Bombardier replaces CEO and suspends dividend; reports Q4 loss; shares plunge

Bombardier (TSE:BBD.B), the struggling Canadian plane and train maker, replaced its leadership, suspended its dividends, and unveiled plans to raise more than $2 billion in equity and debt, while reporting a fourth-quarter loss. Shares dived.

Alain Bellemare, a former United Technologies executive, will become chief executive officer tomorrow, replacing Pierre Beaudoin, who will become executive chairman, the Montreal, Quebec-based company said in its quarterly earnings statement today. Pierre Beaudoin’s father, Laurent Beaudoin, who led the company for more than 30 years, will retire as chairman.

Bellemare becomes only the second outsider to run the family-controlled company since Bombardier began operating in 1942 as a maker of snowmobiles in rural Quebec.

Bombardier said it plans to raise about $600 million in equity and up to $1.5 billion in new long-term debt.

It will suspend dividends on both Class A and common shares until further notice. Bombardier paid out $182 million in dividends in 2014, down from $196 million a year earlier.

Bombardier said it would explore other options to reduce debt, including “certain business activities’ potential participation in industry consolidation.”

Free cash flow “would be more appropriately applied to bolstering the corporation’s financial structure and investing in its core programs and businesses,” Bombardier said in the statement.

The CEO change and capital-raising moves underscored the pressure on Bombardier from the CSeries, a $4.4 billion program that has become a make-or-break project.

“This is a new beginning, both for myself and for Bombardier,” said Bellemare in the statement. “We must improve profitability and realize the true potential of this great organization.”

The announcements follow a profits warning on January 15 that led to a 25 percent fall in the company’s share price.

Bombardier reported today a fourth-quarter loss due to a $1.4 billion charge relating to its decision to suspend development of a new Learjet model, announced last month. Net loss was $1.6 billion, or $0.92 per share, in the October-to-December quarter, compared to a profit of $97 million, or $0.05 per share, in the same period a year earlier.

Bombardier said its profit excluding items was $0.04 per share, down from $0.07 per share a year earlier. The latest results beat analyst expectations for a profit of $0.02 per share.

Revenue rose to $5.96 billion, also beating expectations, up from $5.32 billion.

Free cash flow in the quarter, which is traditionally Bombardier’s strongest period for plane deliveries, fell to $590 million from $771 million a year earlier.

Worries have increased over Bombardier’s ability to meet its timetable to launch its new C Series jet by the end of 2015. The aircraft is meant to compete with aerospace titans Boeing Co. and Airbus in the 100-plus seat category, but it has been marred by delays and technical hurdles.

The C Series has secured only 243 firm orders, well short of the 300 that the company has targeted ahead of the plane’s entry into service, scheduled for this year.

Shares tumbled 14 percent to $2.62 at 9:53 a.m. in Toronto, stretching losses this year to 37 percent.

Story by ProactiveInvestors