Embraer liquidity ‘remains solid’ despite net loss of $198.8m in Q2

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Embraer revealed an adjusted net loss of $198.8m in second quarter of 2020, however liquidity “remains solid”, as the company finished the quarter with $2bn cash. In the executive jets segment, Embraer delivered nine light and four large jets in the quarter whilst all announcing the delivery of its new Phenom 300E.

The delivery of 13 executive jets left the company’s firm order backlog at the end of the second quarter at $15.4bn. Adjusted EBIT (Earnings before interest and tax) and EBITDA (Earnings before interest, taxes, depreciation, and amortisation) were $140.5m and $120.4m, respectively. Both were negatively impacted by weak commercial aviation results, producing an adjusted EBIT margin of – 26.2%% and adjusted EBITDA margin of -22.4%.

The second-quarter (Q2) results include some net negative non-cash special items amounting to $202m. These are: additional negative provisions for expected credit losses during the Covid-19 pandemic of $16.1m, an impairment loss on the commercial aviation business unit of $91.1m, recognition of previous period depreciation and amortisation expense in the commercial aviation business of $101.2m, and a positive valuation mark to market of $6.5m on the company’s stake in Republic Airways shares.

As noted, adjusted net loss (excluding special items and deferred income tax and social contribution) was $198.8m, with adjusted loss per American Depository Share (ADS) of $1.08. Embraer reported cash flow of $476.2m in Q2; an improvement compared with the $676.5m use of free cash flow reported in Q1, due to several initiatives focused on reducing investments and controlling working capital, according to the company.

Embraer said its liquidity “remains solid” ,as the company finished the quarter with total cash of $ 2bn and major debt maturities starting in 2022 onwards. The company also finalised the terms of contracts for working capital and export financing with export credit agencies in Brazil and the USand private and public banks, adding a total of up to $700m to its total liquidity.

Embraer noted, due to continued uncertainty related to the Covid-19 pandemic, financial and deliveries guidance for the company’s 2020 results remains suspended.

At a glance: Embraer Q2 2020 results

  • Embraer delivered four commercial jets and 13 executive jets;
  • Adjusted EBIT and EBITDA were US$ (140.5) million and US$ (120.4) million;
  • Total net negative non-cash special items of US$ 202 million;
  • Adjusted net loss was US$ (198.8) million;
  • Reported Free cash flow of US$ (476.2) million;
  • Finished the quarter with total cash of US$ 2.0 billion
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