Embraer Net Triples

Embraer reported net income in the third quarter (3Q07) was $194.9 million, representing a net margin of 13.6 percent, compared to net income of $61.3 million and a net margin of 7.0 percent in the same period of 2006. In 2Q07 net income was $67.3 million and net margin of 6.1 percent.
Embraer recorded net sales of $1,428.5 million in 3Q07.
During 3Q07 the company achieved the production of 13 jets per month of the ERJ 170/190 family, and keeps moving towards its goal of producing 14 jets of that family per month by the end of the year. The company maintains its delivery forecast of 165 to 170 jets in 2007. At the end of 3Q07, Embraer’s firm order backlog had reached a record high of $17.2 billion.
A total of 47 jets were delivered during 3Q07 representing an increase of 11 and 17 aircraft compared to deliveries in 2Q07 and 3Q06 respectively. During the quarter ended September 30, 2007, the company delivered 38 jets to the Commercial Aviation segment, nine Legacy 600 jets to the Executive Aviation segment, and one EMB 120 turboprop to the Defense and Government segment, to the Angolan Government. Net sales increased 28.7 percent and 62.9 percent, from $1,110.0 million and $876.9 million in 2Q07 and 3Q06 respectively to $1,428.5 million in 3Q07, mainly due to the higher number of deliveries.
In 3Q07, net revenues related to the Commercial Aviation segment reached $982.0 million and represented 68.7 percent of total revenues, compared to $708.6 million and $ 559.3 million reached in 2Q07 and 3Q06, resulted from higher number of aircraft delivered.
As a result of the Legacy; deliveries in 3Q07, net revenues for the Executive Aviation segment reached $211.4 million in 3Q07 representing 14.8 percent of total revenues, compared to $167.4 million and $183.5 million reached in 2Q07 and 3Q06, respectively.
Net revenues for Aviation Services were $153.6 million representing a 10.8 percent share of total revenues in 3Q07, compared to $111.3 million and $85.1 million in 2Q07 and 3Q06. Net revenues for the Defense and Government segment in 3Q07 totaled $58.8 million, compared to $100.6 million and $12.6 million in 2Q07 and 3Q06. The share of participation in total revenues also increased from 1.4 percent in 3Q06 to 4.1 percent in 3Q07.
In 3Q07, the gross margin was 21.8 percent, compared to 26.2 percent in 3Q06 and compared to 21.8 percent in 2Q07. High industrial costs still affected the company’s results, and with the implementation of the third shift almost completed, the company expects to gradually reduce the costs related to overtime work and employee training.
During 3Q07, operating expenses totaled $80.5 million, compared to $177.4 million for the same period in 2006. Sales expenses totaled $86.7 million in 3Q07, representing an increase of 5.9 percent compared to $81.9 million in 3Q06, mainly owing to an increase in the sales efforts for business jets.
Owing to the progress in the development of the Phenom family, R&D expenses totaled $54.3 million in 3Q07, representing an increase of 36.5 percent, compared to the same period in 2006. In addition to the investments in R&D, Embraer is also focusing on the development of new technologies and materials for future implementation of its projects. Those investments related to new programs and to the competitiveness of the company, totaled $7.1 million in 3Q07.