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Bombardier's cash burn overshadows profit gain

Tags: Bombardier
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Bombardier Inc. (BBD.B-T) said it burned through cash at a higher rate in the second quarter as aircraft orders dried up, sending its shares lower on Wednesday even as it reported a stronger-than-expected profit jump.

Bombardier drew $1.07 billion US from free cash flow, nearly double the rate of a year earlier. It relied more on cash flow in the absence of customer deposits, as the company received no orders for its CRJ's and Q400 regional commercial aircraft.

The world's third biggest commercial planemaker and No. 1 trainmaker expects economic uncertainty in the United States and Europe to keep a lid on customer advances in commercial aircraft for the rest of the fiscal year.

"The key here is that while quarterly variances are expected, the significant drain is cause of concern, in our view," RBC Capital Market analyst Walter Spracklin said in a note to clients.

The stock opened more than 2 percent higher, lifted by a higher-than-expected net profit of $211 million, or 12 cents a share.

Lower-than-normal taxes and strong sales in its train division lifted the results, which came in ahead of analysts' average forecasts for 10 cents a share.

In the same quarter last year, profit was $138 million, or 7 cents a share.

"On the whole it's a net positive because results themselves were better than expected in both divisions-aerospace and transportation," BMO Capital Markets analyst Fadi Chamoun said.

"Business jets orders (are) encouraging and hopefully that continues and that's really the critical thing," Chamoun said.

Revenue for the Montreal-based company rose 17 percent to $4.74 billion, ahead of analysts' forecasts of $4.49 billion.

Bombardier's transportation division, which builds trains and other rail equipment, reported a 29 percent jump in revenue to $2.7 billion, allaying fears about its high exposure to economically troubled European markets.

The market was "worried that problems with sovereign debt issues would restrict its orders and that's not been the case," said Nicholas Heymann of William Blair & Co.

Revenue at the aerospace division, which manufactures business, commercial and amphibious aircraft, increased 11 percent to $2.1 billion.

Bombardier warned that order delays in the regional aircraft market would keep weighing on its aerospace unit. But no production cuts for its commercial jets were announced, as some had been expecting.

The aerospace segment received 43 net orders for the C-Series aircraft for a value of $2.8 billion in the second quarter.

Overall, Bombardier's order backlog rose to $56.9 billion at the end of July from the $55.1 billion on April 30.

Bombardier's stock is down about 26 percent in the past three months. Investors are concerned that sales could slide if the global economy keeps weakening. There is also concern about slim orders for its bold, new C-Series plane, scheduled to be launched in 2013.

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