Embraer nuggets make for a happy meal

I’m sifting through Embraer’s rather rosy annual “20-F” report to the US Securities and Exchange Commission (SEC), and there appears to be some interesting titbits in the filing. For those of you who are overworked, stressed out, or don’t have enough time to think – let alone read this 120-plus page beast – and for the just plain lazy, I’ve broken out the following key air transport-related points:

 

1)      Embraer this year expects its research and development (R&D) costs to total approximately $243 million, including estimated costs of $123 million related to development of its new Phenom executive jets, $48 million related to improvements in its commercial aviation segment products, and $72 million related to development of technology. This excludes contributions from risk-sharing partners.

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2)     By comparison, total R&D expenses for 2005, 2006 and 2007 were $93.2 million, $112.7 million and $259.7 million, respectively, net of cash contributions provided by risk-sharing partners. Research and development costs as a percentage of net sales were 2.5% in 2005, 3% in 2006 and 5% in 2007.

3)      Embraer remains fully committed to continuing to market its ERJ-145 regional jet family. As of 31 March, the company had more than 850 units in commercial operation. The manufacturer says it is currently evidencing increased demand for the family in the secondary market.

 

4)      Embrear continues to develop the E-170/190. It also continues to “analyze new aircraft demand in the jet market to determine potentially successful modifications to aircraft we already produce”.

 

5)      As of 31 March, Embraer’s largest customers were JetBlue Airways, US Airways, HNA Group and the new Brazilian airline recently founded by David Neeleman, called Azul. These accounted for 42.3% of Embraer’s firm orders in backlog for E-170/190s. Embraer believes it will continue to depend on a number of key customers and warns that the loss of these could reduce sales and reduce market share.

 

6)      Embraer’s ECC Leasing subsidiary, which manages and remarkets the aircraft portfolio that may be acquired by Embraer as trade-in or re-purchase transactions, is contributing positively to the company’s financial results. Since its 2002 inception, the unit has reached an accumulated net income of $26.4 million up to 31 December 2007. Also during this period, ECC Leasing and two other Embraer subsidiaries managed a total portfolio of 57 aircraft, of which 29 aircraft were under operating lease and 28 aircraft were sold to airlines, corporations and government entities in North America, South America, Asia and Europe.

 

7)      Embraer currently expects investments in property, plant and equipment to total approximately $330 million in 2008 and an additional $270 million in 2009, primarily related to the production of the E-170/190 family, as well as its executive jets and defence aircraft.

 

(Photo from Embraer) 

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One Response to Embraer nuggets make for a happy meal

  1. RobH June 4, 2008 at 9:19 am #

    Brazil’s made savvy infrastructure investments and they’re sitting on copious natural resources. They’ll be the dominant superpower south of the U.S. border within 10 years.

    Great job on this! Made for an exciting evening, I’m sure.