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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 September 30, 2022 (3Q22), June 30, 2022 (2Q22 Restated), and September 30, 2021 (3Q21), are derived from the unaudited financial statements, except annual financial data and where otherwise stated.
REVENUES AND GROSS MARGIN Consolidated revenues of US$929.0 million in 3Q22 represented a decrease of 3.0% y-o-y mostly driven by lower revenues in Defense & Security and partially offset by higher revenues in Commercial, Executive and Services & Support.
- Commercial Aviation reported revenue of US$253.3 million 5% increase y-o-y. Reported 3Q22 consolidated gross margin of 5.4% lower than 6.5% reported in 3Q21, reflecting a less favorable mix. Reported gross margin of 10.0% versus 3.2% reported in 9M21.
- Executive Aviation revenues were US$271.7 million, which is 6% higher y-o-y. Reported 3Q22 gross margin of 19.7% against 21.0% reported in 3Q21 with higher margin mix concentrated in the upcoming quarter. Reported gross margin of 20.6% versus 16.3% reported in 9M21.
- Defense & Security reported revenue fall of 42% to US$101.7 million in 3Q22, mainly impacted by less PoC (Percentage of Completion) revenue recognition from A29 program compared to 3Q21. Reported gross margin of 17.2% versus 23.7% reported in 3Q21. In 9M22 gross margin was 21.2% versus 24.1% in 9M21.
- Services & Support reported revenues of US$295.0 million, representing y-o-y growth of 7%. It continues to show solid growth from initiatives such as pool programs, repair management and new long-term agreements. Reported gross margin of 31.0% higher than 25.9% reported in 3Q21. In 9M22 gross margin of 29.9% compared to 26.4% in same period of 2021.
Reported 3Q22 consolidated gross margin of 19.1% flattish compared to 3Q21. As a reference, 9M22 consolidated gross margin of 20.9% higher than 16.0% reported in same period of 2021
EBIT AND ADJUSTED EBIT In 3Q22, the Company’s reported results is summarized in the table below.
Excluding these special items, 3Q22 Adjusted EBIT was US$50 million and Adjusted EBIT margin was 5.4%, compared to Adjusted EBIT of US$ 36 million and Adjusted EBIT margin of 3.7% in 3Q21.
NET INCOME (LOSS)
Net profit attributable to Embraer shareholders and earnings per ADS for 3Q22 were negative US$30.2 million and negative US$0.16, respectively, compared to negative US$45.0 million in net income attributable to Embraer shareholders and negative US$0.24 in Earnings per ADS in 3Q21 Note: reported net income is explained above and adjusted net income can be seen below at the chart.
DEBT & LIABILITY MANAGEMENT
Embraer ended 3Q22 with a net debt position of US$1.3 billion, compared to US$1.8 billion y-o-y. The decrease in the Company’s net debt position is a result of cash generation during the last four quarters and also Embraer’s liability management strategy to reduce the gross debt and the interest expenses. To ensure company liquidity, Embraer (i) obtained in Oct22 a revolving credit facility line “RCF” in the amount of up to US$650 million (ii) a credit transaction guarantee of US$100 million by JPMorgan/UKEF to finance suppliers, (iii) BNDES (National Bank for Economic and Social Development was approved the renewal for financing the production and export of manufactured commercial aircraft, in the amount of US$400 million to 2027. The average loan maturity in 3Q22 was 3.7 years. The cost of Dollar-denominated loans in 3Q22 was 5.33% p.a., in line with the 5.30% p.a. cost in 2Q22, while the cost of Brazilian Real denominated loans increased to 7.95% p.a. in 3Q22 compared to 7.32% in 2Q22, due to the increase in the reference rate.
FREE CASH FLOW Adjusted free cash flow for 3Q22 was negative in US$109.4 million, due to working capital requirements related to concentrated deliveries in the last quarter of the year.
CAPEX Net additions to total PP&E for 3Q22 were US$33.3 million. Of the total 3Q22 value, Capex amounted to US$13.8 million, and pool program spare parts represented US$19.6 million of total figures. In 3Q22, Embraer invested a total of US$28.2 million in product development and US$12.8 million in Research.
WORKING CAPITAL Aligned with the Company’s planned ramp-up of deliveries in the coming quarter, working capital was impacted by an increase in inventory’s work-in-progress to support strong deliveries in the last quarter.
TOTAL BACKLOG Firm order backlog reached US$17.8 billion in 3Q22, representing an increase of 6% and flat compared to 3Q21 and 3Q22, respectively. Backlog figures were stable in 3Q22, increasing in Executive Aviation and Services & Support YTD22. New firm orders of 20 E195-E2 from Porter and of six E195-E2 from SalamAir were partially mitigated by consensual reduction of 31 E175 from Republic in the 3Q22 Commercial backlog.
| COMMERCIAL AVIATION In 3Q22, Embraer delivered 10 commercial jets, as shown below: |
Embraer delivered 9 Embraer 175 to SkyWest and 1 Embraer 195-E2 to Aircastle. In 3Q22 Republic and Embraer agreed on a reduction of 31 Embraer E175, partially offset by a firm order of 20 Embraer E195-E2 passenger jets by Porter Airlines, adding to their existing 30 firm orders, and SalamAir which has signed a firm order for six E195-E2. Nordic Aviation Capital (NAC), the world’s largest regional aircraft leasing company, have signed a contract for up to 10 conversion slots for the E190F/E195F, with deliveries starting in 2024. Unit backlog and cumulative deliveries for Commercial Aviation at the end of 3Q22 were as follows:
EXECUTIVE AVIATION Executive Aviation delivered 23 aircraft (15 light and 8 mid/super-midsize jets) in 3Q22. Deliveries were higher than 3Q21 and sales pace continued strong, as the second-best 3rd quarter in the last 10 years.
Growth in the light and mid-sized business jet segments continues strong. Growing fleet ageing likely to sustain a significant replacement cycle in medium-term.
DEFENSE & SECURITY
As of 3Q22, there are four units of C-390 Millennium in the production line destined to the Brazilian Air Force (FAB), two units to the Portuguese Air Force and one to the Hungarian Defence Forces. The flight test campaign for the Portuguese Program is in progress to prepare for the NATO systems integration and tests, while the first aircraft for the Hungarian Program had its fuselage and wing structures completed earlier than expected.
Also, in 3Q22, Embraer and L3Harris Technologies announced a partnership to develop an “Agile Tanker,” a tactical aerial refueling option to address the U.S. Air Force’s operational imperatives and joint force refueling requirements specially for contested logistics environments.
In addition, the execution of the amendments successfully concludes the negotiations between Embraer and Brazilian Air Force to reduce from 22 to 19 the total number of KC-390 Millennium aircraft to be delivered. The amendments to the Contracts preserve the Company’s cash flow, ensure the economic and financial viability of the KC-390 Millennium program, and do not change and do not compromise the Company’s guidance for 2022.
SERVICES & SUPPORT
The consistent revenue improvement comes despite ongoing challenges in the aerospace industry. The most critical of these are worldwide materials shortages and supply chain constraints which are affecting availability of spare parts inventories, delaying repair turnaround time, and increasing the quantity of back-ordered items. The main driver for Commercial Aviation services were in the Pool Program contract renewals such as Azul Repair Management and LOT Polish as well as new customers including Porter Airlines of Canada, Sky High Aviation Services, and Western Air, operator of the largest fleet of ERJs in the Caribbean. Highlights also include new contracts for more than 20 aircraft from Breeze and Envoy Air of Heavy Maintenance & Modifications, the rollout of upgrades and new features AHEAD (Aircraft Health and Analysis Diagnosis), and the new E-Jets MRBR (Maintenance Review Board Report) optimized Maintenance Plan to reduce DMC (Direct Maintenance Cost).
This press release was prepared and distributed by Embraer
