RE:RE:RE:RE:RE:RE:RBC: Surprised by the market reactionHi Pablo.
Thanks for taking the time to do all this work. This re-affirms what the Cash on Hand told me. This had to be done
to confirm the Cash on Hand in a diferent way, and you've done that. I feel that this assumption has now been proved with your work. I'll rely on your findings, because these days I don't have a ton of time to dedicate to some things. The Bomber Financial Statements aren't a priority right now. So thanks for the reaffirmation in concrete terms through the statements. Your work is always apreciated by me as you know.
There was something that needed to be addressed when I wrote to Luke earlier, but I ddidn't have time, so I'll just address it now. It has to do with Gulfstreams parent GD. I feel that, the way that Gulfstreem always ends up having such high Revs every year, even though they don't have many more deliveries than the Bomber annually, is through the Military contracts, and I feel that the GD is throwing extra Revs on the Gulfstream side, to compensate, or maybe spread out the Revs from GD's side to take advantage of the Gulfstream expenses side, such as the development and Certification costs for the new models.
Which brings me to the next point with the Bombers competition, Gulfstream. Bombardier is ramping up production to take away business from the new Gulfstream model, the G700, which is still in development stage, with certification due to be completed in 2026. This is why the Bomber is running like crazy in 2024, to increase production of the G7500, and now G8000, that they're bringing in in 2025 as well. Just to limit the demand for the Gulfstream product. The way I see things is, that the G8000 is way ahead in the production process, as the G8000 is similar to the G7500, and the Gulfstream G700 is a new unproven model, & it will be in a slower production cycle for 2026/7, which will also be a drag on profitability for Gulfstream for at least 2 years. So the customers wanting a new 20 passenger plane will flock to one they can buy cheaper & get it delivered quicker from Bombardier, which has proven it now with the increase in production, especially for the Charter/Fractional users. Management is trying to set a stage where, when the Gulfstream G700 is certified,
it will have a minimal effect/affect on their G7500/8000 product. This kind of chess game is what makes the NEW Bomber Management a force to be reckoned with.
Of course, more sales, also bolsters the Service side of our company, and we're way ahead Globally there, than Gulfstream. The way the Business jet industry is evolving right now, it is more Globally, than it being more North American centered. Although the North American Bombardier Service center capabilities, are very strong, the world doesn't just revolve aroung the US market. The Arabs, Chinese, Europeans, Central America, Africa, Asia, are all coming on stream strongly, and Bombardier is setting their BJ franchise up, to absorb more of those markets. Cheers
PabloLafortune wrote: 859, I did a fairly thorough for me (an amaateur) analysis of Bombardier's balance sheet and my conclusion is they generated $300MM of cash in 2023, it just didn't go to LTD. So its probably not unreasonable that this would increase to $400M and $500M in 2024 and 2025 respectively.
My calculation for the $300MM is as follows:
opreating current assets (cash inventory receiv pay current contract liability) + 67
RVR +100M (reduced)
LTD +373M (reduced)
Long term contract liability + 235 (reduced)
Other long term liabilties (lease, govt funding, vendor funding) + 25M (reduced)
= 800M
less funding from cash generated from other financial assets 500M
= $300M
Other notes
- the negative cashflow in Q1 (Q2? Q3?) will be from the significant increase in payables and inventory. comment: with more military and aftermarket business, can't push that stuff to Q4...
- ignored deferred tax (acct calc), retirement (actuarial calc), tooling & PPE (captured in EBITDA)
- the total of all other assets financial or otherwise is now $999M (excl back to back between govt, airbus and bombardier) of which almost half is what I call quasi cash - whether or when that can be released to actual cash remains to be seen.
- the other liabilities and provisions totals $1,441M excl. provisions and aforementioned back to back. of this, $807M is long term in nature (govt refundable advance $161M, lease $448M and vendor funding $198M). so the other liabilities financial or otherwise is $634M. Reasonable.
In my opinion, ability to reduce long term debt will depend (in no particular order) on 1) generating operating cashflow - looks good on that front 2) maintaining orders and backlog ie long term contract liabiilties - unknown 3) cash being released from other financial assets - unknown 4) capex discipline - PPE&E and tooling actually went down in 2023 although of note, all Pearson expansion in 2023 was paid out of their own pocket it seems - should be fine 5) other (asset sales, settlement with HBS, etc) - unknown. LESS 6) balance sheet growth (ie higher inventory) - unknown.
To your point, 2, 3, 5 and 6 will impact how much and when they can pay back some LTD.