By Frederick K. Larkin | October 28, 2021 Estimated reading time 5 minutes, 24 seconds.
Bombardier has reported impressive financial results for its third quarter ended Sept. 30, 2021. On June 2, Skies reported on Bombardier’s outlook as a pure play biz jet company. We believed that strong orders for new aircraft, improved operational efficiencies, and a disciplined debt reduction program would likely result in strong revenue growth, improved earnings, enhanced cash flow, and a stronger balance sheet. The results reported for Q2/21 confirmed our belief, and now the Q3/21 numbers have demonstrated that the positive trends driving the company’s financial turnaround remain in place.
During the seasonally weak third quarter, Bombardier’s total revenues were up three percent year-over-year to US$1.45 billion from US$1.41 billion. However, revenues related to aircraft sales increased by 17 percent as a result of an improved mix of aircraft deliveries. During Q3/21, Bombardier delivered 27 aircraft, a 13 percent increase from the 24 delivered in the year-earlier period. The product mix played an important role in the revenue growth, as 15 of the 27 units were Globals — including nine flagship Global 7500s.
The product mix also contributed to the company’s improved profitability. The gross margin increased to 14.6 percent in Q3/21 from 12 percent in Q3/20. The higher margins of the Global models were a key factor. Operational efficiencies were assisted by the production cost reduction learning curve on the flagship Global 7500 program. The cost to build the 100th unit was expected to be 20 percent less than that to produce the 50th unit. Incidentally, the 100th Global 7500 is currently at the completion center at Dorval, Quebec.
The enhanced earnings performance enabled strong cash flow generation during Q3/21. During the most recent quarter, it was US$156 million, compared to the negative US$611 million experienced during the year-earlier period. The improved cash flow, and proceeds from previous divestitures, has enabled a meaningful improvement in the health of Bombardier’s balance sheet. At the end of Q3/21, the company’s gross debt totaled approximately US$7 billion. That is US$3 billion less than where it stood at the start of the year. Pro-forma liquidity (cash and cash equivalents) stood at a healthy US$1.9 billion at Sept. 30, 2021. Furthermore, the company does not have any significant debt maturing until December 2024.
The outlook for Bombardier remains encouraging. The order backlog at Sept. 30 stood at US$11.2 billion, up from US$10.7 billion at June 30, 2021 and US$10.4 billion at March 31, 2021. The Q3/21 book-to-bill ratio was an impressive 1.7X, reflecting strong sales of new Challenger and Global aircraft. Orders continued to come from both traditional customers and first-time buyers.
The Covid-19 pandemic has resulted in a significant increase in interest in private aviation from high-net-worth individuals around the world, and this has resulted in increased purchases of aircraft by people who have never owned an aircraft.
A number of metrics indicate that the business aviation industry is well positioned to achieve growth. The total number of pre-owned business aircraft available for sale, as a total of the operational fleet, was estimated at five percent as of Sept. 30. That is its lowest level since 2000. Corporate jet usage in the U.S. during the first eight months of 2021 was up 42.5 percent year-over-year. As well, European business jet utilization during the first nine months of 2021 was up 27.1 percent.
With an increased order backlog; a buoyant market environment; enhanced profitability and cash flow; and the continuing deleveraging of its balance sheet, Bombardier’s financial turnaround continues to be a story worth following.
