UPDATE – Embraer narrowed its first-quarter loss compared to last year, reporting a $31.7 million net loss attributable to shareholders. This compares to $-89.7 million for the same period last year. However, the Brazilian airframer slipped back into a loss again after reporting a tiny $2.1 million profit in the final quarter of last year, it reported on April 28. Embraer narrows Q1 loss despite lower revenues.
The Adjusted net loss was $78.5 million compared to $-95.9 million in Q1 last year. Adjusted EBIT was $-27 million versus $-29.6 million, Adjusted EBITDA was a positive $13.2 million versus $18 million in 2021. EBIT includes $9.3 million in expenses related to Eve Urban Mobility, which adds to the $5.3 million already included in the Q4 2021 results.
Group revenues were down to $600.9 million from $807.3 million. By business segment, Commercial Aviation produced only $169.2 million in revenues compared to $272.2 million in the same period of last year. Embraer blames this on lower aircraft deliveries (six versus nine) due to the shutdown of the unit in January when the reintegration of Commercial Aviation into the company was completed, making it a sixty-day only quarter. The unit had been separated earlier from the parent company in preparation for the joint venture with Boeing, which collapsed in 2020. Commercial Aviation produced a gross margin of 11.3 percent, up from -1.5 percent in Q1 last year, with Executive Jets even higher at 18.7 percent (2021: 6.2). Overall profit margins ended at 20.1 percent, which pleased analysts.Â
Executive Jets also produced lower revenues of $89.9 million compared to $152.1 million, also caused by lower deliveries from thirteen last year to eight this Q1. Defense and Security reported $68.3 million in revenues, down from $128.5 million. This was caused by the lack of any KC-390 deliveries during the quarter. Services and Support was the only unit to grow its revenues to $271.2 million from $250.6 million as MRO activities took off thanks to higher flying activities of airline customers.
More investments in the E2 product development
During the quarter, Embraer spent $38.8 million in R&D and invested $21.4 million in product development, mainly the E2-jets but also the E1-series. That includes the recently launched freighter versions E190F and E195F that are scheduled to enter service in early 2024. Total capital expenditures were $8.7 million. Embraer’s total backlog grew to $17.3 billion, up from $17 billion in Q4 and the highest level since the second quarter of 2018. This includes 315 E-jets, of which 166 E195-E2s, 143 E175s, three E190s, and three E190-E2s.
The Brazilian airframer ended Q1 with $1.453 billion in net debt, slightly up from the $1.392 billion in December. Total debt was $3.6 billion, down by $0.5 billion. Liquidity improved to $2.6 billion. Free cash flow drastically improved from $-226.6 million in Q1 last year to $-67.8 million, the result of a higher net result and strict working capital discipline, lower inventories, and advanced payments from customers.
Sales campaigns for some 200 aircraft
In its outlook for 2022, Embraer is optimistic about the future. It has sales campaigns for some 200 aircraft, mostly for E2s, with existing and new customers. If successful, Embraer should be able to maintain its thirty percent market share in commercial aircraft. Executive jets are also doing well and sold 35 aircraft in the first quarter.
Supply chain issues, notably staff shortages at its European units, are having an effect on production, but Embraer upholds its guidance for 2022 and expects to deliver 60-70 E-jets and 110 to 110 executive jets. Revenues should increase in the coming quarters and total between $4.5 to $5.0 billion at the end of the year. It projects an adjusted EBIT margin of 3.5 to 4.5 percent and a free cash flow of $50 million, but the listing of Eve on the New York Stock Exchange in May after the acquisition by Zanite will have an effect.
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