Supported by the resilience of the business jet market, Bombardier is “raising the bar” by raising the objectives it had set for 2025, while it gets ahead of its strategic plan.
The Montreal company improved its objectives established in 2021 a few hours before its investor day on Thursday. It now hopes to generate nearly $900 million in cash flow in 2025, more than the $500 million initially projected.
If the targets are reached, this new leeway would allow Bombardier to accelerate the repayment of its debt. The company is targeting a range of between 2 to 2.5 times its adjusted earnings before interest, taxes, depreciation and amortization for 2025, “which would be close to investment-grade companies.”
The more optimistic forecasts for cash flow leave the door open for new investments, underlines the analyst of Desjardins Capital Markets Benoit Poirier. He is happy that the company is not talking regarding launching a new program from scratch. “It’s a good decision, because it requires less capital, it’s more appreciated by creditors and it’s less risky. »
Remember that Bombardier found itself in a difficult financial position at the end of the 2010s due to cost overruns on the CSeries, sold to Airbus (A220).
The pandemic will have given a boost to the business aircraft industry, as many businesses and wealthy travelers have shifted from commercial aviation to business jets. Despite the uncertain economic outlook, President and CEO Éric Martel said last February that customer demand remained resilient.
Bombardier estimates that it will be able to generate revenues of more than $9 billion in 2025 with margins before interest, taxes and depreciation of approximately 18%. The initial target was for revenues of 7.5 billion and margins of around 20%.
Beyond 2025, management wants to achieve revenues of at least $1 billion in the defense segment during the second half of the decade, i.e. between 2026 and 2030. In recent months, Mr. Martel reiterated more renewed interest in a major military contract, the replacement of Canadian Defense CP-140 Auroras. The CEO also expressed his fears that Ottawa would award the contract to Boeing without a call for tenders.
