Brasilia / BLOOMBERG
Embraer SA reported fourth-quarter profit that fell short of analysts’ estimates as the company made a 390.6 million-real ($100.3 million) provision related to Republic Airways Holdings Inc.’s bankruptcy filing. The Brazilian planemaker said net income attributable to controlling shareholders rose 76 percent to 425.8 million reais, trailing the 527.5 million-real average estimate for adjusted earnings of seven analysts compiled by Bloomberg. Net revenue climbed to 7.99 billion reais, boosted by a weaker Brazilian currency as all sales are denominated in dollars.
Embraer delivered four E175 jets to Republic Airways this year and had outstanding orders for 24 jets scheduled for deliver this year and next when the US
airline filed for bankruptcy on February 26. Republic has a fleet of 230 Embraer planes, composed of 50 ERJ 145 and 180 E170/175.
“Payments and cash disbursements for these provisions can occur depending on the result of future negotiations,” Embraer said in the statement filed to the Brazilian securities regulator.
“Cancellation of those orders would impair 5 percent of Embraer’s current backlog and risk up to 5 percent of our expected consolidated revenues for the company through December 2017,” Moody’s analysts Cristiane Spercel and Marianna Waltz wrote in report dated March 1, citing negative credit risks. “Embraer needs to find other buyers to allocate Republic’s orders over next few months.”
Embraer shares dropped 4.3 percent to 27.84 reais at 10:26 a.m. in Sao Paulo trading, extending losses for a third day.
The planemaker’s order backlog climbed to almost $23 billion at the end of 2015, as the manufacturer pushed to update its regional jets. The company presented an upgraded version of its E190 jetliner, the E190-E2, on Feb. 25 and expects to invest $325 million in product development this year mainly on the new generation of planes. Embraer delivered 78 planes in the quarter, down from 82 a year earlier, due to a decline in demand for business jets. Executive jets unit will have a 30 percent share of total revenue in 2016, down from 36 percent last year.
The company expects to deliver 105 to 110 commercial jets in 2016, up from 101 last year, and between 115 to 135 executive jets, compared to 120 in 2015. Total revenues may be between $6 billion and $6.4 billion.