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Embraer announces a tame but optimistic fourth quarter result

Sao Paulo. Aircraft manufacturer Embraer has announced its targets for operating profit margins similar as last year, with negligible increase. Its annual revenue target edged up from $6 billion to $6.5 billion, slightly above its 2013 target of $5.9 billion to $6.4 billion. The company plans to invest $650 million this year, up from a 2013 plan of $580 million. The Brazilian major released its fourth quarter and fiscal year 2013 results and 2014 outlook recently.

In the fourth quarter of 2013 (4Q13), Embraer delivered 32 commercial and 53 executive (38 light and 15 large) jets and ended the year with total deliveries of 90 commercial and 119 executive (90 light and 29 large) aircraft. As a result of aircraft deliveries and growth in the Company’s Defence and Security segment, 4Q13 and 2013 Revenues reached $2.304 billion and $6.235 billion, respectively, also meeting the Company’s Revenue Guidance range of $5.9 to $6.4 billion. Strong Operating Cash Flow of $564.6 million during 2013 increased the Company’s net cash position to $429.3 million at the end of the year.

For 2014, Company Guidance is for expected Net Revenues of $6.0 to $6.5 billion, driven by growth in the Defence & Security segment and expected deliveries of 92 to 97 jets in the Commercial Aviation segment and 25 to 30 large jets and 80 to 90 light jets in the Executive Jets segment. The Company’s backlog ended 2013 at a value of $18.2 billion, representing 46 per cent growth from the $12.5 billion reported at the end of 2012.

For 2013, the Commercial Aviation segment accounted for 53 per cent of consolidated Revenues, Defence & Security accounted for 19.2 per cent, Executive Jets made up 26.4 per cent, and the Other segment made up the remaining 1.4 per cent of total Revenues. The breakdown by segment of annual Revenues is in line with Company Guidance, with slightly lower participation from the Defence & Security segment’s Revenues due to the effect of the devaluation of the Brazilian Real and its translation impact on results, as roughly half of segment revenues are denominated in Reals. Consistent with the Company’s diversification strategy, in 2013 the Executive Jets and Defence & Security segments showed significant year-over-year Revenue growth of 27.3 per cent and 14.5 per cent, respectively. Aiming for its commitment of providing the highest level of support and services to its clients, Embraer commenced MRO (Maintenance, Repair and Overhaul) operations at its São Paulo Service Center in November 2013. The FBO operation of this brand new Service Centre is scheduled to enter into service during early 2014.

In the defence and security segment, Embraer is currently leading several projects that are important for Brazil, such as the development of the KC-390 medium lift military transport jet and the Integrated Border Monitoring System (SISFRON). Embraer Defence & Security finished adapting the hangar at its plant in Jacksonville, Florida and materials for assembling the Super Tucano aircraft for the Light Air Support (LAS) programme of the United States Air Force (USAF) have started to arrive to allow for production to begin in February 2014.

In the Air Traffic segment, Atech held field acceptance tests (SAT) of such strategic systems as SIGMA and versions of SAGITARIO in several regions of Brazil and signed a new contract for implementing the SAGITARIO system in 19 Approach Controls (APPs), which added $83.4 million to the company’s backlog.

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