Embraer Expects Further Delay In Boeing Deal
Embraer said it expects a further delay in the closure of a deal for Boeing to purchase its commercial aircraft business as it recorded a strong year in its executive jet division in 2019.
Embraer now expects a delay beyond June 23 for approval by the European Commission for its plan to sell Boeing 80% of its commercial aircraft business for $4.2 billion in cash, officials told analysts in a March 26 earnings call.
The deal with Boeing remains a top priority despite the crisis caused by the novel coronavirus, officials said.
Embraer continues to work with Boeing to gain the approval and to make the deal move forward, Embraer CEO Francisco Gomes Neto said on the call.
Despite the COVID-19 pandemic, Embraer is continuing to deliver executive jets in 2020.
“We had a few deliveries this week and we continue with our sales activities,” Embraer CFO Antonio Carlos Garcia said. Embraer delivered all business jets it produced in 2019 and ended the year without whitetails, he said.
The company delivered 109 executive jets in 2019, including 62 light jets and 47 large jets, up from 91 in 2018. Shipments included 46 in the fourth quarter, including 20 light jets and 26 large jets, up from 36 for the same quarter the year before.
In late 2019, Embraer announced a purchase agreement with Flexjet for an order valued at up to $1.4 billion for Praetor and Phenom 300E business jets.
Backlog at the end of 2019 for the executive jet segment totaled $1.4 billion, about 9% of Embraer’s total backlog.
In its commercial aviation segment, Embraer delivered 89 commercial jets in 2019, including 35 in the fourth quarter, compared to 90 in 2018.
The Brazil-based manufacturer posted total revenue of $5.46 billion in 2019, up from $5.07 billion in 2018, and a net loss of $322.3 million compared to a net loss of $178.2 million in 2018.
So far in the wake of the novel coronavirus, Embraer has not experienced order cancellations, an extensive slowing in its supply chain or production operations, or a material impact on demand for products, it said. Still, the company has suspended guidance for 2020 until the company has a better sense of its impact, officials said.
The company has temporarily halted production in Brazil and is evaluating other possible actions.
It has also been in discussions with airline customers about potential delays in commercial aircraft deliveries from 2020 to 2021, but has not experienced cancellations, officials said. It continues to have conversations and is monitoring the situation.
Embraer’s Defense & Security segment recorded 2019 revenue of $775.3 million, up 14% from $612.1 million in 2018. Results include fourth-quarter 2019 revenue of $236.1 million, up from $139.4 million for the same time the year before.
In late 2019, the company announced the new name and designation of its multimission medium aircraft, the C-390 Millennium. It also signed contracts for the Super Tucano light attack aircraft with two undisclosed customers, adding another nine to its backlog in the fourth quarter.
Backlog in the Defense & Security unit totaled $4.1 billion at the end of the fourth quarter, or 25% of the company’s total.
So far, it is difficult to know the impact of COVID-19 on its business, officials said. As soon as it does, Embraer will restate its financial guidance.