3 Min Read
(Adds share performance, comments from analysts and CFO)
By Brad Haynes
SAO PAULO, May 2 (Reuters) - Brazilian planemaker Embraer SA reported a sharp drop in profit on Tuesday as its revenue was hurt by a big seasonal dip in deliveries and a delayed satellite launch, sending its share price down by more than 3 percent.
First-quarter net income at the world's third-largest producer of commercial aircraft slumped 59 percent from a year earlier to $43 million.
Still, earnings beat the average forecast of $18 million in a Reuters survey of analysts as a currency swing reduced Embraer's deferred tax bill, an effect rarely considered by analysts.
Embraer reaffirmed its full-year operating targets, counting on a rebound in commercial and executive jet deliveries, as well as the launch this week of a geostationary satellite that was delayed by a general strike in French Guyana last month.
"The first quarter was a little bit disappointing, but we're very confident in maintaining our guidance for the year," said Chief Executive Paulo Cesar Silva on a call with analysts.
Embraer shares fell 3.4 percent in Sao Paulo trading to a four-month low of 14.84 reais, and the stock was the biggest drag on the benchmark Bovespa stock index which rose 1.6 percent on the day.
Earnings before interest, taxes, depreciation and amortization fell 40 percent to $96 million, missing an average estimate of $131 million.
Chief Financial Officer Jose Filippo said the satellite launch was now scheduled for Thursday, and highlighted the delivery of two small business jets and a mid-sized private aircraft that were planned for March but were now set for April.
"Despite the weak start to the year, management reiterated all aspects of their guidance but they have a higher hill to climb now," wrote Deutsche Bank analysts led by Myles Walton in a note to clients.
Silva struck a positive note on new orders this year, reporting "great activity" in sales campaigns among airlines in the United States and elsewhere.
He said the company was confident that this year, it would be able to land the first order from outside Latin America for the KC-390 military cargo jet currently under development. Deliveries to the Brazilian Air Force start next year.
Still, Silva warned that a transition to a new generation of commercial jets would likely weigh on profit margins in that division next year.
Profitability of defense programs should remain in line with this year and profit margins of executive jets, which may improve slightly this year, will depend on the recovery of a sluggish market, he said. (Reporting by Brad Haynes; Editing by Mark Potter and Bernadette Baum)