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Embraer executives are encouraged by a strengthening in business jet sales this year, but the company’s Executive Jets unit saw revenues drop 27 percent in the first quarter and it posted a negative margin as deliveries declined.
Executive Jets deliveries fell by four units in the quarter, with three fewer Phenoms (for a total of eight) and one fewer of its large jets (for a total of three). Embraer attributed this decline to five aircraft deliveries shifting into the second quarter. Company executives indicated that sales activity improved in the first quarter and said the company is seeing a firming of average prices.
“We are seeing overall improvement in business aircraft and inventories [are] lower,” said Embraer president and CEO Paulo Cesar de Souza e Silva, pointing to a strengthening in the U.S. and Europe. He cited economic growth and tax reforms as helping to boost sales and said Executive Jets has seen good activity in particular in the Legacy line. “Not a great improvement but definitely an improvement,” he said.
But as a result of slowed deliveries, revenues for Embraer’s Executive Jets unit dropped from $175.4 million in the first quarter of 2017 to $127.8 million in the most recent quarter. And the unit’s margins for the quarter ended up at nearly a negative 17 percent.
The percentage that Executive Jets represented among all company sales fell from 16.8 percent in the first quarter of 2017 to 12.9 percent.
The Executive Jets first quarter 2018 performance helped lead to a 4.8 percent decline in Embraer’s overall revenues to $992 million. Likewise, earnings for the company fell from $40.6 million in the first quarter of 2017 to $25.4 million in the most recent quarter.
In its earnings release today, Embraer shed a little light on the direction of the negotiations with Boeing, saying talks may result in the creation of a new jointly owned entity for the Commercial Aviation segment. But Embraer added, “This structure would not contemplate the Defense & Security segment and, possibly, the Executive Aviation segment, which would remain exclusively with Embraer.”
Embraer did not detail when these talks may conclude and underscored that such a joint effort may not materialize.