Brazil's Embraer foresees a 10 percent drop in revenue in 2010, Chief Financial Officer Luiz Carlos Aguiar told analysts on Friday.
Aguiar did not elaborate on the reasons for the revenue decline, but his remarks come a day after the company revised down for the third time this year its guidance for aircraft deliveries to "about" 232 jets for 2009 from 242.
"What we could say right now is that, in general, we should have a decline of 10 percent in our revenue and we will continue to pursue scale gains," Aguiar said.
"We are going through a rough ride in terms of new sales, but we have been able to translate our backlog into revenue and make the business sustainable," Aguiar added.
Embraer's common shares had their worst intraday drop since May 20 on Friday after both Aguiar and chief executive Frederico Curado said operational margins would remain close to 7 percent of total revenue from a previous estimate of 10 percent for this year and next.
The margin was 5.5 percent in the third quarter.
"Margins were well below expectations," said Alan Cardoso, an aerospace analyst with Rio de Janeiro-based Agora Corretora. "The fact that they provided informal guidance of a 10 percent tumble in revenue for 2010 signals times ahead are more than challenging."
Analysts are concerned the jet maker may need to do more than trim payroll expenses and renegotiate prices with suppliers to cope with the worst crisis in commercial aviation since the end of World War Two.
NET INCOME
Embraer's Aguiar said he is confident the company will "support the level of operational margins reported over the prior quarters."
Further reductions in research and development spending and increased sales could lift margins in the fourth quarter, Aguiar said.
Embraer said in a securities filing late on Thursday that net income totaled BRR221.9 million reais (USD$128 million) in the third quarter under Brazilian accounting rules, compared with a loss of BRR39.2 million in the same period of 2008.
Profit dropped 52 percent from BRR466.9 million in the second quarter, indicating that an 11 percent gain in Brazil's currency, the real, in the period might have weighed on revenue.
Revenue at Sao Jose dos Campos-based Embraer, which sells most of its planes outside Brazil, suffered as it sold more of its smaller, less expensive planes to counter the fallout in global aviation.
Sales of commercial, defense and private aircraft dropped 10 percent to BRR2.33 billion in the quarter, despite a 19 percent increase in deliveries during the period.
