Embraer has reported a first quarter loss as fewer aircraft deliveries and the ongoing work to prepare for the proposed joint-venture with Boeing weighed on the bottom line.
The Brazil-based manufacturer posted a net loss of US$42.5 million for the three months to March 31 2019, compared with a net loss of US$37 million in the prior corresponding period. It was the company’s fifth consecutive quarterly loss.
Revenue fell 14.3 per cent to US$823.3 million, Embraer said in a statement on Wednesday (Brazil time).
The manufacturer attributed the decline to fewer commercial aircraft deliveries, lower revenues from used business jet sales and a year-over-year decline across several programs in Embraer’s defence and security business.
There was also an increase in operating expenses, which totalled US$53.5 million in the quarter, up from US$29.7 million in the prior corresponding period.
The company said this was principally due to a “combination of higher impairments on the company’s portfolio of used commercial jets, higher taxes on intercompany remittances, and separation costs related to the strategic partnership between Embraer and Boeing”.
Total deliveries down by three commercial aircraft
Embraer said it delivered 22 aircraft in the first quarter, comprising 11 commercial aircraft (one E190-E2 and 10 E175s) and 11 business jets (eight light jets and three large jets). This was below the 14 commercial aircraft and 11 business jets a year ago.
Nonetheless, the company has reaffirmed its previous guidance of between 85-95 commercial aircraft deliveries and 90-110 business jet deliveries in calendar 2019.
Its financial results said first quarter deliveries were “generally the lowest in terms of seasonality” and were expected to increase as the year progressed.
Embraer executive vice president for finance and investor relations Nelson Salgado said the company delivered nine commercial aircraft in April.
“The first quarter the results were negatively impacted by lower commercial aviation deliveries that we expect to recover in the next quarter,” Salgado said during the company’s first quarter results conference call with analysts.
The first quarter results showed Embraer had a firm order backlog of 359 commercial aircraft, comprising 196 E175s, seven E190s, three E195s, 41 E190-E2s and 112 E195-E2s.
On April 10, Embraer said its E195-E2 regional jet has been certified by regulators in three jurisdictions, paving the way for deliveries to begin later in calendar 2019.
VIDEO: A look at the first flight of the E195-E2 in 2017 from the Embraer YouTube channel.
Embraer-Boeing partnership
On July 5 2018, Boeing and Embraer announced plans to establish a joint-venture that aims to boost their competitive offerings in the commercial aircraft sector.
Boeing will acquire an 80 per cent stake in Embraer’s commercial aircraft operations for US$4.2 billion, effectively adding the E-Jet family to its own commercial airliner line-up.
Embraer will hold a 20 per cent stake in the new JV.
In February, Embraer said 96.8 per cent of shareholders had approved the the proposed partnership with Boeing.
However, the deal still required the approval of antitrust authorities in Brazil and the United States.
Embraer said it expected the transaction to be completed by the end of 2019, subject to all approvals being obtained in a timely manner.
“We currently have ongoing interaction with several antitrust authorities in different jurisdictions throughout the world and we keep working hard on the carve-out project so that we can separate the commercial aviation business,” Salgado said.
“We expect the transition to close by the end of 2019, obviously, that depends on our approval being obtained on time.
Salgado said the recent grounding of the Boeing 737 MAX had no bearing on the joint-venture.
