Phenom Production in U.S., Embraer Profts Up

With a new 150,000-square-foot, state-of-the-art facility in Melbourne, Fla., Embraer is creating a final assembly line, the first for Embraer in the U.S., to produce both the Phenom 100 and Phenom 300 executive jet models. Announced with Melbourne Mayor and Florida Governor Charlie Crist, the new $50 million facility will include a paint shop and a delivery and customer design center. The announcement comes in the wake of Bombardier’s consideration of CSeries production in the U.S., which, with the value of the dollar, is now a low-cost production environment.
The assembly line will supplement the company's assembly line in Gavião Peixoto, Brazil and will be operational in 2010. It is expected to nearly double production rates for the Phenom jets. After a rigorous and thorough site selection process, the preferred location for the project is Melbourne International Airport, in Melbourne, Florida, which best satisfies all applicable operational requirements and strategies, said the company, which signed a Memorandum of Intent with a final decision predicated on approval by state and local governments.
Embraer expects to create approximately 200 skilled positions by 2011 for aircraft assembly, production planning, logistics and quality, aircraft interior design, corporate administration, engineering, and aircraft painting, delivery, and flight testing functions. When it reaches maturity, the Florida plant is expected to produce eight Phenoms a month or an additional 96 aircraft per year to address the 750-aircraft backlog for its Phenom program.

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 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'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.