MONTREAL: Bombardier told investors that stronger sales of aftermarket services would help the business jet maker hit new 2025 targets like generating $7.5 billion in revenues.
Bombardier shares dropped 1% in morning trade, reversing an earlier climb of about 6%.
Montreal-based Bombardier, which expects to turn cash flow positive in 2022, held its first investor day since becoming a pure play business jet maker in late January.
The company plans to cut costs and diversify earnings by capturing a greater share of aircraft product and maintenance package sales, at a time when jet deliveries could take years to recover due to the pandemic.
Bombardier said it expects to grow its aftermarket services from roughly 18% of revenue in 2020 to 27%, or about $2 billion by 2025.
“We are in the final phase of the largest aftermarket footprint expansion in Bombardier’s history,” Chief Executive Éric Martel told the virtual event. “We are adding 50% more space to our worldwide network.”
Bombardier has evolved in recent years from a plane and train maker to a business jet manufacturer, generating revenue of $6.5 billion in 2020. After facing a cash crunch in 2015, Bombardier shed assets during a five-year company turnaround plan through 2020 that missed some targets.
“The market will have to assess whether this new Bombardier team can meet its long-term targets, versus the failure of the previous team to do so,” Citi analyst Stephen Trent said in a note on Thursday.
Bombardier said in a statement it expects to generate more than $500 million in free cash and $1.5 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), and a 20% margin in 2025, while slashing debt.
Bombardier’s flagship Global 7500 jet, which lists for $75 million, is expected to be the biggest contributor to EBITDA over the next five years as production costs decline.
Bombardier, which disclosed a long-term debt of $10.1 billion as of Jan. 29, said it plans to use $3.6 billion in net proceeds from the recent sale of its rail division to France’s Alstom SA to pay off near-term maturities, focusing on 2021 and 2022 tranches.