Brazilian aircraft maker Embraer, the world's leading manufacturer of commercial jets with up to 120 seats, recorded third quarter 2008 net sales of US$ 1.5 billion and net income of US$ 57.7 million.
By the end of September 2008, the volatility of the Brazilian currency directly impacted Embraer's net results. The company's policy to mitigate its exposure to currency variations is based on the balance between assets and liabilities indexed in foreign currency and on the daily management of its currency trading, since most of its revenues are denominated in dollars and possibly could act as a natural hedge for the company.
The trend of appreciation of the U.S.dollar against the real might cause losses in the company's derivative instruments, but those losses tend to be compensated with an increase in operating revenues, since part of Embraer's costs are denominated in reais.
Embraer delivered 48 aircraft during the third quarter of 2008, compared to 47 in the third quarter of 2007 and 52 aircraft in the second quarter this year, totaling 145 jets delivered in by September 30, 2008.
The company expects to deliver 195 to 200 jets in 2008, tending toward the higher figure, as well as ten to 15 Phenom 100 jets. Embraer's firm order backlog on September 30, 2008, reached a record high of US$ 21.6 billion, including sales to the Executive Aviation market, which backlog is approximately US$ 7.0 billion.
The Embraer 170/190 jet family backlog accumulated a total of 865 firm orders and 813 options.
Net revenues for this year's third quarter totaled US$ 1,546.0 million, an 8.2% increase over the US$ 1,428.5 million in net revenues for third quarter 2007, basically due to the higher number of aircraft deliveries and a more favorable product mix.
The gross margin for third quarter 2008 totaled 21.7%, representing an increase over the 21.2% in third quarter 2007 gross margin in despite the impact of the 13.0% decrease in the average exchange rate (R$/US$) on the portion of the company's cost stated in reais, and the average increase of 10.13% in the payroll.
The higher gross margin is due to productivity gains achieved since the improvement of the company's industrial processes that started in mid-2007. The gross margin for third quarter 2008 is in line with the 21.9% for second quarter 2008.
Income from operations reached US$ 100.5 million in third quarter 2008, representing a decrease from the US$ 162.2 million recorded for the same period in 2007. The operating margin was 6.5% in third quarter 2008, representing a decrease from the 11.4% for third quarter 2007 and also a decrease from the operating margin of 6.9% for second quarter 2008.
Net income totaled US$ 57.7 million in third quarter 2008, compared to US$ 194.9 million in third quarter 2007 and US$ 134.4 million in second quarter 2008. The net margin decreased to 3.7% in third quarter 2008, compared to 13.6% in third quarter 2007 and 8.2% in second quarter 2008.
The company maintained its high level of liquidity, and its net cash position was US$ 491.9 million for the quarter ended September 30, 2008.
Third Quarter 2008 Highlights
Indian Government Acquires Three Embraer Emb 145 Aew&C Jets
Embraer and the Indian Government signed an agreement for three EMB 145 AEW&C (Airborne Early Warning & Control) jets. The contract includes a comprehensive logistics package comprised of training, technical support, spare parts, and ground support equipment.
Five Embraer 190 Jets Sold to China's Kun Peng Airlines
Embraer and Kun Peng Airlines Co., Ltd., one of the main operators in the Chinese regional aviation market, signed a contract for five firm orders for the Embraer 190 jet, marking an important expansion of Embraer's presence in mainland China.
Embraer and AeroMexico Sign a Contract for 12 Embraer 190 Jets
Embraer signed a contract with AeroMexico for 12 Embraer 190 jets, as part of the airline's modernization plan. The new aircraft will be flown by its AeroMexico Connect subsidiary, which already operates 28 ERJ 145 jets, and has taken operating leases on an additional four Embraer 190 jets from GE Commercial Aviation Services (GECAS), since November 2007.
Embraer and NAS Aviation Confirm Five Additional Embraer 190 Jets
Embraer and Saudi Arabia's National Air Services (NAS) Aviation confirmed options on five additional Embraer 190 jets. The original contract, covering five firm orders and five options, was announced in November 2007, during the Dubai Airshow. The airline also retains purchase rights for 12 additional aircraft of the same model.
Embraer Sells Five Embraer 190 Jets to NIKI Airline
Embraer and Austria's NIKI Luftfarht GmbH signed a contract for five Embraer 190 jets. The agreement includes purchase rights for another five aircraft, which could be either the Embraer 190 or the Embraer 195.
Embraer to Create Two Centers of Excellence in Portugal
In a ceremony held in Lisbon, Embraer announced plans for implementing two new industrial units dedicated to manufacturing complex airframe structures, being one focused on metallic assemblies and the other on composites, both of which to be located in the city of í‰vora, Portugal.
Embraer to Supply the Super Tucano to the Chilean Air Force
Embraer and the Chilean Air Force (FACH) signed a contract for 12 Super Tucano aircraft. This is a result of a public bid held by the FACH, which chose the airplane manufactured by Embraer as the best solution for the tactical training of its pilots. The first Super Tucano is expected to be delivered in the second half of 2009.
First E-Jets Sale to Montenegro Airlines
Embraer announced the sale of the first Embraer 195 jet to Montenegro Airlines. The agreement with the airline from the Republic of Montenegro also includes purchase rights for two more aircraft of the same model.
Two New Executive Jets Service Centers in the U.S.
Embraer celebrated the opening of its facilities at Phoenix-Mesa Gateway Airport, in Mesa, Arizona, and another hangar at Bradley International Airport, in Windsor Locks, Connecticut. The new facilities are dedicated to full-service care for the company's Phenom 100, Phenom 300, Legacy 450, Legacy 500 and Legacy 600 executive jets.