SAO PAULO: Brazil's Embraer SA expects surging operating profit this year despite a drop of as much as 10 percent in commercial jet deliveries, as the planemaker focuses on tight cost controls after a challenging 2016.
Embraer forecast net revenue this year between $5.7 billion and $6.1 billion, down from $6.2 billion in 2016, according to a securities filing on Thursday. Yet the company forecast 2017 earnings before interest and taxes (EBIT) between $450 million and $550 million, up sharply from $206 million last year.
The world's third-largest commercial planemaker booked heavy provisions last year to settle a six-year corruption probe and pay for voluntary employee buyouts. The lean cost structure yielded better fourth-quarter earnings, also reported Thursday.
Quarterly net income jumped 76 percent from a year earlier to $195 million, beating an average analyst estimate of $132 million according to Thomson Reuters data.
EBIT rose four-fold to $277 million from a year earlier, when Embraer booked a $101 million provision due to a bankruptcy filing by Republic Airways. Embraer transferred orders for 24 E175 jets from Republic to United Airlines in November, part of a $52 million boost in the fourth quarter that Embraer attributed to negotiations with Republic.
EBITDA, a gauge of operating profit which also discounts depreciation and amortization, more than doubled to $379 million in the quarter, beating an average forecast of $260 million.
Improving the efficiency of Embraer's executive jet production, which is migrating from Brazil and China to an assembly line in Melbourne, Florida, helped to lift the company's gross margin to 20.1 percent from 16.9 percent a year earlier.
Embraer shares are up 17 percent this year after tumbling 47 percent in 2016, when a strengthening Brazilian currency sapped the profitability of its export-focused business.
For 2017, Embraer maintained its annual delivery target of 105 to 125 executive jets, but cut its outlook for commercial jet deliveries to between 97 and 102 aircraft, down from 108 commercial jets delivered last year.
Embraer is a year away from bringing its re-engined E190-E2 into service, so the company said most commercial aircraft deliveries this year will come from its smaller and less profitable E175, destined mainly for US regional carriers.
Comments
Comments are closed for this article.