(The Canadian Press circulated the following story on March 18.)
MONTREAL — Shares of Bombardier Inc. fell by as much as 11 per cent today as the stock market digested the major shakeup of the company’s European rail division announced the day before.
In the sober aftermath, analysts lowered their expectations for the current year after Bombardier’s financial results, also posted Wednesday, were much worse than expected.
There are fears that the closure of seven of the division’s 35 plants in Europe and the elimination of 6,600 employees may be fraught with pitfalls.
Germany’s finance minister said the government will oppose the shutdown of a railcar factory at Ammendorf in eastern Germany that employs 800 people.
“We can’t just stand by and watch as such a business disappears from the market and employees are put out on the streets,” said Wolfgang Clement.
German business newsletter Deutsche Welle said the plan to close the plant in 2005 “sparked a wave of protest.”
The company said the shakeup at Bombardier Transportation will cost $777 million, but will save $600 million a year.
It also said an improvement in business jet sales in the fourth quarter points to a turnaround in its aerospace division.
But analyst Steve Laciak of National Bank Financial described the results for the fourth quarter of Bombardier’s financial year ended Jan. 31 as “ugly.”
And the company’s shares closed down 46 cents or seven per cent at $5.98 on heavy volume of 20.6 million shares, after trading as low as $5.72. That followed a loss of 35 cents on Wednesday.
Excluding charges associated with the restructuring and other non-recurring items like a charge on its Amtrak contract, the company earned 11 cents per share. Analysts on average had expected 20 cents.
Laciak noted that revenues from aircraft deliveries were up in the fourth quarter but profit margins did not keep pace.
Laciak, pointing to shaky aircraft sales and the looming turnaround in the rail division, has a 12-month target on the stock of $3.25.
Claude Proulx of BMO Nesbitt Burns is not as pessimistic.
“Although the results were disappointing, we believe investors should focus beyond the near term and more on the level of profitability Bombardier should be able to generate two to three years from now,” Proulx wrote in a note to clients.
For this year, however, Proulx has dropped his earnings per share forecast to 30 cents from 37 cents, and lowered his 12-month target on the stock to $7.75.
Overshadowed by Wednesday’s news on the rail-equipment side was the aerospace division, the world’s third-largest maker of commercial aircraft.
For the year ended Jan. 31, Bombardier Aerospace delivered 324 aircraft — 232 regional airliners, 89 business jets and three amphibious planes.
The previous year the company delivered 298 aircraft, and chief executive Paul Tellier bragged that Bombardier was the only major plane maker to increase deliveries last year.
However, its firm order backlog of $14.5 billion at year-end was down from $18.7 billion a year earlier.
Bombardier’s arch-rival Embraer of Brazil reported Thursday it delivered 101 aircraft during the year, down from 131 the previous year. But it said the value of firm orders rose to $14.1 billion, approaching Bombardier’s level.