EMBRAER RELEASES 4TH QUARTER AND FISCAL YEAR 2011 RESULTS
During the 4th quarter of 2011 (4Q11), Embraer delivered 32 commercial and 50 executive aircraft and ended the year with total deliveries of 105 commercial and 99 executive aircraft (83 light jets and 16 large jets);
As a consequence, 2011 Revenues totaled US$ 5,803 million, in line with the annual Revenue guidance range of US$ 5.6 to US$ 5.8 billion;
2011 Operating performance was strong and the recurring EBIT1 margin for the year would have reached 8.7%. However, due to provisions, primarily related to financial guarantees in connection with the American Airlines (AMR) fleet, the actual 2011 accumulated EBIT margin was 5.5%;
Positive operating cash generation of US$ 178.7 million in 4Q11 increased the Company’s net cash2 position to US$ 445.7 million at the end of 2011;
Net income (loss) attributable to Embraer Shareholders was negative US$ 91.8 million in 4Q11 and totaled US$ 111.6 million for 2011. Earnings (loss) per ADS for 4Q11 and 2011 totaled negative 0.5072 and positive 0.6169, respectively.
The Company’s operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) in accordance with IFRS. The financial data presented in this document as of and for the quarters ended December 31, 2011 (4Q11), December 31, 2010 (4Q10) and September 30, 2011 (3Q11), are derived from the unaudited financial statements.
NET SALES AND GROSS MARGIN
Embraer delivered 32 commercial and 50 executive aircraft in 4Q11, for an accumulated total of 105 commercial and 99 executive aircraft (83 light jets and 16 large jets) in 2011. As a result, 4Q11 and 2011 Revenues totaled US$ 2,025.1 and US$ 5,803 million, respectively, and therefore reached the upper end of the US$ 5.6 – US$ 5.8 billion 2011 Revenue guidance range. The mix of products and revenues for the year, coupled with the Company’s ongoing focus on its programs directed towards improving productivity and efficiency, resulted in a Gross Margin of 22.5% for 2011, compared to 19.1% in 2010.
EBIT
The 4Q11 EBIT and EBIT margin were negative US$ 5.9 million and negative 0.3%, respectively. The final accumulated EBIT and EBIT margin for 2011 were US$ 318.5 million and 5.5%, respectively. Throughout 2011, the Company experienced certain extraordinary events which impacted operating results for the year. These events include the provisions detailed below, as well as the unusually high liquidated damages, of approximately US$ 67 million, that were collected throughout 2011. Such liquidated damages came as a result primarily of the commercially challenging market environment in the Executive aviation segment. If not for these extraordinary events, EBIT margin for the quarter would have been 12.1%, and 2011 EBIT and EBIT margin would have been US$ 504.3 million and 8.7%, respectively, bringing the year’s result to levels above the Company’s EBIT margin guidance of 8% for 2011. Furthermore, it is important to note the increase in operating leverage achieved in the last quarter of the year, which allowed the Company to maximize the utilization of its installed capacity and dilute fixed costs in a more efficient manner.
Due largely to the appreciation of the Real against the US Dollar in 2011, during which on average the Real appreciated approximately 5% vs. the 2010 average exchange rate, coupled with the increase of approximately 10% in labor costs, total 2011 Administrative, Selling and Research expenses increased to US$ 767.1 million, compared to US$ 643.7 million in 2010. It must be noted that a portion of these expenses are Real- denominated and the appreciation of the Real against the US Dollar negatively impacted those expenses. Research expenses for 4Q11 totaled US$ 26 million, bringing total 2011 Research spending to US$ 85.3 million, in line with the Company guidance of US$ 90 million. General and Administrative expenses for 4Q11 totaled US$ 71.5 million, above the US$ 60.6 million spent in 4Q10. Selling expenses of US$ 113.9 million in 4Q11 were stable, compared to the US$ 105.7 million spent in 4Q10. Furthermore, the Company continued to make investments throughout 2011 to develop its customer support network, especially in Executive aviation, and has implemented some changes in the Defense & Security organization, as well as intensified its efforts to define the product strategy in the Commercial aviation segment, all of which impacted the Company’s SG&A expenses for the year. 2011 Other operating income (expenses), net totaled negative US$ 221.5 million, primarily as a result of the provisions of US$ 253.3 million, coupled with the liquidated damages of approximately US$ 67 million, mentioned above.
NET INCOME
Net income (loss) attributable to Embraer Shareholders and Earnings per ADS for 4Q11 were negative US$ 91.8 million and negative US$ 0.5072, respectively, bringing total 2011 Net income attributable to Embraer Shareholders and Earnings per ADS to US$ 111.6 million and US$ 0.6169, respectively. If not for the net effect of all extraordinary events described earlier, which totaled approximately US$ 293 million, 2011 Net income attributable to Embraer Shareholders and Earnings per ADS would have reached US$ 305.3 million and US$ 1.6875, respectively. COMMERCIAL AVIATION
In 2011, as per IATA, passenger demand increased by 5.9%, and performed well despite weak economic conditions in western economies. International demand increased by 6.9%, with Europe achieving the second fastest growth rates, behind Latin America. Domestic markets increased by 4.2%, with Brazil, India and China showing double-digit growth. North American traffic growth rates still remain notably low, with international traffic increasing by 4.0% and domestic by 2.2% in 2011. The airline industry achieved $6.9 billion net profit in 2011, but shall face some challenges in 2012 with profit forecast of $3.5 billion. European airlines are likely to be hardest hit by recession in their home markets and small losses are expected. Contrasting performances are shown by North American airlines, where capacity cuts are providing some protection to profitability, and in Asia, where, in particular, China’s expanding domestic market show significant profits generated by high load factors.
Embraer delivered 105 commercial jets in 2011, of which 32 were in 4Q11. The E-Jets family achieved significant milestones in 2011: more than 1,000 orders and 800 deliveries, increased presence with leasing companies (CIT, BOC Aviation, GECAS, Air Lease, CDB) and the sale of 124 E-Jets (28% above 2010 sales). As Paulo Cesar de Souza e Silva, Embraer’s President of Commercial Aviation, said: “All 2011 achievements reinforced the E–Jets’ role and importance in the airlines’ improvement process. Our 60 customers in 40 countries are proving that the E–Jets’ flexibility, operational performance, economics and passenger preference are meeting market requirements.”
In 4Q11, Embraer signed for the sale of 45 E-Jets, 33 of which are E190s (15 to BOC Aviation, in Singapore; ten to CIT Group, in the U.S.A.; and six to GECAS, in the U.S.A. – all leasing companies; and two jets to Hebei Airlines, in China) and 12 E195s (11 to Azul, in Brazil and one to Jetscape, in the U.S.A.). Hebei Airlines became the newest E-Jets operator, when it received two E190s in December.
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Source: Embraer
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