MONTREAL – Bombardier is looking at opportunities to sell trains and planes to Iran and assemble aircraft in China as the transportation giant tries to grow its presence in the world’s emerging markets.
CEO Pierre Beaudoin said Thursday that Bombardier is evaluating the market potential in Iran if a permanent deal is reached to lift all sanctions, while removing any possibility for Tehran to develop a nuclear weapon.
“Our role right now is to understand when sanctions could be lifted and how we could take advantage of a market we feel will be important for all of our products,” he said at a news conference after Bombardier’s annual meeting.
Iran’s top aviation official has said the country is looking to buy 400 passengers planes in the next 10 years to upgrade its aging fleet if sanctions imposed by the West over its controversial nuclear program are lifted.
Beaudoin added that Bombardier wants to ensure it’s not at a competitive disadvantage if sanctions are lifted.
In China, Bombardier is in early negotiations about establishing final aircraft assembly to gain further access to sales in the world’s fastest growing economy.
The move would be similar to efforts in Russia, that could be threatened if sanctions are imposed over the political crisis in Ukraine.
Bombardier (TSX:BBD.B) is hoping to reach an agreement this year to establish a joint venture with Rostec, a Russian state corporation, that could lead to some 100 turboprops, valued at US$3.4 billion at list prices, being built for the Russian market.
The final assembly line in Russia would complement Bombardier’s Toronto operations, where final assembly of the 70- to 80-seat turboprop currently takes place.
Bombardier Aerospace president Guy Hachey said the same concept could apply in China.
“We’re not far along in those discussions but you could have the same kind of approach where if you could reach a partnership with someone local you could serve that market from that point and the Q400 could be one of those candidates or other platforms,” he told reporters.
Hachey said there is no need in the short-term to assemble CSeries outside Mirabel, north of Montreal.
Earlier, Bombardier (TSX:BBD.B) said it’s on track to deliver promised results for the year, despite posting a 22 per cent drop in earnings in the first quarter and near doubling of its use of free cash.
The Montreal-based transportation giant’s net aircraft orders surged to 91 from 28 a year ago, pushing the aerospace division’s backlog to a record US$38.5 billion. It delivered 56 planes during the quarter, three more than the same period a year ago.
Bombardier continued to trail rival Gulfstream in terms of the value of business jets delivered in the quarter, an industry association said Thursday. The General Aviation Manufacturers Association said Bombardier delivered 43 aircraft valued at US$1.57 billion, compared with its U.S. competitor’s 39 planes valued at US$2.05 billion.
Overall, Bombardier, which reports in U.S. dollars, earned $115 million or six cents per share for the period ended March 31, down from $148 million or eight cents a year earlier.
Excluding one-time items, net income amounted to $151 million or eight cents per share, in line with analyst forecasts. It earned $156 million or eight cents per share in the 2013 quarter.
Revenues for the train and plan manufacturer were ahead slightly at $4.4 billion, compared with $4.3 billion year-over-year.
The company used $915 million of free cash in the quarter, up from $590 million a year ago.
Its total liquidity slipped to $3.9 billion including $2.5 billion of cash, compared to $4.8 billion in short-term capital and $3.4 billion of cash as of Dec. 31.
Beaudoin said he was satisfied with the results and added Bombardier has enough liquidity to meet its development plans.
Meanwhile, Bombardier said it will closely watch the Supreme Court of Canada, which Thursday agreed to hear a case filed by a Pakistani-born Canadian citizen who was initially denied pilot training by Bombardier in Dallas and Quebec after being excluded by U.S. authorities.
“I think it’s premature right now to make comments, but we’re satisfied that we’ve taken the high road in this particular case,” said Hachey.
The world’s third-largest aircraft manufacturer said the delayed CSeries aircraft program continues to make “solid progress” with test flights reaching the maximum operating altitude of 12,497 metres (41,000 feet) and the maximum operating speed of Mach 0.82 or 871 km/h. The fourth flight test vehicle is expected to complete its first flight in the coming weeks.
On the Toronto Stock Exchange, Bombardier’s shares closed Thursday at C$4.15, down 26 cents or 5.9 per cent.
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