Reduced Demand Helps Drive 1Q Embraer Loss
Darren Shannon darren_shannon@aviationweek.com
A near collapse in business jet deliveries, softening demand for both commercial and defense aircraft and costs associated with a staff reduction program have resulted in a first-quarter net loss of $23.4 million for Embraer.
The Brazilian manufacturer recorded a 13.5% year-on-year dip in first quarter revenue to $1.15 billion as deliveries dropped by five units to 40 airframes in the quarter. Gross profits at the same time fell almost 23% to $209.6 million, while operating income declined from $48.7 million in the first quarter of 2008 to $27.2 million in the same period this year.
Last year, Embraer recorded a first quarter net profit of $85 million.
For this year's first quarter the airframer also recorded an undisclosed number of cancellations from its executive jet backlog and deferral of several - again undisclosed - commercial orders. As a consequence, the value of Embraer's backlog fell 5.7% in the three months to $19.7 billion, although its E-Jet backlog is still a healthy 354 aircraft.
"In light of this new scenario, Embraer revised its revenue guidance for 2009 to $5.5 billion," the company said in its first quarter statement. Of this, $3.3 billion is still expected in commercial sales, while just $800 million will come from the airframer's executive aviation division, and most of this will be in very light jet sales.
A further $600 million is forecast in defense and government sales, while services and "other" should generate another $800 million.
The downturn in business jet demand is illustrated in the first quarter results. In just one year, executive jet sales have dropped from $173.6 million to $70.2 million, as deliveries of corporate jets fell from seven to just two. As a percentage of total sales, executive aviation now accounts for 6.1% of revenue, less than half the 13% recorded in the first quarter of 2008.
This slump puts more emphasis on Embraer's commercial aircraft, which accounted for 75.3% of all first quarter sales despite a 6.4% dip in value to $870.4 million. At the same time last year, the $929.5 million generated in commercial revenue represented 69.6% of all sales.
Defense and government revenue in the first quarter also declined 23.6% year-on-year to $657.8 million, although as a percentage this segment only fell from 6.6% to 5.9%.
Embraer's services division, however, recorded growth in the period, with revenue growing 2.1% to $128.1 million. Its influence on total sales also grew to 11.1% from the 9.4% recorded in the first three months of 2008.
But the decline in demand was only one factor in Embraer's first quarter loss. A plan to cut 20% of its workforce cost $33.3 million in the first quarter, and even though the company retained some deposits from the cancellations, one-time charges totaled $32.4 million.
At the same time, Embraer also paid $45.4 million in income tax during the first quarter, a reversal on the $21.3 million tax benefit recorded in the same period in 2008.
Photo credit: Embraer
