Embraer S.A. (ERJ)

Q2 2011 Earnings Call

July 29, 2011 9:00 AM ET


Frederico Fleury Curado – President and CEO

Paulo Penido Pinto Marques – EVP of Finance and Investor Relations Officer


Noah Poponak – Goldman Sachs

Ron Epstein – Bank of America

Peter Skibitski from SunTrust

Nicolai Sebrell – Morgan Stanley

Joseph Nadol – JPMorgan



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Good morning, ladies and gentlemen and welcome to the audio conference call that will reveal Embraer’s Second Quarter, 2011 Results. Thank you for standing by. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instruction to participate will be given at time. (Operator Instructions)

As a reminder, this conference is being recorded and webcasted as www.embraer.com. This conference call includes forward-looking statements or statements about events or circumstances which have not occurred. Embraer has based these forward looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance.

These forward-looking statements are subject to risks, uncertainties and assumptions including among other things, general economic, political and business conditions in Brazil and in other markets where the company is present. The words; belief, may, will, estimates, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements.

Embraer undertakes no obligations to update publicly or revise any forward-looking statements, because of new information, future events or other factors.

In light of these risks and uncertainties, the forward-looking events and circumstances discussed on this conference call might not occur. The company’s actual results could defer substantially from those anticipated in the forward-looking statements.

Participants on today’s conference call are Mr. Frederico Curado, President and CEO, Mr. Paulo Penido, Chief Financial Officer; Mr. André Gaia, Head of IR; and Mr. Rodrigo Rosa (ph), Controller.

I would now like to turn the conference over to Mr. Curado. Please sir, go ahead.

Frederico Fleury Curado

Good morning, everyone. I will – I think the opportunity to introduce Paulo Penido to most of you who have not had a chance to meet him personally. He will be going to United States soon to visit with you. And now, I ask Paulo to just to go through our highlights and as soon as we finish that, of course, we’re going open the Q&A answer session and we’ll be here together to answer your questions. Thank you.

Paulo Penido Pinto Marques

Thank you. Good morning everybody. It’s a pleasure to be with you for the first time. I’m quite excited with my new challenging position here in Embraer.

I’d like to go through this 18-page introduction, starting on page three please, where we show the commercial jets, I’d say, recent highlights. First, market demand is – it’s happening it’s there. At the Paris Air Show, we did four new deals. One was a company from Indonesia and other one from company – was a company from Kenya and two others was companies from the U.S.

In the first half of 2011, we delivered 45 jets and we sold 62 E-jets and we have reached 1,003 firms orders, which is a remarkable level. In additional, there were 42 additional aircraft pending final documentation, totaling 104 in the first half of 2011. We continue to expand our client base. We have three new airlines added, one from Austria, one from Kazakhstan and one from Bulgaria Air.

On page four please, I’m talking about executive jets. We signed a strategic corporation agreement with Minsheng in China and it may turn into exactly 20 executive sales – 20 executive jets we expected. In EBACE, we were able to see the first signs of recovery in this part of the industry and we got some – few orders, a new few orders and just to hedge (ph) we have delivered our Phenom number 200 to Swift Aviation Group.

On page five talking about defense and security, we have sold eight Super Tucanos to the Indonesian Air force and we continue to develop our KC-390. And currently, we have just defined the most of the strategic partnership suppliers and we are now entering in the joint definition phase of the product.

On page six we are showing revenue by segment. We had, let’s say, meaningful growth in revenues when comparing the first quarter of 2011 to the second quarter of 2011. And I’d say somewhat stable breakdown of revenues and settlement.

Now on page seven. In the second quarter of 2011, we have sold or we delivered 24 commercial jets, three executive large jets and 220 executive light jets quite in line with our, I would say budget, our expected levels.

Page eight. It’s a firm order backlog, again stable. A small reduction, but, its normal there is fluctuation. Now on page nine, talking about revenues and gross margin, I would like to highlight the better margins that we are presenting in 2011 and the gross revenues that I already mentioned. So we are now facing 23% average margin in our business according to the high IFRS, I would say, way to account it.

In terms of SG&A, somewhat stable when comparing in local currency in Brazil with some growth, in U.S. dollars it’s a result of the challenge of the appreciation of the local currency. The company is working hard to control its cost and to face this challenge and with some, I would say, meaningful success.

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