Monday, March 17, 2008
Embraer Posts $489.3M Net for ‘07
The firm order backlog on December 31, 2007, increased 9.3 percent over the previous quarter, and reached a record high of $18.8 billion, and highlighted sales to the Executive Aviation market and the favorable performance of the ERJ 170/190 family. Embraer’s backlog accumulated a total of 764 firm orders and 786 options booked.
In 4Q07, Embraer delivered 61 jets for the Commercial Aviation, Executive Aviation and Defense and Government segments. Total deliveries in 2007 reached 169 jets, a record for a single year, but on target of predictions for between 165 and 170 aircraft for the year. The company also reaffirmed its delivery guidance 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 expected to be concluded in the second half of 2008, as planned.
Net revenues for 4Q07 totaled $1,875.0 million, a 77.0 percent increase compared to $1,059.6 million for the fourth quarter of 2006 (4Q06). Deliveries for 4Q07 totaled 61 aircraft, a 64.9 percent increase compared to 37 jets delivered in 4Q06. For fiscal year 2007, net revenues totaled $5,245.2 million, a 39.5 percent increase compared to fiscal year 2006 revenues of $3,759.5 million.
To meet deliveries scheduled for 2007 and to improve its production capacity, Embraer hired and trained approximately 4,500 new employees, implemented a new third shift and widely used overtime work, resulting in an increase of the Company's production costs and, consequently, a reduction in its margins. Gross Margin for 4Q07 totaled 23.4 percent, representing a decrease from the 24.5 percent gross margin of 4Q06, and an increase from the 21.8 percent gross margin of the third quarter of 2007 (3Q07). For fiscal year 2007, gross margin totaled 22.5 percent representing a decrease when compared to fiscal year 2006, mainly due to the production difficulties previously reported.
Income from operations reached $178.8 million in 4Q07, 113.6 percent above the $83.7 million recorded for the same period last year. The increase results from higher deliveries in the quarter and to a favorable decision for the company in a tax dispute that permitted it to reverse $29.7 million in provisions. In 2007, income from operations was $455.7 million, an increase of 32.9 percent, over the $342.8 million in 2006, for the same reasons.
The increased operating results led to increases in net income, which was $200.9 million in 4Q07, in comparison with $124.4 million in 4Q06. Increases production costs, resulted in a net margin decrease to 10.7 percent in 4Q07, compared to 11.7 percent in 4Q06. For the same reason, net income increased to $489.3 million in 2007 from $390.1 million in 2006, and net margins decreased to 9.3 percent from 10.4 percent, respectively.
For the year ended December 31, 2007, the company maintained its high level of liquidity with a cash position at the end of 2007 of $740.1 million.
2007 in perspective
At the end of 2007, Embraer's firm order backlog was a record $18.8 billion. In the same period, 145 new firm orders for ERJ 170/190 aircraft were signed, and the company continued the successful sales of the Phenom family, of which 700 jets have already been sold. The Legacy 600 and Lineage 1000 aircraft also maintained positive sales performance during the period.
In 2007, new customers were added to Embraer's firm order backlog, such as M1 Travel from Lebanon, Montenegro Airlines, Alpi Eagles, Lufthansa and Air France/KLM from Europe, Aeromexico and TACA from Latin America, Virgin Nigeria from Africa, and Suzuyo & Co. Ltd., from Japan.
In February 2007, Embraer concluded a secondary offering of 11.3 percent of the total capital of the company for portions of the shareholding positions of BNDES Participacoes S.A. - BNDESPAR, Caixa de Previdencia dos Funcionarios do Banco do Brasil - PREVI, Fundacao SISTEL de Securidade Social and the totality of the shares then held by European Aeronautic Defence and Space Company- EADS France and Dassault Aviation S.A.
In the second quarter, Embraer created a new business area called Aviation Services, to reinforce its presence in the after-sale market and to be better prepared to serve the future deliveries of its E-Jets and executive jets, worldwide. Owing to that, the company started the construction of its first service center at Williams Gateway Airport in Mesa, Ariz. Three weeks later the company also started the construction of its second wholly-owned, U.S service center for executive jets, at Bradley International Airport in Windsor Locks, Conn. These facilities will be dedicated to support full-service of our executive jets and are scheduled for completion in mid-2008.
The Phenom 100 aircraft flew for the first time on July 2007, completing an important and significant milestone in its certification process. As of December 2007, the company had three pre-serial aircraft working on the flight test phase and certification process.
The 1000th jet of the ERJ family was delivered at Harbin Embraer Aircraft Industry Co. Ltd., in Harbin, China. This delivery marked an important achievement for the ERJ 145 family program, which was responsible for the turnaround of the company in the 1990s. In addition, the ERJ 145 family platform has been used to launch products for the Executive Aviation and Defense and Government segments.