Brazilian aerospace group Embraer reports net loss for first quarter

19th June 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor


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Brazilian major aerospace group Embraer, the world’s number one manufacturer of commercial jets with up to 150 seats, and the world’s number three commercial jet manufacturer, after Airbus and Boeing (in alphabetical order), has reported a net loss of $292-million attributable to its shareholders and an adjusted net loss (which omitted special items and deferred taxes and social contributions) of $104-million for the first quarter of this year (1Q20). Embraer’s financial year is the same as the calendar year.

The company’s free cash flow was negative $676.5-million in 1Q20, compared with negative $665.3-million during the same period last year (1Q19). But Embraer’s free cash flow during the first quarter was usually negative, “due to seasonal working capital consumption” (in the words of the company’s media release). In sharp contrast, its free cash flow during the last quarter of last year was positive $739.4-million.

Earnings before interest and taxes (Ebit) in 1Q20 were negative $46.9-million but earnings before interest, taxes, depreciation and amortisation (Ebitda) were positive $9.3-million, compared with 1Q19’s Ebit of negative $15.2-million and Ebitda of positive $30.9-million. The adjusted Ebit and Ebitda figures for 1Q20 were positive $8.7-million and positive $64.9-million respectively.

These first quarter results were affected by the global Covid-19 pandemic. Thus the company booked $22.2-million in negative fair value changes (related to Embraer’s share in Republic Airways Holdings) and $33.4-million in bad debt provisions.

“Embraer’s liquidity remains solid as the company finished the quarter with total cash of $2 500.6-million and major debt maturities starting in 2022 onwards,” assured the group. Total debt at the end of 1Q20 was $3 832.2-million, and net debt was $1 331.6-million. “Embraer continues to evaluate additional financing to further enhance its cash position.”

Embraer’s business is divided into Commercial Aviation, Executive Jets, Defence & Security, Services & Support, and ‘Others’. During 1Q20, Commercial Aviation accounted for 22.2% of total net revenues (as against 34.1% in 1Q19), Executive Jets for 20.4% (14.2% in 1Q19), Defence & Security for 23.5% (21.8%), Services & Support for 33.6% (29.7%) and Others for 0.2% (also 0.2%).

During 1Q20, Embraer delivered five commercial jets (three E175s, and one each of its E190-E2 and E195-E2 types). At the end of the quarter, the company’s commercial jet order backlog stood at a total of 318 aircraft, comprising 163 E175s, four E190s, 15 E190-E2s and 136 E195-E2s. This backlog included an order for 20 E175s that was signed in January. The company had so far not suffered from any order cancellations. During the first quarter, the company also delivered nine executive jets (comprising five light and four large).

In the Defence & Security business, Embraer continued production of its KC-390 Millennium airlift aircraft, with six aircraft on the assembly line (five for the Brazilian Air Force and one for the Portuguese Air Force), of which two of the Brazilian examples would be delivered this year. These would be the third and fourth examples of the aircraft to enter Brazilian Air Force service, two having already been delivered. Production of the Super Tucano light attack aircraft continued, with a new order (to Embraer and its US partner, Sierra Nevada Corporation) from US Air Force Special Operations Command for two of the aircraft.

Regarding the Gripen E/F programme for the Brazilian Air Force, being developed in conjunction with Saab, the Swedish company carried out the first metal cut for the first Gripen F (this two-seat version is being developed jointly by Saab and Embraer). The Brazilian Gripens will be assembled in both Sweden and Brazil. Embraer also continued the modernisation programme for the Brazilian Air Force’s A-1 fighter-bombers. It also delivered air traffic control and radar systems and military communications systems to civil and military customers in Brazil and Paraguay. The group further signed a contract for the development of a combat management system for the Brazilian Navy’s new frigate programme.

Embraer also reaffirmed its belief that US aerospace giant Boeing’s termination of the joint venture agreement between them had been “wrongfully” done. The Brazilian group was “pursuing all remedies against Boeing for the damages [it had] incurred . . . including by means of arbitration”.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor



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