Embraer says it is running sales campaigns for some 200 commercial aircraft and is optimistic that it will conclude agreements for most of them. The Brazilian airframer has active negotiations with potential customers around the world, President and CEO Francisco Gomes Neto said on May 4 during the Q1 earnings call. Embraer bullish about sales opportunities.
Embraer has shared the same optimism during previous calls. During the FY22 presentation, the airframer said that it was having discussions with Chinese customers on the E2-family, which received the Chinese type certificate late last year. It was expected that Embraer would announce deals during the recent state visit of Brazilian President Lula to China, which followed a few weeks after Gomes Neto himself was in the country. But the Brazilian delegations returned home without any commercial contracts in their pockets.
In March, Embraer pitched its E2-jets for Lufthansa and LOT Polish Airlines, but the German airline said later that month that its sales campaign has yet to be launched later this year.
Deeper net loss in Q1
Embraer reported a consolidated Adjusted net loss of $-88.9 million for Q1 compared to $-75.3 million in the same period last year. Adjusted EBIT was $-31.6 million versus $-27 million, with a -1.4 percent margin compared to 0.6 percent last year. Revenues increased to $716.7 million, up from 600.9 million. The Adjusted free cash flow was $-399 million versus $-65.9 million. Liquidity stood at $2.9 billion and the net debt at $1.4 billion. Embraer ended the quarter with $17.4 billion in backlog, down 0.1 billion in Q4 of 2022.
Commercial Aviation produced $198.8 million in revenues, up from $169.2 million, thanks to more E2-deliveries. The airframer delivered five E195-E2s and two E175s in Q1 compared to two and four respectively last year. Executive Jets revenues were slightly lower to $87.1 million from $89.9 million last year, with deliveries of six Phenoms and two Praetors, identical to last year.
Defense and Security benefitted from better revenue recognition on the C-390 Millennium, which improved revenues to $97.7 million from $62.5 million. Services and Support generated $326.2 million in revenues, up from $271.1 million, which reflects increased sales and MRO activities.
Like its competitors Airbus and Boeing, Embraer continued to be confronted with supply chain constraints across its aircraft production facilities. In response, the company has beefed up its inventories to $2.8 billion, up $600 million year on year. The airframer is nevertheless seeking to ramp up production this year and in 2024. Gomes Neto reiterated the guidance for FY23 of 65-70 commercial aircraft deliveries compared to 57 last year and 120-130 Executive Jets compared to 102 in 2022.
Partnerships
Last month, Embraer announced a Memorandum of Understanding with Swedish aerospace company SAAB for two projects: the C-390 and the Gripen fighter program. The two companies wish to collaborate and extend the partnership, which should offer Embraer the position to bid for a C-390 contract for the Swedish Air Force. It would offer SAAB the option to supply equipment and systems for the multi-role transporter. The Gripen partnership could include the current production in Brazil and the development of the Gripen E-fighter.
With another recent MoU announcement with the Portuguese defense industry, Embraer get ever more involved in commercial and industrial partnerships except for commercial and executive aircraft. Asked if Embraer can still go it alone or will need a partner (which was planned for the new turboprop that is delayed), Gomes Neto said: “Definitely, we are open to different types of collaboration on local production in markets where the business case makes sense. We have this on our radar and we have alternative plans, but our focus is greatly on sales and on solidifying our sales opportunities in specific markets.”
