Embraer suffers sharp fall in fourth-quarter profits

Embraer, the Brazil-based company that makes commercial, military, and corporate aircraft and also provides aircraft-related services, has announced a sharp fall in its profits for the fourth quarter of 2008.

The aerospace conglomerate – which is the world’s biggest manufacturer of commercial jets up to 120 seats as well as Brazil’s leading exporter – said it had proposed to reduce executive salary and also cut dividends in its effort to cope with the global economic recession.

In a statement, Embraer, which is also the world’s third-largest maker of commercial aircraft, said the company’s net income dropped to $111.7 million in the fourth quarter of 2008 from $200.9 million in the same period a year before.
While sales went down by 3% to $1.82 billion, aircraft deliveries slumped to 59 planes in the fourth quarter of 2008 from 61 planes in the same period a year ago.
Embraer, which is short for Empresa Brasileira de Aeronautica, said in the statement that the economic recession had “hit its balance-sheet hard, leading to the company’s huge derivatives losses.”

The company’s net revenues for the fourth quarter of 2008 amounted to US $1.8 million – a 3% drop from the same period in 2007.

The yearly net income too fell to US $388.7 million in 2008, down from $489.3 million in 2007 – resulting in a 3.2% crash in net margins for the year. Those losses, Embraer explained, occurred despite a 43.5% gain in net income from the company’s operations – to $537 million – for the year.

Embraer said that its firm-order backlog in December 2008 declined by 3.2% over the September 30, 2008, levels. The cancellations were caused on account of the worldwide economic slump.

As to the positive side, Embraer said it delivered 204 jets in 2008 – which was the company’s highest total annual sale to date.

The company stressed in the statement that it “remains liquid” notwithstanding the plunging market – with US $376 million in net cash on hand.

Jets manufactured by Embraer are used by some of the major airlines in the world, including American Airlines, based in the United States, Lufthansa, the flag-carrier airline of Germany, and Japan Airlines, the national airline and flag carrier of Japan.

In the statement, Frederico Curado, chief executive of Embraer, said the company did not witness an improvement in its situation at the start of 2009 and that Embraer’s clients “still have difficulty finding credit, and new sales continue to be weak.”