Bombardier Inc outlined plans to list a minority stake in its rail unit on Thursday, as it reported a quarterly profit that topped market expectations.
Canada’s Bombardier Inc said it was preparing for an initial public offering of a minority stake in its railway unit, Bombardier Transportation.
The IPO is expected to take place in the fourth quarter and the primary listing is likely to be in Germany, the company said on Thursday.
The initial public offering is expected to take place in the fourth quarter and the main listing is likely to be in Germany, where its rail business is headquartered.
Reuters reported in April that Bombardier was looking to raise cash from the rail unit Bombardier Transportation as it grappled with cost overruns in its aircraft business. It acquired a large chunk of the rail business through its acquisition of Adtranz from DaimlerChrysler back in 2001.
“In Business Aircraft, the market has seen some softness in certain regions, particularly in Latin America, China and Russia, which resulted in a lower order intake,” Bombardier said.
On Thursday, Bombardier also signaled that its long-delayed CSeries jet could go into service even later than previously forecast. The company still expects the plane to be certified by the end of 2015, but said entry into service would be in the first half of 2016.
Bombardier had long forecast entry into service in 2015. In February, Chief Executive Alain Bellemare said entry into service could slip a few weeks into 2016 depending on customer decisions.
Bombardier confirmed, as widely expected, that Lufthansa’s Swiss International Air Lines [SWIN.UL] would be the first customer to take delivery of the CSeries.
Bombardier Transportation will continue to be controlled by Bombardier and included in its financial results, the company said.
“Let me be very clear, Bombardier Transportation is not for sale. We like this business and it will remain part of Bombardier,” Bellemare said on Thursday.
Reuters reported last week that China’s two top trainmakers had been in discussions with Bombardier about possibly buying a controlling stake in the rail unit. But any bid could have faced political opposition in Canada, while sapping Bombardier of cash flow.
Bombardier did not rule out doing a deal in the future, noting that a public offering would preserve its flexibility to participate in industry consolidation.
Excluding items, the company earned 9 cents per share in the quarter ended March 31, above average analysts’ estimate of 5 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose nearly 1 percent to $4.40 billion.
Net orders for its business aircrafts fell to 19 from 46, whereas commercial aircraft orders dropped to 25 from 45. Bombardier said the business jet market had been soft in Latin America, China and Russia.
The company is planning to adjust production rates to match demand and is assessing a related impact on its workforce.