Embraer delivers 21 business jets in Q3

Embraer delivered a 21 executive jets in the third quarter (Q3) of 2020, down six from the same period in 2019, but only four short of 2018’s total. The Brazilian OEM delivered 19 light and two large business jets in the period as well as seven commercial aircraft. Leaving the company’s firm order backlog at the end of the quarter at $15.1bn.

Of that backlog, the portion from executive jet revenues declined from 30.9% in Q3 2019 to 28.0% in Q3 2020, as the segment’s revenues fell 41.5% due to lower deliveries in this quarter. However over the first nine months of 2020 executive jets comprised 25.5% of total revenues.

In Embraer’s financial results conference call held on Tuesday, CEO, Francisco Gomes Neto said while the company has not wanted to lose the competition advantage found in its staff, “but it has become essential to review the workforce” post-Covid. Neto said the company would be looking for areas of duplication following the carve-out of its commercial segment due to its joint venture with Boeing.

Embraer delivered its first Phenom 300E with Bossa Nova interior during the quarter. Whilst the OEM also reported two further deliveries of a Phenom 100EV and a Phenom 300E. The company also announced the Phenom 300MED a unique MEDEVAC transportation solution for Phenom 300 series aircraft, which is also available for retrofit, through a partnership with umlaut and Aerolite.

Adjusted EBIT (earnings before interest and taxes) and EBITDA (earnings before interest, taxes, depreciation and amortisation) were $45.3m and $0.6m, respectively. Embraer said these figures were negatively impacted by weak commercial aviation results, yielding adjusted EBIT margin of -6.0% and adjusted EBITDA margin of -0.1%.

For comparison, in Q3 2019, Embraer reported an EBIT margin of -1.8% and EBITDA margin of 1.5%. The margins were impacted following the carve-out of the commercial aviation segment after the Boeing partnership was agreed in February 2019.

The third quarter 2020 results include total net positive special items of $7.6m:

1) Restructuring expenses of $54.0m related to the voluntary and non-voluntary dismissal programs announced in September,

2) Negative provisions for expected credit losses during the Covid-19 pandemic of $13.0m,

3) Reversal of previous impairment in the Executive Jets business which positively impacted results by $15.9m,

4) Reversal of previous impairment in the Commercial Aviation business which positively impacted results by $58.7m.

Adjusted net loss in Q3 2020 was $148.3m, with adjusted loss per American depositary share of $0.81. Embraer reported free cash flow of $566.5million in the quarter, still affected particularly by higher inventories that are largely in the commercial aviation segment.

Embraer’s liquidity remains solid as the company finished the quarter with total cash of $2.2bn, higher than the $2.0bn in cash at the end of the second quarter despite the negative free cash flow in Q3. Embraer successfully issued $750m in bonds, using $250m to prepay portions of its 2022 and 2023 bonds, while adding $500m in liquidity. Also, the Brazilian firm’s liability management during the quarter resulted in the average debt maturity increasing from 3.8 to 4.5 years.

Due to continued uncertainty related to the COVID-19 pandemic, financial and deliveries guidance for the Company’s 2020 results remains suspended until further notice.