Embraer sees market recovery signs despite net loss of $121M

Embraer suffered more than a $121 million net loss for the third quarter of 2020, the recent company’s financial results showed. Despite a significant drop in main indicators, the Brazilian aerospace manufacturer did not lose its optimistic attitude and announced having noticed some signs of the recovery in the business aviation market.

According to the recent financial report that was made public on November 9, 2020, Embraer adjusted a net loss reaching $121.2 million compared to $77.2 million net income in the same period of 2019. The company announced that lower operating rates, which were negatively impacted by the ongoing COVID-19 crisis, as well as higher financial expenses, hit the manufacturer‘s earnings hard. The company also reported a revenue fall of 35% to more than $758 million compared to Q3 of 2019.

“Our earnings have been negatively impacted by the lower operating results as well as higher financial expenses and non-cash FX losses, similar to the operating numbers. Net income also reached a bottom in the second quarter and has started to rebound, and we expect better bottom-line performance in the fourth quarter of this year, driven by higher deliveries“, presenting the results said Antonio Garcia, the Chief Financial Officer of Embraer, on November 10, 2020.

Embraer also noted a lower free cash flow of  $567 million in Q3, which was strongly affected by additional manufacturer’s investments in working capital to increase its reserves. Despite negatively affected free cash indicators, Embraer announced that its liquidity in the quarter remained solid. The company finished Q3 with total cash of $2.2 billion, which was higher than $2 billion in cash compared to Q2 2020, the financial report showed.

“We highlight our strong cash position. Our liquidity increased during the third quarter with a total cash position of $2.2 billion, which is a similar cash level that would have prior to the [COVID-19] pandemic. I’m also happy to announce that we completed a series of liability management initiatives,“ added Garcia.

According to the report, in the third quarter of 2020, Embraer delivered 21 executive jets. However, the number of deliveries dropped down by 6 aircraft in comparison with the same period in 2019. The 19 jets of 21 executive aircraft orders were light jets and the other 2 were large jets. These deliveries included the first Embraer’s Phenom 300E jet with Bossa Nova interior. 

The Chief Financial Officer outlined that Embraer noticed some signs of recovery in the Executive Jets segment and expected that the demand for deliveries for business aviation would continue to grow in Q4 2020.

“Embraer’s facilities around the world were fully functional during [the third quarter]. Although the Covid-19 pandemic is still impacting the business, especially in commercial aviation, it is possible to identify that executive jet flight activity continues to show strong recovery, with flying back to pre-Covid levels“, said Garcia.

The Chief Financial Officer also noted that the gradual increase in spare parts sales in Q3 indicated that customers of Embraer were slowly returning to their operations. According to Garcia,  Embraer signed four heavy maintenance contracts with Delta Airlines (DAL), Envoy, and CommutAir during Q3 2020. 



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