Embraer beats delivery goals despite supply chain hurdles in 2023

Monday, March 18, 2024

• In the fourth quarter of 2023, Embraer delivered a total of 75 aircraft, comprising 25 commercial jets, 49 executive jets (consisting of 30 light jets and 19 medium jets), and 1 military C-390. Throughout 2023, the company’s deliveries amounted to 181 aircraft, including 64 commercial jets, 115 executive jets (with 74 light jets and 41 medium jets), and 2 military C-390s. This marked a 13% increase in deliveries compared to the previous year’s total of 160 aircraft. However, the company faced challenges due to supply chain delays, which impacted its 2023 results negatively.
• The firm’s order backlog by the end of the fourth quarter of 2023 reached a significant milestone, totaling US$18.7 billion, the highest recorded figure in the past six years. Both Executive and Commercial Aviation segments reported book-to-bill ratios exceeding 1:1. Furthermore, Services & Support backlog reached an all-time high of US$3.1 billion.
• Embraer’s revenues for the fourth quarter of 2023 amounted to US$1,975 million, with total revenues for the year reaching US$5,269 million, in line with company projections and representing a 16% increase compared to 2022. Revenue growth was observed across all business units, with Defense leading at 25% followed closely by Commercial Aviation at 20%.
• Adjusted earnings before interest and taxes (EBIT) for the fourth quarter of 2023 reached US$181.7 million, with corresponding adjusted EBIT and EBITDA margins of 9.2% and 12.8%, respectively. For the entire year of 2023, the company reported adjusted EBIT of US$350.0 million, achieving a margin of 6.6%, meeting guidance driven by various factors including volume growth and operational efficiencies.
• Adjusted free cash flow in the fourth quarter of 2023 amounted to US$684.0 million, contributing to a full-year free cash flow of US$318.3 million, surpassing expectations mainly due to robust sales pre-down payments (PDPs).
• Credit rating agencies S&P Global Ratings and Moody’s upgraded Embraer to investment grade (IG), while Fitch revised the company’s outlook to positive, maintaining its rating at BB+.
• Guidance for 2024 includes expected deliveries of 72 to 80 Commercial Aviation aircraft and 125 to 135 Executive Aviation aircraft, with total company revenues projected in the range of US$6.0 to US$6.4 billion. Adjusted EBIT margin is expected to be between 6.5% and 7.5%, with adjusted free cash flow targeted at US$220 million or higher for the year.
• Operating and financial information is presented on a consolidated basis in United States dollars (US$) in accordance with IFRS, unless otherwise specified. The data is derived from unaudited financial statements, with the exception of annual financial data and specified cases.
• Revenue breakdown for 2023 indicated growth across all segments: Defense & Security (25%), Commercial Aviation (20%), Executive Aviation (13%), and Services & Support (12%). However, gross margins were affected by factors such as product mix and one-time tax benefits.
• Executive Aviation saw a revenue increase of 13% year-on-year (yoy) primarily due to volume growth, though gross margin declined to 19.4% yoy due to product mix and tax benefits.
• Defense & Security revenues grew by 25% yoy driven by higher C-390 volumes, while Commercial Aviation revenues increased by 20% yoy due to higher deliveries and product mix. However, reported gross margins declined for both segments due to various factors.
• Services & Support revenues increased by 12% yoy, with reported gross margins declining slightly to 26.7% in 2023 due to a shift in services mix and one-time tax benefits.
• The company’s net income attributable to shareholders significantly improved in the fourth quarter of 2023, with adjusted net income rising by 80% compared to the previous year.
• Embraer’s debt management showed a decline in net debt without EVE, with positive free cash flow contributing to an improved net debt position.
• Significant investments were made in capital expenditures (CAPEX) during 2023, particularly in research and development (R&D), as well as in working capital to support increased deliveries.
• The company’s backlog reached US$18.7 billion in 2023, with notable contributions from Services & Support, Executive Aviation, and Defense & Security segments. Commercial Aviation also reported a healthy book-to-bill ratio.
• Executive Jets segment witnessed a 13% increase in deliveries compared to the previous year, reflecting sustained demand across its product portfolio and markets.
• Defense & Security segment secured significant contracts, including the C-390 Millennium deal with South Korea, along with strategic partnerships aimed at expanding operational capabilities.
• Commercial Aviation segment achieved certifications and secured orders, including a notable deal with Porter Airlines for E195-E2 jets, contributing to its growth and market expansion efforts.
• Services & Support segment marked milestones in various programs, including the conversion of passenger aircraft to freighters and expansion of maintenance services. Embraer also expanded its training capacity through strategic partnerships and investments.

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