Bombardier invests in rail

Bombardier Inc. revised its profit forecast for 2019 as it announced hundreds of millions in spending to ramp up capacity at its train-making unit following earnings that fell below analysts’ expectations.

The news triggered a 15 per cent drop in the transportation giant’s share price to $1.93 in mid-morning trading on the Toronto Stock Exchange.

The Montreal-based company plans to spend an additional US$250 million to US$300 million this year to ensure on-time project delivery, upping investment in manufacturing and engineering at Bombardier Transportation, its biggest division.

“We are making the necessary investments to ensure we have the right resources and capacity to deliver stronger, sustainable financial performance in the years ahead,” chief executive Alain Bellemare said on a conference call with investors Thursday.

Bombardier continues to struggle with a handful of contracts in Switzerland, Germany and the United Kingdom, part of the US$33.6 billion backlog at its rail unit, which saw adjusted core earnings fall 37 per cent year over year to US$146 million last quarter.

The company bumped down its core adjusted earnings guidance for 2019 to between US$1.2 billion and US$1.3 billion, from US$1.5 billion and US$1.65 billion.

The announcement came as the company, which also makes aircraft, reported a US$36-million net loss and a US$47-million adjusted loss for the second quarter ended June 30.

The loss, reported in U.S. currency, amounted to four cents per diluted share before adjustments and compared with a year-earlier profit of $70 million or two cents per share.

Bombardier’s adjusted loss for this year’s second quarter was also equal to four cents per share, twice as much as the average analyst estimate, according to financial markets data firm Refinitiv.

Revenue was $4.31 billion, up one per cent compared with $4.26 billion in last year’s second quarter and above analyst estimates.

Analysts had estimated an adjusted loss of two cents per share and revenue of $4.09 billion, according to Refinitiv.

Last month, Bombardier announced it would lay off half of the 1,100 workers at its Thunder Bay, Ont., manufacturing plant.

Two of the plant’s major contracts — for the Toronto Transit Commission streetcars and Metrolinx GO Transit rail cars — are slated to wind down by the end of the year.

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