Bombardier bumps up financial goals for 2025 as business jet market takes off

Bombardier Inc. has upped its financial targets for 2025, as the plane maker looks to boost production of business jets amid a growing market.

Bombardier, which keeps its books in U.S. dollars, said Thursday it is now aiming for more than US$9 billion in revenue for 2025, up from about US$7.5 billion.

It also raised its objective for free cash flow to over US$900 million, up from more than US$500 million.

Bombardier's share price jumped by 7.3 per cent to $66.29 in mid-morning trading on the Toronto Stock Exchange.

Despite uncertain economic conditions, chief executive Eric Martel expressed confidence that the Montreal-based company's strategy is "on track or ahead of plan."

"There is some added volatility and uncertainty in the markets today," Martel told analysts during a question period at the company's virtual investor day. "We'll see how fast the economy is going to come back ... but we are capable of taking those little bumps on the road right now.

"Yes, there's a bit of turbulence short term, but in the long term ... the fundamentals remain very, very strong," he said, adding that cancellations for jet orders are few and far between.

The global business jet market is expected to grow to US$23.7 billion by 2028 from US$18.4 billion last year, according to a new report from market research firm IMARC Group.

If achieved, the higher cash flow through the next three years will position Bombardier to further pay down its sizeable debt.

By the end of 2025, the company expects net debt to decrease to between two and two-and-a-half times its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), down from a previous predicted leverage ratio of three times.

Bombardier had $4.69 billion in net debt at the end of 2022, more than five times its annual adjusted earnings.

Since selling off its remaining stake in the Airbus A220 jetliner program in 2020, the 81-year-old company has focused exclusively on the burgeoning business jet market while continuing to chip away at its hefty debt load.

The beefed-up objectives laid out Thursday included no hint of a new jetliner program.

"We view this decision as positive, as it is less capital-intensive, more favourable to creditors and less risky," said analyst Benoit Poirier of Desjardins Capital Markets in a note to investors.

Bombardier also raised its EBITDA target to more than $1.63 billion for 2025, up from about $1.5 billion.

However, the company forecast a shrunken EBITDA margin of 18 per cent, down from 20 per cent.

"We do not view the decrease in margin outlook as an overly bearish indicator, given the implied improvement from 13.5 per cent in 2022," said Poirier.

An 18 per cent EBITDA margin would still place Bombardier at the higher end of the spectrum for the business jet market, he added.

Higher prices on the company's planes and services will likely be offset by higher costs, said chief financial officer Bart Demosky.

- This report by The Canadian Press was first published in French on March 23, 2023