Bombardier’s rail unit named preferred bidder for $3.4-billion Egypt monorail project

Bombardier Inc’s rail business was named the preferred bidder for a 3 billion euros (US$3.36 billion) monorail project in Egypt, which would be the unit’s biggest in recent years if confirmed.

The design and build contract has potential value of 1.2 billion euros for Bombardier Transportation, while a 30-year operations and maintenance deal has a potential value of about 1.1 billion euros, the company said on Monday.

The project, which is in partnership with two Egyptian companies — Orascom Construction and the Arab Contractors — is for the building a 54-kilometre monorail system connecting the New Administrative City with East Cairo and a second 42-kilometre line linking 6th October City with Giza, Bombardier said.

The news comes as Bombardier’s rail division, its largest unit, has faced recent headwinds due to delivery delays and production problems at a handful of long-term projects, forcing the company to cut its first-quarter and full-year revenue targets for the division.

Earlier this month, the Canadian company said it would merge its corporate and regional jet units, besides selling off two aerostructures operations.

 

Alain Bellemare, President and CEO of Bombardier Inc., speaks during a news conference on the acceleration of Global 7000 business jet aircraft interior completion operations and the inauguration of the new Bombardier Centre of Excellence in Pointe-Claire, Quebec, Canada, November 17, 2017. REUTERS/Christinne Muschi

Alain Bellemare, President and CEO of Bombardier Inc., speaks during a news conference on the acceleration of Global 7000 business jet aircraft interior completion operations and the inauguration of the new Bombardier Centre of Excellence in Pointe-Claire, Quebec, Canada, November 17, 2017. REUTERS/Christinne Muschi

Bombardier Inc. is looking to sell its aerostructure businesses in Belfast and Morocco as its continues its five-year turnaround plan and shifts its focus to concentrate on its private jet and rail divisions.

The train-and-plane maker announced Thursday that it will pursue the divestiture of its two aerostructure businesses, while at the same time consolidating its remaining aircraft operations under one division, to be renamed Bombardier Aviation. Previously, Bombardier had operated separate divisions for its private jet, commercial aircraft and aerospace and engineering work.

Chief executive Alain Bellemare said Thursday following the release of first quarter results that the creation of Bombardier Aviation has been something the company has been working towards since October 2017, when aerospace giant Airbus SE acquired a majority stake in Bombardier’s beleaguered CSeries program. With the Airbus partnership finalized, Bombardier’s Downsview property in Toronto sold, and a deal for its Q400 program on the verge of closing, Bellemare said the “timing is right.”

“We can now finally zoom in on the businesses that will create the most value for shareholders – and it is business aircraft and rail,” Bellemare told analysts on a conference call Thursday.

“When we look at where we will invest our capital moving forward (it’s) in these businesses.”

The company’s stock fell as much as 10 per cent shortly after the Toronto Stock Exchange opened. Shares of Bombardier were down 2.6 per cent just after 1 p.m. ET.

Bombardier’s aerostructure businesses in Belfast and Morocco are largely tied to the former CSeries program now operating as the A220 under Airbus’ control. Given the program is now out of Bombardier’s control, the move to sell the operations “makes sense,” National Bank analyst Cameron Doerksen wrote in a note to clients Thursday. Doerksen estimates that Bombardier could earn between $910 million and $1.04 billion from the sale of those operations.

Unite, the union representing the approximately 3,600 employees working at the Belfast facility, released a statement Thursday saying the announcement came “as a shock.”

“The U.K. government must stand ready to ensure the retention of jobs and skills at these sites,” the statement said.

“Bombardier is simply too important to the Northern Ireland economy to allow anything less.”

Dual class share structure remains

Bombardier is on the tail end of a five-year turnaround plan launched by Bellemare in 2015, shortly after he stepped into the role of chief executive. The strategy includes several ambitious financial targets, including overall revenues of US$20 billion by 2020. (Bombardier reports its financial results in U.S. dollars.)

But that strategy has stumbled in the last year. Last week, the company had to preemptively cut its full-year revenue forecast for 2019, largely due to slower production at its transportation division.

Bombardier stock as of 3:32 p.m. ET on Thursday May 2.

Bombardier stock as of 3:32 p.m. ET on Thursday May 2.

Revenues in the transportation business, its most profitable division which produces trains, will be $750 million less than the originally expected $8.75 billion because of “a slower production ramp-up on certain large projects.”

Bombardier reported $2.1 billion in revenues in the three month period ending March 31, a drop of 11 per cent from the same time last year.

Shortly after discussing the first quarter results with analysts, Bombardier executives met with investors at its annual shareholder meeting at the company’s headquarters in Montreal.

MEDAC, a Quebec-based shareholder rights group, had put forward several shareholder proposals ahead of the meeting, including one that effectively called for the abolition of Bombardier’s dual-class share system. MEDAC’s proposal was to convert the Class A shares – which are controlled by the Beaudoin-Bombardier family, giving them a majority of voting rights despite not holding to a majority of shares – to single voting right per share.

The proposal, which was supported by proxy organizations including Glass Lewis, Institutional Shareholder Services and the Canada Pension Plan Investment Board, was defeated.

 

Published at Tue, 28 May 2019 13:08:33 +0000