Embraer bizav revenues rise as deliveries stay strong

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by CJI Expert

November 14, 2022

Embraer Phenom 100.

Embraer’s Executive Jets Division has posted an increase in revenue to $271.7m in the third quarter (Q3) of 2022, up by 6% compared with Q3 last year.

The division accounted for more revenue than the commercial aviation side of the business this quarter, making up 26.8% of the group’s overall $1.02bn revenue.

The group sold 23 executive jets within the quarter, accounting for almost half of the business jets sold in the year-to-date (52). Of the 23 sold in Q3, 15 were light jets and the remaining eight were mid and super midsize jets. Embraer said Q3 was the second-best third quarter for executive aviation in the last decade.

On an earnings call, Antonio Carlos Garcia, executive vice president and chief financial operator, Embraer said: “This is one of the highest quarters [in terms of backlog] since the beginning of the pandemic, driven by solid sales activity in executive aviation and service and support.”

Reported Q3 gross margin was down slightly compared with last year, at 19.7% this year and 21% in Q3 2021. But the gross margin is still up year-to-date at 20.6% in the first nine months of 2022 compared with 16.3% within the same time last year.

Group-wide, free cash flow in the quarter was negative $109.4m, mainly due to an increase in working capital because of higher deliveries in Q4 this year, which is expected to reverse to a positive trend.

The group also cut its debt by $0.53bn since Q3 last year, with the group finishing the quarter with $1.3bn debt. Embraer said the decrease in debt is a result of cash generation during the last four quarters. To ensure liquidity, Embraer obtained a revolving credit facility in October this year for up to $650m, as well as a credit transaction guarantee of $100m by JP Morgan and UK Export Finance to finance suppliers.

The group’s total backlog remained stable in Q3 at $17.8bn, the same as Q2 this year and up 6% compared with Q3 2021 when backlog was $16.8bn.

The topic of supply chain problems was brought up on the earnings call held shortly after the results were published today. Carlos Garcia said that despite the supply chain hold-ups, he still expects the company to deliver strong full year results. He said: “We all know the supply chain constraints which are impacting Embraer, and a big portion of the deliveries will be in Q4. Despite the challenges of the supply chain, we should stay in the lower end of the delivery guidance for […] executive jets.”

Francisco Gomes Neto, CEO and president, Embraer added: “The end of the year will still be challenging with the concentration of deliveries in the fourth quarter. But we have known this since the beginning of the year and the company’s focus has been on mitigating such issues. We are prepared to deliver solid full year results.”

Gomes Neto said that delivery slots for the next two years are “almost completely filled” for executive jets. He said: “Regarding the coming years we foresee a better perspective in terms of revenue and profitability growth.”

Embraer results at a glance: