MONTREAL — Bombardier Inc. reported yesterday that its profit plunged 64 per cent in the second quarter as the company took special charges reflecting a major decline in the corporate jet sector, the Globe and Mail reported.
The Montreal-based aerospace and railway equipment giant also defended its actions of last Friday, when it stunned the stock markets by issuing the first profit warning in its history after insisting until very recently that the corporate jet segment would recover in the second half of the year.
For the three months ended July 31, the company reported a profit of $101.4-million or 7 cents a share, compared with $287.9-million or 21 cents a year earlier.
Revenue increased 16 per cent to $5.7-billion from $4.9-billion, largely reflecting the acquisition last year of German rail equipment maker Adtranz.
The results were made public after the stock markets had closed. Bombardier B shares rose 6 cents yesterday to $7.34 on the Toronto Stock Exchange.
The stock price plunged 22 per cent last Friday, its biggest one-day drop, after the company issued its warning, slashing its earnings forecast for the year by 21 per cent.
Bombardier said it booked one-time charges of $211.4-million ($136-million after taxes) or 10 cents a share.
The charges were mostly related to the writedown of the value of its fleet of used aircraft that customers trade in.
A smaller provision was taken in connection with an anticipated reduction in sublease revenue from commercial aircraft under sale and leaseback arrangements in the wake of the Chapter 11 bankruptcy protection filing last week by US Airways.
Bombardier also said it took a charge of $41-million to settle contract disputes over jet specifications with two unidentified customers.
Bombardier said its aerospace division posted a loss before taxes of $28.4-million in the quarter.
Bombardier president and chief executive Robert Brown told analysts that the company had received an unprecedented eight cancellations — four for the Challenger wide-body aircraft and four for the Learjet 45 — in the first half of August.
He also said there have been four cancellations for the regional jet that also were unprecedented. In the second quarter, Bombardier delivered a total of 74 jets, compared with 90 at the same time last year, he said. Corporate jet deliveries were 21, down from 43; deliveries of regional jets increased slightly to 53 from 27 a year earlier, he said.
Total deliveries of corporate jets for the year should reach 100, compared with 140 last year, he said. Mr. Brown said Bombardier acted perfectly correctly last Friday when it suddenly issued its warning, only days before release of its second-quarter results.
One analyst — Horst Hueniken of TD Newcrest — assailed Bombardier management in a research note on Monday, accusing it of releasing “misleading” statements in the weeks leading up to the bombshell.
Bombardier misread the short-term impact of a weak corporate jet sector but acted quickly to issue a profit warning as soon as it realized the market was not going to recover soon, Mr. Brown said.
“It would be totally unfounded to suggest that we were lacking in terms of timely disclosure,” he said. “Clearly there is a price to pay when you are not meeting publicly announced targets.”
He added: “The hoped-for recovery [in the corporate jet market] has simply not materialized. The slump in corporate jet sales, reflecting continued U.S. uncertainty over the economy and possible terrorist acts, won’t result in any job cuts, Mr. Brown told the analysts.
He said Bombardier’s regional jet program remains strong, and a ramp-up of the 70-seater model is on schedule.
On Friday, Bombardier said it wouldn’t meet its target of 10-per-cent growth — to 89 cents — in earnings per share this year, revising the figure to 70 cents.
Earnings per share last year were 81 cents, before special items.