right balance sheet and not strain it by taking too much on at once," Chief Financial Officer Bart Demosky said.

Desjardins analyst Benoit Poirier said Bombardier's free cash, revenue and deliveries targets were stronger than expected and deemed the lack of a capital expenditures commitment less risky.

"A clean sheet design has received pushback from investors," Poirier wrote.

© Reuters. Bombardier workers Patrick Turcotte and Emilie Briere install an aluminium skin panel on the cockpit of the Challenger 650 business jet at the Bombardier's Challenger manufacturing center in Montreal, Canada March 23, 2023. REUTERS/Allison Lampert

Bombardier also said it anticipates tripling its revenue from defense sales and services to more than $1 billion in the second half of the decade.

The company expects an adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 18% in 2025, down from an earlier target of 20% on high inflation on materials, Demosky said.

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