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Embraer posts higher Q1 loss but holds to 2019 delivery goals

Brazilian airframer Embraer lost $41.2 million in the first quarter of 2019, slightly more than its $34.9 million net loss in the same period of 2018.

The quarterly loss reflects a revenue decline across several segments, and the financial impact of a commercial aircraft restructuring and pending joint venture with Boeing, says Embraer chief financial officer Nelson Salgado.

“Let me remind you that we have all expenses related to carve-out in commercial aviation. Everything is being conducted toward the conclusion of the strategic partnership with Boeing by the end of 2019,” he states.

Embraer generated $823 million in revenue during the first three months of the year, down 14% year-on-year.

The commercial aircraft business brought in $281 million in revenue, down 26%.

That unit delivered 11 aircraft, including 10 E175s and one E190-E2, in the first quarter, down from 14 aircraft in the same period of 2018.

“It was a little under our expectations but did not impact our goals for the year,” states Salgado.

Embraer delivered nine commercial aircraft in April and remains committed to its expectation of delivering 85-95 commercial jets in 2019.

The airframer landed an order for nine additional E175s from US regional airline company SkyWest during the first quarter, bringing its total commercial aircraft backlog to 359 aircraft at the end of March.

Embraer’s shareholders approved the proposed Boeing joint venture during the first quarter. That deal envisions that Boeing will buy 80% of Embraer’s commercial aircraft division for $4.2 billion, leaving the Brazilian manufacturer with 20%.

Boeing’s 737 Max crisis has not affected the deal, which Embraer still expects will close in 2019 following regulatory approvals.

“The issues with the 737 Max will not impact the partnership with Boeing,” says Salgado.

Embraer’s executive jet business posted $117 million in first-quarter revenue, down 8% year-on-year. The unit delivered 11 aircraft in the period, comprising eight light business jets and three large jets, the same as in the first quarter last year.

The Brazilian manufacturer sold $300 million worth of business jets in the first quarter, more than in any quarters of the last several years, and remains committed to a previously stated estimate of delivering 90-110 business jets this year.

Flight testing of Embraer's new Praetor 500 and 600 jets continues. The manufacturer expects the Praetor 600 will be certificated this quarter, and that the Praetor 500's certification will follow in the third quarter.

The company’s defence revenue slipped 15% year-on-year in the first quarter, to $179 million. That unit is flight testing the KC-390 military transport and expects to deliver the first of the type to the Brazilian air force this year.

Revenue from Embraer's services and support business inched up 2% year-on-year in the first quarter, to $244 million.

Embraer ended the first quarter with $2.5 billion in cash and cash equivalents, down nearly one-third from $3.4 billion at the end of March 2018.

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