August 1, 2019 / 10:42 AM / 22 days ago

UPDATE 2-Bombardier posts loss, lowers 2019 profit forecast as rail woes persist

(Adds details, context and analyst comment)

By Allison Lampert

Aug 1 (Reuters) - Bombardier Inc on Thursday lowered its full-year core earnings and free cash flow forecasts, and reported a quarterly loss, as the Canadian plane and train maker wrestles with challenges in its important rail division.

Montreal-based Bombardier is in the middle of a broader restructuring, shedding underperforming commercial plane programs to focus on its more profitable business jet and rail units. The company faced a cash crunch in 2015 after investing heavily to bring two new planes to market.

But Bombardier is still being dogged by a handful of rail contracts in its $34 billion backlog that generated a disappointing free cash flow result in 2018. The rail division is Bombardier’s largest by revenue.

“We continue to view near-term execution risks as high, evidenced by setbacks in (transportation) and the lowering of 2019 EBITDA (earnings before interest, tax, depreciation and amortization) and (free cash flow) guidance,” Citigroup analyst Manish Somaiya wrote in a note to clients. “We expect this shift in guidance to weigh on the bonds.”

Bombardier said it would invest an additional $250 million to $300 million in the rail division in 2019.

Bombardier Chief Executive Officer Alain Bellemare said in a statement that the company’s largest growth program, the Global 7500 business jet, “is proceeding as planned.”

The company reduced its adjusted core earnings forecast for the full year to a range of $1.20 billion to $1.30 billion, from $1.50 billion to $1.65 billion that it had expected earlier.

Free cash flow guidance for the year, a closely watched metric, was lowered to negative $500 million from a range of break even to negative $250 million.

The company also lowered its full-year forecast for earnings before interest and taxation (EBIT), a closely watched measure, in the rail division. Adjusted EBIT for 2019 is now expected at $700 million to $800 million, down from around $1 billion.

Adjusted EBIT margin was lowered to about 5% from 8%.

Net loss was $36 million, or 4 cents per share, in the second quarter ended June 30, compared with a profit of $70 million, or 2 cents per share, a year earlier.

Analysts had expected a loss of $30 million, or 2 cents per share, according to IBES data from Refinitiv.

EBIT rose to $371 million for the quarter, helped by proceeds from the sale of the company’s Q400 turboprop program. (Reporting By Allison Lampert in Montreal and Arathy S Nair at Bangalore; Editing by Shailesh Kuber and Saumyadeb Chakrabarty)

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