Brazilian aircraft maker Embraer on Thursday reported a profit in the third quarter, reversing a loss in the year-earlier period, helped by a mix of lower costs, a tax rebate and lower debt-servicing costs.
Embraer, the world's third-largest commercial aircraft maker, said in a securities filing that net income totaled BRR221.9 million reais (USD$128.2 million), compared with a loss of BRR39.2 million in the same period of 2008.
Yet, profit dropped 52 percent from BRR466.9 million the second quarter, indicating that an 11 percent gain in the real, Brazil's currency, in the period weighed on revenue.
The BRR95.1 million tax refund bolstered profit for the second straight quarter. The rebate came as Embraer failed to offload inventory faster, suggesting sales are still struggling with the deepest crisis in commercial aviation since the end of World War II.
The company revised down for the third time this year its guidance for deliveries, which now stands at a total 242 jets for 2009. So far this year, 153 planes were effectively delivered.
"Due to the appreciation of the Brazilian real against the US dollar along the year, operational margins should stay around 7 percent," Embraer said.
Embraer had a BRR29.7 million financial expense in the quarter, compared with about BRR72 million a year earlier, reflecting the impact of record-low borrowing costs and a stronger real on debt-servicing.
The real's 34 percent gain should at some point limit cost savings and crimp revenue this year, analysts said prior to the third quarter earnings release. About 40 percent of Embraer's production costs are denominated in the local currency.
Operational expenses fell 17 percent on a year-on-year basis, reflecting the company's decision earlier this year to slash its workforce and negotiate lower prices with suppliers.
Net income was also lifted by revenue stemming from penalties from purchase cancellations.
REVENUE DROPS
Revenue suffered as it sold more of its smaller, less expensive planes to counter the fallout in global aviation.
Sales of commercial, defence and private aircraft dropped 10 percent to BRR2.33 billion in the quarter, despite reporting a 19 percent increase in deliveries during the period.
The company reported deliveries of 57 jets in the three months ended September 30, including 22 units of the Phenom model. The price tag for Phenom planes is about one-tenth that of its 118-seat Embraer 195 plane.
A year earlier, Embraer delivered 48 jets. Deliveries of the Phenom series began only last December.
Inventory fell 13.6 percent from the previous quarter to BRR5.19 billion. Embraer did not disclose the number for the third quarter of 2008.
"The drop was due to the mix of sales," the company said.
That sparked a drop in earnings before interest, taxes, depreciation and amortisation (EBITDA) during the quarter.
EBITDA dropped to BRR264.9 million, or 11 percent of revenue, from BRR367.1 million, or 14.2 percent, a year earlier. EBITDA was BRR513.1 million in the second quarter of the year.
Embraer reported profit of USD$233.7 million under US accounting rules.
