2007 - second quarter results 2007
TRANSCRIPT
Second Quarter 2007 Results
August 15, 2007
Forward Looking Statement
This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,”“expects” and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.
Second Quarter 2007 - Summary
• As a result of actions taken regarding the supply chain and industrial process, 2Q07 deliveries came to 36 jets, bringing the total for the first six months of 2007 to 61 aircraft.
• The Company's industrial costs are still at a high level due to longer production cycles and higher man/hour labor costs in its production processes, including those related to overtime work, and the recently hired employees.
Jet Deliveries
Net revenues – Gross Margin
27
36
30
37
25
36
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
1.110
843
1.084
8941.021
808
21,8%
28,7%
22,7%
27,5%28,3%
24,3%
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Second Quarter 2007 - Summary
• Backlog reached record high of US$15.6 billion;
• Phenom family has accumulated more than 460 Firm orders;
• Embraer participated in the 2007 Paris Air Show. During the Air Show, important deals were firmed including Lufthansa contract for 30 EMBRAER190 and Japan Airlines (JAL) order of ten EMBRAER 170 jets. Alsoduring the Air Show, Embraer and Brazilian airline BRA Transportes Aéreos signed a preliminary commercial agreement for 20 firm orders of theEMBRAER 195 jet, Italy’s Alpi Eagles confirmed five options for theEMBRAER 195 jet from its original order for five aircraft of this model and GE Commercial Aviation Services (GECAS) confirmed three options for EMBRAER 190 jets
• After the implementation of a new business segment, Customer Services, a comprehensive analysis of our commercial operations and of certain accounting practices, Embraer has modified the application of previously adopted US GAAP accounting policies.
• The change had no effect on Earnings from continuing operations, Net Earnings, Retained Earnings or Shareholders´ Equity. The change resulted in reclassifications on Net Sales, Cost of Sales and Services, Selling Expenses and Interest Income (Expenses), Net, as described below:
1) Expenses related to Product Guarantees are recorded on the aircraft delivery date and estimated upon historical basis. Those expenses were reclassified from Selling Expenses to Cost of Sales and Services;
2) Contratual obligations related to prepaid spare parts, services as training and technical representative assistance have their revenues recorded when “ganhas”by the Company. Formerly, a provision was made for the amounts related to those obligations when the aircraft was delivered, but they were reversed from Selling Expenses against Net Sales.
Second Quarter 2007 – New accounting practices
3) The fulfillment of those obligations described above with the customers, may occur before or after the actual delivery of the aircraft. Obligations accomplished before the delivery date of the aircraft were recorded as revenues “ganhas” against Account Receivables. All other contractual obligations accomplished after the delivery of the aircraft but not yet accounted were recorded in Current Liabilities as Unearned Income;
4) Commercial concessions prior accounted as Selling Expenses, were reclassified as Sales Deductions. The recuperation of part those commercial concessions through financing structures was recorded as Financial Income but it has been reclassified as Gross Sales offsetting Sales Deductions.
Embraer believes that the modification of the previously adopted accounting practice is a more appropriate application, and will facilitate the comparability of the company's financial information with the financial information of other aircraft manufacturers and will enhance investors understanding of its results and financial condition.
Second Quarter 2007 – New accounting practices
2007 Guidance – After Modified AccountingPractices
GROSS MARGINBEFORE AFTER30% at 4Q07 23.5% at 4Q07
EBITBEFORE AFTER10.0% FY07 7.0% FY07
Results & Performance
Jet Deliveries
27
36
30
37
25
36
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Net Revenues and Gross Margin
US$ million
1.8231.937
832
1.110
25,3%
22,7%21,8%
25,4%
1H06 2H06 1Q07 2Q07
Net Revenue by Segment
2Q06 2Q07
Commercial Aviation
63%
Defense and Government
9%
Executive Aviation
16%
Customer Services and
Others12%
Defense and Government
6%
Executive Aviation 11%
Commercial Aviation 69%
Customer Services and Others 14%
EBITDA
US$ Million
248
159
34 51
4,6%4,1%
13,6%
8,2%
1H06 2H06 1Q07 2Q07
Ebitda Ebitda Margin
Net Income
US$ Million
186
26
204
67
9,6%11,2%
3,1%
6,1%
1H06 2H06 1Q07 2Q07
Net Income Net Margin
Aircraft Financing Support
US$ Million
238,9184,4 174
217,4 223,4 231
135,5
139,6
32,4
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
CCF Acc Rec
Inventories
US$ Million
1.648 1.6391.882
2.0472.317
2.621
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Net Cash (Debt) Position
US$ Million
302
527 507416
217128
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Loans
Short Term 27%
Long Term 73%
Brazilian Currency
21%
Foreign Currency
79%
Total Debt of US$ 1,751.5 Million
• Average cost in R$ = 8.67%p/a
• Average cost in US$ =Libor + 1.20% p/aLong-Term Loan Average
Maturity: 3 years and 6 months
Loans Maturity
US$ million
472
5 6 7
9 4 3 3
5 2 2
6 3
1,751
Total Short-term
2008 2009 2010 2011 after2011
Backlog and Delivery Forecast
ERJ 145 Family Order Book
53
53
-
-
FirmBacklog
8621,046131915Total
680864131733ERJ 145
7474-74ERJ 140
108108-108ERJ 135
DeliveriesTotalOptionsFirm
Orders
EMBRAER 170/190 Family Order Book
257744232EMBRAER 195
399
283
69
22
FirmBacklog
2561,374719655Total
79783421362EMBRAER 190
37242136106EMBRAER 175
133275120155EMBRAER 170
DeliveriesTotalOptionsFirm Orders
Backlog
US$ Billion
10,2 13,3 14,8 15,0 15,6
15,3 15,914,9
18,2 18,222,9
10,4
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Firm Options
Jet Deliveries Forecast
160 161
131
101
148 141130
195/205
165/170
2000 2001 2002 2003 2004 2005 2006 2007E 2008E*
* Includes 15/20 Phenom 100
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