By Frederick K. Larkin | April 25, 2024 Estimated reading time 4 minutes, 57 seconds.
During 2024’s first quarter, Bombardier’s total revenues declined 12 per cent year-over-year to US$1.28 billion from US$1.45 billion. Revenues related to aircraft sales decreased to approximately US$800 million from about US$1 billion. The decline was primarily related to the mix of aircraft models delivered. During Q1/24, the OEM delivered 20 aircraft, including 12 Challengers and eight higher-priced Globals. Conversely, Bombardier last year delivered 22 aircraft during the first quarter, including eight Challengers and 14 Globals.
Revenues related to aftermarket services, such as maintenance and modification work, grew by 12.5 per cent year-over-year to US$477 million from US$424 million. This is important, as the aftermarket is expected to provide a growing contribution to Bombardier’s top line in future years. It is worth noting that Q1/24’s US$477 million is up 77 per cent from the US$269 million realized in Q1/21. The service segment continues to have exciting growth potential.
Operating costs continue to be a focus for Bombardier’s management and progress is being made. The gross profit margin during Q1/24 was 22 per cent, up from 20 per cent in Q1/23. The company’s Q1/24 operating profit (defined as Earnings Before Interest and Taxes) was 11.2 per cent, an improvement from 9.6 per cent in Q1/23.
Financial deleveraging remains a priority for the company, and its balance sheet remained stable during the latest quarter. Another US$100 million of debt was retired during Q1/24. Bombardier does not have any long-term debt coming due until June 2026.
With respect to its financial health, the company stated, “We believe our available liquidity of US$1.4 billion is sufficient to execute our plan in the short-term. We currently anticipate that these resources will enable the development and upgrade of products and investments in property, plant and equipment to ensure our competitiveness and support our growth.”
Bombardier’s outlook remains positive. The order backlog at March 31, 2024, stood at US$14.9 billion, up from US$14.2 billion at Dec. 31, 2023. The US$700 million improvement reflects orders for 32 aircraft. That inflow resulted in an impressive 1.6:1 book-to-bill ratio during the quarter. Management mentioned that interest in the Global family remains strong from both civilian and military customers. The company expects the long-term book-to-bill ratio to be around 1:1, and cautioned that there could well be quarters when the result is higher or lower than that anticipated average.
The current order backlog represents approximately two years of production of both Challenger and Global models. It reflects a mix of traditional customers including corporations, families, governments and fleet operators such as NetJets, Flexjet and VistaJet.
During a conference call with investors, Bombardier management reiterated that it expects to deliver 150 to 155 aircraft during 2024. In a recent Skies article about Bombardier’s new Global manufacturing facility at Toronto Pearson, the author forecast that 75 Challengers and 75 Globals will be delivered during 2024. During 2023, 63 Challengers and 75 Globals were delivered. Approximately 40 per cent of the 2023 deliveries were made during the fourth quarter and that delivery profile is expected to be repeated this year.
Bombardier’s defence business has interesting potential. Over many years, it has delivered numerous aircraft to military customers. Surveillance aircraft have become a priority for many armed forces around the globe and Bombardier a created a dedicated unit to address this growing market. The Challenger 650 and Global 6500 have already been selected by a number of air forces and excellent potential exists for additional orders.
These Q1/24 financial results confirm that Bombardier remains on track to achieve its targets for 2024 and 2025. With an impressive order backlog, continuing demand for its products and services, and a balance sheet that continues to be delivered, Bombardier’s financial turnaround remains a situation to be monitored.
