Bombardier has repatriated a good part of its production to North America, which helps to mitigate the risks associated with supply chain disruptions and geopolitical tensions in Ukraine and, more recently, in Taiwan, believes its president and chief executive officer. management, Éric Martel, who reiterated his favorable forecasts for the business jet market.
In 2020, Bombardier repatriated some of its production to reduce supply chain disruptions. “We repatriated the manufacture of parts, which could come from certain regions, including China, said Mr. Martel, Thursday, at a press conference as part of the unveiling of second quarter results. The very, very large majority of our suppliers are either North American or European.”
The Montreal-based company does not live in isolation from events unfolding in Taiwan, but management is focused on what it can control. “Obviously there are things that are out of our control. If there is a complete blockage, for example on the production of Taϊwan, we will have challenges, but there are plenty of people who will have them too. These are things you cannot speculate on.”
Supply chain disruption remains a challenge for Bombardier. However, the company believes that the situation is under control. It continued to benefit from the strong demand for business jets in the second quarter, which enabled it to improve its financial forecasts on Thursday.
The repatriation of production required the recruitment of nearly 500 people, the majority of whom work in the aircraft manufacturer’s facilities in Saint-Laurent on the island of Montreal, which has nearly 1,400 employees. Mr. Martel clarified that the Saint-Laurent facilities were not operating at full capacity and that it would be possible to repatriate more work there if necessary, balancing the objectives of securing the supply chain and that of posting competitive production costs.
“The pandemic has taught us all, in several sectors, not just in aeronautics, that we had a dependency which may have gone to the extreme in certain manufacturing areas. We quickly reacted to that. It often takes weeks and months to bring parts back in-house, but in 2020, we made the decision to significantly bring volume back to the Saint-Laurent unit.”
Demand remains resilient
While the U.S. market remains strong, Martel sees improvement in Europe, despite geopolitical tensions in Ukraine, and in Asia-Pacific, where tighter health restrictions in several countries have slowed activity.
The executive described demand from private jet fleet operators as “extremely strong” during a call with financial analysts. “There are a lot of people who used to fly first class who are now flying business jets. They don’t all buy them, but many of them go to business jet operators.
In this context, the Montreal company estimates that it will generate more than US$515 million in cash flow during fiscal 2022. Analysts anticipated an improvement in the forecast, but this was greater than the 196 million they expected on average, underlines Benoit Poirier, of Desjardins Capital Markets.
Due to supply chain pressures, the company has not touched its 2025 production rate targets. The fact that the production forecast remains unchanged sends a positive message on the state of the market , according to analyst Tim James of TD Securities. “We believe this means demand is above Bombardier’s production plan, a positive sign for pricing and potential deliveries beyond the short to medium term.”
In the second quarter, Bombardier recorded a net loss of 109 million for continuing operations, compared to a profit of 139 million in the same period last year. The diluted net loss per share reached 48 cents compared to a loss of US$1.49. Revenues, for their part, amounted to 1.56 billion, an increase of 2%.
Bombardier’s backlog increased by 37% over last year to $14.7 billion. As of March 30, it stood at US$13.5 billion.
Cash flow, an important factor for the financial viability of a company, reached 341 million, compared to 250 million in the same period last year. Bombardier pointed out that paying down debt allows it to pay less interest costs and generate more cash. The company reduced its debt by 773 million in the first six months of the year.