By Allison Lampert and David Ljunggren
(Reuters) -Bombardier obtained an exemption from recent Canadian sanctions on Russian titanium, its CEO said on Thursday, as it joined Airbus in securing a government waiver that allows access to the strategic metal.
Bombardier (OTC:) CEO Eric Martel disclosed the waiver during a call with reporters after the company reported strong orders during quarterly results earlier on Thursday.
Shares of the Canadian business jet maker were up 6.8% at C$60.85 on Thursday afternoon in Toronto.
Canada in February became the first Western government to ban Russian titanium as part of its latest package of measures triggered by the war in Ukraine. Russia’s state-backed VSMPO-AVISMA has for years been a critical supplier of titanium for the aerospace sector.
While Bombardier does not directly purchase Russian titanium some of its suppliers do, so the company needed an exemption, Martel said on the call.
“We did work with the government and we did work also with all our supplier base to make sure we were doing the right thing. But at the same time we needed to ensure you know that we keep running our factories,” he said.
On Tuesday, Reuters exclusively reported that Airbus had been granted a waiver, triggering pushback from Canada’s politically active Ukrainian diaspora.
The Ukrainian Canadian Congress on Wednesday pressed the government of Justin Trudeau to enforce its own sanctions policy.
Canada’s foreign ministry says it has made clear to companies that they must find other sources of titanium.
The sanctions exemption that Canada granted Airbus to allow it to use Russian titanium in its manufacturing is available only for a limited time, a Canadian source with direct knowledge of the matter said on Thursday.
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The exemptions that Canada has issued so far apply only to the aerospace sector, including the military sector, said the source, who requested anonymity given the extreme sensitivity of the matter.
Earlier on Thursday, Bombardier reported improved margins with orders for its jets rising 60% in the first quarter, pushing the company’s backlog to $14.9 billion.
Bombardier also reported a higher-than-expected cash burn in the first quarter as it builds up inventory to support increased production of business jets.
Cash burn for the quarter through March rose 57% to $387 million, above analysts’ estimates of $361 million, according to LSEG data.
“While we continue to require more working capital investment in the near term, we will be well-placed in the second half of the year and well beyond,” Martel told analysts on a separate call.
The company is ramping up production this year of its super mid-sized Challenger jets which seat about 10, and it will expand manufacturing of its large-cabin Global aircraft in 2024, Martel said.
Bombardier is facing a challenge from rival General Dynamics (NYSE:)’ Gulfstream, which is starting deliveries of its flagship G700 luxury jet that was certified last month.
Bombardier reported 20 aircraft deliveries in the first quarter, down from 22 a year earlier and said it is still on track to handover 150 to 155 jets this year.
Revenue declined 12% in the quarter due to a delivery mix favoring Challengers which are priced below the Globals.
Total revenue for the first quarter was $1.3 billion, below estimates of $1.5 billion.
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