Embraer releases fourth quarter and fiscal year 2008 results

2009-03-28 The Company's operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) and in accordance with US GAAP.

The financial data presented in this release regarding the quarters ended December 31, 2008, September 30, 2008 and December 31, 2007, as well as the information regarding the fiscal year 2008, are derived from our unaudited financial statements. The financial data presented in this release for the fiscal year 2007 is derived from our audited financial statements.


São José dos Campos, March 26, 2009 – Embraer (BOVESPA: EMBR3; NYSE: ERJ), the world’s leading manufacturer of commercial jets up to 120 seats, recorded fourth quarter 2008 (4Q08) net sales of US$1,818.4 million and net sales for FY2008 of US$6,335.2 million. Net Income for 4Q08 and for the full year totaled US$111.7 million and US$388.7 million, equivalent to diluted earnings per ADS of US$0.7181 and US$2.2432, respectively.

During the last quarter of 2008, Embraer increased the number of customers with firm orders for jets from the EMBRAER 170/190 family, with the sale of 11 E-Jets (six EMBRAER 170s and five EMBRAER 190s) to British Airways, from the United Kingdom. The Company delivered the first EMBRAER 190s to Holland’s KLM Cityhopper, and EMBRAER 195s to Azul Linhas Aéreas, which is the first Brazilian airline to operate an E-Jet. Regional – Compagnie Aérienne Européene, a wholly owned subsidiary of Air France, received the 500th E-Jet in the last quarter of 2008. The entry level Phenom 100 jet received the Type Certificate (TC) from Brazil’s National Civil Aviation Agency (Agência Nacional de Aviação Civil – ANAC) and from the U.S. Federal Aviation Administration (FAA). The first two units of the jet were delivered in December 2008. At the end of the year, the ultra-large Lineage 1000 received the Type Certificate from ANAC and from the European Aviation Safety Agency (EASA) and the Supplemental Type Certificate (STC) from the FAA. During 4Q08, the Defense and Government segment signed an important Latin American contract for the Super Tucano with the Dominican Republic, and sold one aircraft for transporting government officials to the Royal Thai Army, in Asia.

The firm order backlog on December 31, 2008, decreased 3.2%, compared to September 30, 2008, and reached US$20.9 billion, reflecting the beginning of the economic downturn initiated in September. Embraer sold 11 E-Jets during 4Q08, compared to 112 new sales for FY 2008. The E-Jet firm order backlog accumulated a total of 876 firm orders and 810 options.

In 4Q08, Embraer delivered 59 jets in the Commercial Aviation, Executive Aviation, and Defense and Government segments. Total deliveries in 2008 were 204 jets, the highest for a year in the Company’s history, and consistent with Embraer’s delivery schedule for the year.

Net revenues for 4Q08 totaled US$1,818.4 million, or a 3% decrease, compared to US$1,875 million for 4Q07. For FY 2008, net revenues totaled US$6,335.2 million, or a 20.8% increase over FY 2007 net revenues of US$5,245.2 million.

The gross margin for 4Q08 totaled 20.8%, representing a decrease from the 22.6% gross margin of 4Q07. For FY 2008, gross margin totaled 21.2%, representing a decrease, compared to 22.0% reported for FY 2007.

Income from operations reached US$274.6 million in 4Q08, or 66.1% above the US$165.3 million recorded for the same period last year. In FY 2008, income from operations was US$537.1 million, or an increase of 43.5% over the US$374.2 million of FY 2007, mainly due to the productivity gains achieved during the year, combined with the recognition of approximately US$80 million in contributions from suppliers, due to the certification of the Phenom 100 entry level jet.

Net income decreased from US$200.9 million, in 4Q07, to US$111.7 million, in 4Q08, and the net margin was 10.7% and 6.1%, respectively. Net income also decreased to US$388.7 million, in 2008, from US$489.3 million, in 2007, and net margins decreased to 6.1% from 9.3%, respectively.

For the year ended December 31, 2008, the Company maintained its high level of liquidity. Its total cash position, at the end of 2008, was US$2,201.5 million. Deducting the total indebtedness of US$1,825.4 million, at the end of 2008, the net cash position on December 31, 2008, was US$376.1 million. FOURTH QUA

During the first quarter of 2008 (1Q08), Embraer signed a contract for the sale of 36 EMBRAER 195 jets with Azul Linhas Aéreas, a start-up airline in Brazil. The first EMBRAER 195 jet was delivered to the airline in December 2008.

Embraer’s customer portfolio was diversified even further throughout the year. In 1Q08, Air Moldova, from Moldavia, and the aircraft leasing company Jetscape, Inc., in the United States, joined the list of new customers. The Company also signed new sales contracts with Regional, a wholly owned subsidiary of Air France, EgyptAir Holding Company, from Egypt, Finnair, from Finland, and M1 Travel Ltd., from Lebanon, as well as JetBlue, from the U.S., which converted three options into three firm orders, and increased its total aircraft on order to 104. During the second quarter of 2008, Embraer signed firm orders with the ETA Star Group, from Dubai, and with Brazil’s TRIP Linhas Aéreas for five EMBRAER 175 jets. In the Defense and Government area, the Company signed a sales contract with the Brazilian government for two EMBRAER 190 jets, which will be used for transporting government officials.

Embraer’s Executive Aviation segment also made important advances in 2008. In April 2008, Embraer formally introduced its new Embraer MSJ and Embraer MLJ executive jet programs. The midsize Embraer MSJ, with a range of 3,000 nautical miles (5,560 km), and the midlight Embraer MLJ, with a range of 2,300 nautical miles (4,260 km), are positioned between the Legacy 600 and the Phenom 300 in the Company’s executive jets portfolio, and were named the Legacy 500 and Legacy 450, respectively, in May, during the European Business Aircraft Conference and Exhibition (EBACE). At the Gavião Peixoto plant, in outstate São Paulo, Embraer finished assembling the first Phenom 300 jet, which successfully took to the air on its maiden flight, on April 29, to begin its test flight campaign. In May, Embraer announced that an investment plan of approximately US$ 50 million for establishing a new facility in the United States. The new 150,000-square-foot state-of-the-art facility will be the headquarters for the Company’s executive aviation operations in the U.S., with capacity to product the Phenom 100 and Phenom 300 executive jets, and will have a paint shop, a delivery area, and a customer design center, to aid new customers choose their aircraft. During 3Q08, the highlight was Embraer’s participation in the 46th edition of the traditional Farnborough Airshow, in England. On that occasion, the Company announced new aircraft sales to Kun Peng Airlines, of China, Aeroméxico, nasair aviation, of Saudi Arabia, and NIKI, of Austria, closing out the quarter with a record US$ 21.6 million firm order backlog.

In 4Q08, Embraer signed a contract with England’s British Airways for firm orders for 11 E-Jets, which will be operated by BA CityFlyer. During the same period, the list of new operators welcomed Virgin Nigeria, Japan’s JAL, Holland’s KLM Cityhopper, Brazil’s Azul Linhas Aéreas Brasileiras, and Israel’s Arkia, who joined China’s Kun Peng and Grand China Express (Controlled by the Hainan Group), Montenegro Airlines, from the Republic of Montenegro, El Salvador’s TACA, Switzerland’s Flybaboo, and Saudi Arabia’s nasair aviation. All of these companies began operating Embraer E-Jets, in 2008 – a family of commercial jets with a 70 to 122-seat capacity – of which the 500th aircraft was delivered to France’s Regional in December.

The last quarter of 2008 was also marked by the delivery of the first two entry level Phenom 100 executive jets, and by the certification of the ultra-large Lineage 1000 executive jet. With the new sales of executive jets from the Phenom family, the number of firm orders surpassed 800 aircraft.