Bombardier presents vision for future following cash infusion from Quebec, Caisse

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MONTREAL – Armed with US$2.5 billion in new financial support, Bombardier told institutional investors this morning that it has developed a five-year strategic plan to turn around the Montreal-based transportation giant.

“Despite short-term challenges, the potential for Bombardier is great and we are turning the business around,” CEO Alain Bellemare said in a webcast of the meeting in New York City.

After nine months of reviewing the company since his appointment, Bellemare said he has taken action to diminish risk and stabilize the business.

While 2016 will be a year of “transformation,” the focus is to shift to grow earnings and generate better free cash flow.

“We have great fundamentals and significant runway for improvement,” he told analysts.

Bombardier expects overall revenues will grow five to six per cent annually to exceed US$25 billion by 2020 with earnings more than doubling to seven to eight per cent.

Each of the four division heads is slated to discuss their outlooks for business aircraft, commercial planes, aerostructures and transportation during the webcast.

Bombardier Transportation and business jets are each expected to generate at least eight per cent in earnings on more than US$10 billion of revenues by 2020.

Commercial aircraft is forecast to generate profits on more than US$5 billion of revenues as it ramps up production of the CSeries.

Aerostructures will focus on cost reduction to generate 9 to 11 per cent earnings on more than US$2.5 billion in revenues.

The 4 1/2-hour meeting was rescheduled from March soon after Bellemare replaced Pierre Beaudoin as CEO.

Industry analysts had expected the company to present a path forward now that it’s received cash infusions from the Quebec government and by the province’s big pension fund manager.

Quebec is providing US$1 billion for a 49.5 per cent stake in bombardier’s CSeries narrow-body commercial jetliner, while the Caisse de depot et placement du Quebec is investing US$1.5 billion for a 30 per cent stake in its railway division.

The federal government is also considering a request for an undisclosed further contribution.

The public funding comes as Bombardier (BBD.B) prepares to begin deliveries of its delayed and over-budget CSeries commercial aircraft and develops its Global 7000/8000 business jets.

Seth Seifman of JP Morgan says cash will continue to be a key investor focus.

In a recent report, Seifman wondered whether Bombardier could generate sustainable cash flows and how it plans to address more than US$6 billion in debt maturities that begin to come due in 2018.

The New York analyst says he’s also looking for details on how the company evaluates the commercial success of key programs, especially the CSeries, along with its commitment to CRJ regional jets and Q400 turbos, both which have lost market share to Embraer and ATR respectively.

Bombardier shares, after having hit a 52-week of $4.43 last December, closed down two cents at $1.24 Monday on the Toronto Stock Exchange.