Plane deliveries for Bombardier Inc. fell 20 per cent last year, but the business aircraft division roared back from lifelessness to post a top-flight fourth quarter.
The Montreal transport giant reported yesterday that it shipped 244 airplanes for the year ended Jan. 31, down from 302 in 2009. Orders booked last year, though, totalled 201, compared with 11 orders net after cancellations in 2009.
Deliveries were down in all segments and categories: Lear, Challenger and Global in corporate aircraft and regional jets and turboprops in commercial aircraft -even water-bombers slipped from five to four.
Commercial airliner deliveries fell to 97 from 121 in 2009, and business jets from 176 to 143, including sales to its own Flexjet fractional ownership subsidiary. But although the new orders on the commercial side gained slightly, registering 93 orders last year, up from 88 in 2009, the turnaround in business jets was dramatic.
Orders for the division amounted to a turnaround of 192 units; it racked up 107 orders last year, compared with a net loss of 85 orders in 2009 after prospective buyers cancelled orders en masse in the wake of the economic recession. Of the 107 business jet deals, 74 came in the fourth quarter ended Jan. 31.
David Tyerman, an analyst with Canaccord Genuity Corp. in Toronto, summed up that quarter in one word: "Awesome."
"This in an incredibly strong bounce-back" after the business aircraft swoon of the last two years, he noted.
He said that others business aviation firms, including Bombardier rival Gulfstream Aerospace Corp. and Cessna Aircraft as well as tier-one suppliers like Rockwell Collins, were also reporting exceptional performances, suggesting the bottoming-out of the sector has given way to a resurgence.
"Okay, one quarter doesn´t make a trend, but still, this is a bit of a positive shock," Tyerman said. "It´s surprisingly good and augurs well for future quarters." He added that the fall-off in deliveries last year was not a surprise and was in line with guidance Bombardier has provided.
In a note to clients, Montreal analyst Cameron Doerksen of National Bank Financial also called the last-quarter business-jet orders "exceptional" and "the most positive piece of news."
"Seventy-four net new business jet(s) ... is an exceptional order total considering that for the first three quarters of the year, total business jet orders were only 33."He said that indicates the slump in business jets has probably hit its "trough."
In spite of the healthy outlook, Doerksen actually lowered his rating on Bombardier on account of the 30-per-cent hike in its share price in the last few weeks. The stock again rose yesterday, hitting another 52-week high of $6.50.
Doerksen increased his 12-month share target from $6.50 to $7, but wrote that he lowered the rating because shares´ stellar recent performance renders the stock "less compelling."
But asked if Bombardier got good prices for its business jets, Tyerman replied: "That´s a really good question."
"Certainly, I don´t think they got the prices they could charge (in 2008), but they´ve stopped going down. But they´re not at the top, not the really strong margins you would hope for."
In a statement, Bombardier Aerospace president and COO Guy Hachey said that "we believe our fundamentals are strong in the long term for both the business and commercial aircraft markets."
"Over the past years, we have taken significant steps to strengthen our operations and continue to invest in our future programs. By meeting the challenges of today and setting our sights on the future, we believe we are creating a loyal customer base for our products and services, and will emerge from this difficult environment a stronger and more efficient company."
Bombardier expects to deliver 150 business aircraft this calendar year and 90 commercial airplanes.The company is implementing three significant changes simultaneously this year: it´s changing its long-standing fiscal year-end from Jan. 31 to Dec. 31 to align with the calendar year -and with most companies; this means that if approved at a board meeting in December, this fiscal year will be an 11-month period that started on Feb. 1; Bombardier will also change its accounting system to so-called IFRS (International Financial Reporting Standards) rules; and it´s changing its accounting method to amortize aircraft development costs according to the number of aircraft produced, rather than 10 per cent a year over 10 years.
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