Increased Legacy Deliveries Provide Boost to Embraer

 - July 31, 2017, 9:09 AM

While Embraer’s business jet deliveries slid in the second quarter compared to last year, an increase in shipments of the company’s larger business jets along with a surge in commercial deliveries drove a 29.5 percent jump in revenues in the quarter.

Overall, Embraer’s revenues increased to $1.77 billion in the second quarter, compared with $1.366 billion for the second quarter of 2016. This spike comes as deliveries overall increased by seven to 59 for the quarter. But the improved numbers of shipments are attributable to the commercial sector, which increased by nine units to 35 deliveries in the second quarter.

Executive jet deliveries slid by a couple of units year-over-year, from 26 in the second quarter 2016 to 24 in the most recent quarter. But the mix shifted: the number of large-jet deliveries increased by five to eight. This led to a 16 percent increase in revenues for its business jet segment to $339.5 million in Q2 2017, up from $293 million a year ago.

Despite the improved revenue performance, Embraer's business jet revenues are still down close to 18 percent for the first half to $566 million. This reflects the 44 percent plunge in first quarter sales.

While business jet shipments were soft overall in the first half, Embraer president and CEO Paulo Cesar Silva was encouraged that the company is seeing some reasons for optimism. “Of course, the market is still under big pressure,” he said. “However, we have seen some signs of improvements on the used market.There is some stability in prices, and no further deterioration, in general, in the value of the aircraft.”

Embraer has adopted a more disciplined approach to pricing, he said, adding this is beginning to improve margins, and he expects this improvement to continue throughout the year.

The company reaffirmed its outlook for the year with the anticipation of delivering between 70 to 80 Phenoms and 35 to 45 Legacy and Lineage models. This will keep deliveries in the range of last year’s deliveries of 117. The revenue forecast of $1.6 billion to $1.75 billion for the business jet segment is also in line with last year’s results of $1.73 billion.

The book-to-bill this year has been above one, with more sales than deliveries. CFO José Filippo added that the company believes that for Embraer Executive Jets, next year “is going to be a better year.”