* Expects to deliver 235 planes in 2012 vs 245 in 2011
* 2012 aerospace EBIT margin seen at 5 pct, was 5.8 pct in 2011
* Stock falls 7.8 pct to C$4.38 on TSX
* Q4 results largely in line with expectations (Adds detail from conference call, stock price; in US dollars unless noted)
By Susan Taylor
March 1 (Reuters) - Bombardier Inc said plane deliveries will dip in 2012 and the world's third biggest commercial plane maker forecast lower than expected profit margins for its key aerospace unit, news that drove its shares in down nearly 8 percent on Thursday.
The Montreal-based plane and train maker, which faces sluggish demand for its regional jets, said higher costs will hurt its margins, including a $100 million hit from a stronger Canadian dollar and further $100 million for pension expenses.
"A lot of focus will be on aerospace margin guidance of 5 percent," said Canaccord Genuity analyst David Tyerman. "A lot of people might think it's too low and they are being too conservative."
By mid-session, the stock had dropped 37 Canadian cents to C$4.38 on the Toronto Stock Exchange. TD Securities downgraded the stock to "hold" from "buy", citing the weak outlook.
Bombardier competes with Brazil's Embraer in the smaller plane sector and is seeking to tread on the turf of giants like Airbus and Boeing with its yet-to-launched C-series jet. That plane, promised by the end of 2013, will be Bombardier's largest jet to date.
Bombardier said its closely watched margin for earnings before interest and taxes is expected to decline to about 5 percent in 2012 from 5.8 percent in 2011. It withdrew its 2013 forecasts, blaming the poor economy and regional jet weakness.
The company, whose fourth-quarter profit came in slightly above estimates, also said it expects to deliver about 235 planes this year, down from 245 in 2011, reflecting strength for big aircraft and soft demand for its smaller commercial planes.
"On the commercial side it's very weak," said Morningstar analyst Neal Dihora. "Bombardier's commercial aircraft strength is more in North American and Europe and those markets aren't really growing. Growth in Asia has been dominated by other players like Embraer."
Bombardier said it has been expanding its sale force to drive business in emerging markets.
Bombardier expects to deliver 180 business aircraft, such as its Challenger and Global brands, and 55 smaller commercial planes, like its Learjet, in 2012. It delivered 163 business planes and 78 commercial planes in 2011.
"Last year was certainly a very difficult year for aircraft sales for them," said PI Financial analyst Chris Murray. "Next year's going to be more of what they've been doing for the last little while."
The aerospace unit's order backlog reached $22 billion at Dec. 31, the division's new year-end, a 15 percent increase from $19.2 billion at Jan. 31, 2011.
The gain reflects an increase in orders for business and C-Series planes that is partly offset by lower orders for turboprops and regional jets, Bombardier said.
Bombardier expects to run test flights on the C-Series this year and says the plane will enter service in late 2013. There have been doubts in the market that the single-aisle 110- to 149-seater plane will meet its launch date.
Bombardier net profit was $214 million for the fourth quarter, or 12 cents a share, compared with $295 million, or 16 cents a share, a year ago.
Analysts had, on average, expected earnings of 11 cents a share and revenue of $4.74 billion on average according to Thomson Reuters I/B/E/S.
Revenue fell 23 percent to $4.3 billion.
The results reflect a change in the aerospace unit's year-end to Dec. 31 from Jan. 31. The transportation division already had a Dec. 31 year end.
Revenue at Bombardier's aerospace unit, which makes business, commercial and amphibious craft, was $2 billion for the two months ended Dec. 31, compared with $3.1 billion for the three months ended Jan. 31, 2011.
Revenue at the transportation unit, which makes trains, fell to $2.3 billion for the three-month period ended Dec. 31, from $2.5 billion for the same period last year.
Free cash flow in the quarter fell to $590 million, from $1.5 billion last year. (Additional reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Gopakumar Warrier and Janet Guttsman)