Embraer's 2011 profit down 66.2%, hit by AMR's woes

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Embraer has posted a 66.2% year-on-year drop in its full-year net profit for 2011 to $111.6 million.

The Brazilian airframer reported a 7.4% dip in revenues to $5.8 billion for the year ended 31 December 2011. Its operating profit dropped by 18.8% to $318.2 million.

In its fourth quarter, Embraer posted a net loss of $91.8 million, down from a profit of $122.7 million in the same period in 2010. Revenues for the quarter grew by 3% to $2.03 billion, while it recorded an operating loss of $5.9 million.

While its earnings before interest and tax (EBIT) margin for 2011 was 5.5%, the airframer says its 2011 operating performance was strong, and its EBIT margin would have hit 8.7%, if not for the related exposures from financial guarantees connected with the American Airlines fleet.

The company's fourth quarter results include a net provision of $360.7 million related to these obligations.

AMR, American's parent company, operates a fleet of 216 Embraer ERJ-145 regional jets. As a result of AMR's Chapter 11 filing, Embraer had to set aside a provision both for aircraft guarantees and the possible impact to the market resulting from an increase in aircraft availability.

In the last quarter of the year, the airframer delivered 32 commercial and 50 executive aircraft, bringing its total deliveries to 105 commercial and 99 executive jets in 2011.

Its revenue mix in the fourth quarter included a higher contribution from its commercial as well as security and defence segments, which accounted for 53.2% and 14.5% respectively.

Embraer's firm order backlog was $15.4 billion at the end of 2011.

The airframer added that 2011 was a year marked by signs of a continued recession mainly in Europe. Jet sales were also threatened by offers of young used aircraft at "very competitive prices". In addition, the financing options for lower-end jets were more stringent and thus impacted sales.