Embraer Post $85M Profit

Embraer posted first quarter 2008 (1Q08) net sales of $1,335.9 million and net income of $85.0 million, equivalent to diluted earnings per ADS of $ 0.4633. Income from operations reached $48.7 million in 1Q08, a 214.2 percent increase over the same period last year. The increase results from the higher gross...

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Embraer posted first quarter 2008 (1Q08) net sales of $1,335.9 million and net income of $85.0 million, equivalent to diluted earnings per ADS of $ 0.4633. Income from operations reached $48.7 million in 1Q08, a 214.2 percent increase over the same period last year. The increase results from the higher gross profit in the quarter. The operating margin was 3.6 percent in 1Q08, representing an increase compared to the 1.9 percent operating margin for 1Q07, resulted from a more favorable dilution of the fixed costs. Despite the commercial and administrative expenses reduction from 4Q07 to 1Q08, the income from operations was reduced owing to lower deliveries and consequently reduced gross profit.
The increased operating results led to growth in net income, which totaled $85.0 million in 1Q08, compared to $26.2 million in 1Q07. The net margin increased to 6.4 percent in 1Q08, compared to 3.1 percent in 1Q07.
Net revenues for 1Q08 totaled $1,335.9 million, a 60.6 percent increase over the $831.8 million in net revenues of the first quarter of 2007 (1Q07), owing to the increase of deliveries and the product mix delivered.
The gross margin for 1Q08 totaled 20.4 percent, representing a decrease from the 22.5 percent gross margin for 1Q07, mainly owing to the impact of the 17.6 percent decrease in the exchange rate (R$/US$) on the 15 percent portion of our cost denominated in reais and the yearly contractual adjustment in suppliers costs. The decrease in the gross margin from 22.6 percent in the 4Q07 to 20.4 percent in the 1Q08, is also due to annual contractual adjustment to suppliers costs and the product mix delivered.
Embraer added new customers to its firm order backlog in the first quarter such as Air Moldova, Jetscape and the new Brazilian airline founded by David Neeleman, Azul Linhas Aereas Brasileiras S.A. Also during 1Q08, traditional customers, such as Finnair and Lot Polish, announced new firm orders for the E-Jets, and Embraer also disclosed the names of Petroecuador and Universal Airlines, whose firm orders were already included in the company's backlog at the end of 2007. Furthermore, during 1Q08, Regional, Virgin Blue, Egypt Air and M1 Travel confirmed options for the E-Jets.
Embraer's firm order backlog on March 31, 2008, increased 8.0 percent over the previous quarter reaching a record high of $20.3 billion, highlighting sales to the Executive Aviation market and the favorable performance of the 170/190 family. The backlog accumulated a total of 835 firm orders and 840 options.
In 1Q08, Embraer delivered 45 jets for Commercial and Executive Aviation segments. Embraer reaffirmed its delivery forecast for 2008 of between 195 and 200 aircraft, for the Commercial Aviation, Executive Aviation and Defense and Government segments, and 10 to 15 Phenom 100 jets. The certification process for the Phenom 100 is on schedule and is expected to be concluded in the second half of 2008, as planned.
For the year ended December 31, 2007, the company maintained its high level of liquidity, and its cash position at the end of 1Q08 was $649.9 million.