Business & GA, Commercial, Military

Embraer Suspends 2020 Financial Forecast Amid COVID-19 Impact

By Frank Wolfe | March 26, 2020
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While Embraer on March 26 reported a 2019 net loss of $210 million because of expenses related to the proposed Boeing commercial aircraft venture, Embraer also reported strong liquidity and a big backlog for the company’s E190-E2 airliners, which feature Honeywell Primus avionics (Embraer Photo)

Embraer said on March 26 it is suspending its financial forecast for 2020 amid the ongoing impact of the COVID-19 virus.

“Embraer has so far not suffered extensive delays in its supply chain, production operations, or material impacts on the demand for its products,” the company said. “Nevertheless, due to the uncertainty related to the spread of the virus, we are suspending the projections presented, on November 12, 2019, in relation to the expected results for 2020. Updated projections will be disclosed as soon as we have a greater visibility into the impact of the virus on the company’s businesses. At the company’s premises in Brazil, some essential activities continue to operate on a regular basis. Some employees are working from home (home office) and those employees who cannot perform their activities remotely have been placed on temporary paid leave until March 31, 2020.”

In a fiscal 2019 third quarter earnings call last Nov. 12, Embraer projected consolidated 2020 revenues of $2.5 to $2.8 billion, an earnings before interest and taxes margin of two to five percent and break-even free cash flow.

For the fourth quarter of 2019, Embraer on March 26 reported a net loss of nearly $210 million, most of it due to expenses related to a proposed Boeing-Embraer joint venture for the production of commercial aircraft. Yet, Embraer reported strong liquidity of $2.8 billion at the end of 2019 and last month added liquidity of $600 million because of a loan, the company said.

While Embraer had predicted that regulators would approve the sale of an 80 percent stake in its commercial jet business to Boeing this month, Embraer said on March 26 that the European Commission is expected to approve that transaction after June 23.

“In regards to the Embraer employee partnership, Embraer finished the carve out of commercial business at the end of January successfully,” Embraer chief financial officer Antonio Carlos Garcia told investors during a March 26 earnings call.

Due to COVID-19, the company has halted jet production in Brazil while continuing business jet production at the company’s factory in Melbourne, Florida.

Despite the situation, Embraer reported that it met company guidance for 2019 by delivering 35 commercial jets and 46 executive jets (20 light and 26 large) in the fourth quarter of 2019 and by delivering 89 commercial jets and 109 executive jets (62 light and 47 large) overall last year. The latter deliveries included 14 E190-E2 commercial jets featuring Honeywell Primus avionics, including four 13-inch landscape displays with synthetic vision and other advanced flight information graphics capabilities.

Embraer said on March 26 that it recorded 153 firm orders and more than 570 commitments in 2019 for the E190-E2s.

In addition, EmbraerX unveiled its flying vehicle concept for urban air mobility last year, and the company reported that the first two Boeing/Embraer KC-390 transports had entered into service with the Brazilian Air Force. Embraer said that it is collaborating with the Brazilian Air Force on a study for a new light military transport aircraft.

Embraer CEO Francisco Gomes Neto said during the March 26 earnings call that the company has received requests for deferrals for planes scheduled to be delivered this year that will instead be delivered in 2021, but declined to specify how many requests the company has received.

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