By Frederick K. Larkin | February 8, 2024 Estimated reading time 5 minutes, 52 seconds.
In recent years, Bombardier’s fourth quarter’s results have been a significant contributor to the company’s full year financial performance. This was the case again in 2023.
During Q4/23, Bombardier’s total revenues increased 15 per cent year-over-year to US$3.1 billion from US$2.7 billion. Its Q4 revenues represented 38 per cent of the full year’s top line. Revenues related to aircraft sales increased by 16 per cent to US$2.6 billion from US$2.2 billion.
During that period, Bombardier delivered 56 Challenger and Global aircraft — a 14 per cent increase from the 49 units delivered in the year-earlier period. During the fourth quarter, 32 Globals were delivered, representing a 10 per cent increase over the 29 examples delivered in the same period in 2022.
During 2023’s final quarter, 24 Challengers were delivered. That was a 20 per cent increase over the 20 units delivered during Q4/22.
The company’s aftermarket services business generated revenues of US$482 million, a 16 per cent improvement over Q4/22’s US$416 million. That strategically important unit represented 16 per cent of the company’s total Q4/23 revenues.
The company’s profitability during Q4/23 was strong. The gross profit increased by 27 per cent to US$582 million in Q4/23 from US$460 million in Q4/22.
The higher margins of the Global models were a factor. Operational efficiencies were assisted by the production cost reduction learning curve on the flagship Global 7500 program.
Pre-tax income improved by 85 per cent to US$222 million in Q4/23 from US$120 million in the year-earlier quarter. It should be noted that the Q4/23’s US$222 million represented 55 per cent of the company’s 2023 pre-tax income.
The higher earnings and enhanced cash flow has enabled a further strengthening of the balance sheet. At the end of 2023, Bombardier’s total net debt was approximately US$4 billion. That is US$0.3 billion lower than the year-earlier level and was achieved despite significant capital expenditures made on new plant and equipment including the massive Global Manufacturing Centre in Mississauga, Ont.
Impressively, Bombardier has reduced its debt load by US$4.4 billion since the end of 2020. The company does not have any significant debt maturing for another 30 months.
Bombardier’s outlook remains positive. The order backlog at Dec. 31, 2023 stood at US14.2 billion, slightly below the US$14.7 level at Sept. 30, 2023. That number represents approximately 18 to 24 months of aircraft production, depending on the aircraft model.
The order book consists of a strong mix of traditional customers including corporations, families, governments and fleet operators. The latter group, including NetJets, Flexjet and VistaJet, represents about 20 per cent of the current backlog.
Fleet operators generally experience higher utilization of their aircraft than do corporations. For example, it is not surprising to see a fleet operator jet achieve in excess of 1,000 flight hours per year.
A typical corporation-operated jet flies between 300 and 700 hours per year. This is important for Bombardier, as it means future opportunities for its growing aftermarket services unit.
Bombardier has provided updated guidance for its financial performance in 2024. The company is now expecting to deliver 150 to 155 Challenger and Global aircraft this year. That would represent a 10 per cent increase in output from the 138 units delivered during 2023.
While Global production is expected to remain stable around 75 units, the Challenger output may increase by almost 20 per cent from 63 to 75 units.
The company expects to achieve top line growth of between five and seven and a half per cent. Pre-tax income is expected to improve between six and 12 per cent from 2023’s level, depending on a number of variables.
The related improvement in free cash flow is expected to result in further retirements of long-term debt over the next year, now that significant expenditures related to infrastructure programs have largely been completed.
With an impressive order backlog, expectations for continued strong order flow, steady cash flow generation and an ever strengthening balance sheet, Bombardier’s financial turnaround continues to be an impressive story.
Good future.