Brazilian aircraft manufacturer Embraer S.A. (ERJ) reported its financial results for the first quarter of 2011, on May 2. Earnings per ADS in the quarter were 58 cents, up from 13 cents in the year-ago quarter, and down from 68 cents in the previous quarter. Results surpassed the Zacks Consensus Estimate of 34 cents.
The year-over-year improvement in bottom-line results can be attributed to higher sales and decline in operating expenses.
Revenue
Net revenue in the quarter was $1,055.7 million, up 6.4% year over year and down 46.4% sequentially. The year-over-year improvement stems from the company’s aircraft deliveries and product mix. During the quarter, the company delivered 20 commercial and 8 executive aircraft (including six light jets and two large jets).
Commercial Aviation revenue accounted for 71.2% of the total revenue, Defense and Security Business contributed around 16.0%, Executive Aviation 11.0%, and Others 1.8%.
From the first quarter onwards, the company will cease to report Aviation services revenue separately. The segment’s revenue will be broken down into the other segments and reported accordingly.
Firm order backlog at the end of the first quarter was $16 billion, an increase from $15.6 billion at the end of the fiscal year 2010.
Higher revenue, product mix and efforts to improve operational efficiencies all had their cumulative effect on gross profit, resulting in gross margin of 24.3% in the quarter. Operating expenses of $170.5 million accounted for 16.2% of the total revenue in the quarter and were up 25.4% year over year.
EBIT margin in the quarter was 8.9%, compared with 7.2% in the year-ago quarter and 6.7% in the previous quarter. EBITDA in the quarter improved 33.7% year over year while margin stood at 14.8% compared with 11.8% in the year-ago quarter.
Balance Sheet
Exiting the first quarter, Embraer’s net cash position improved 13.7% year over year to $504.9 million, while worsening 27.0% sequentially. Cash and cash equivalents were $1,302.5 million compared with $1,393.1 million in the previous quarter, while long-term debt was $1,361.0 million versus $1,362.2 million in the previous quarter.
The company’s cash from operating activities improved from ($137.5) million in the first quarter of 2010 to $62.1 million in the quarter, while decreasing drastically from $578.1 million in the previous quarter. Spending on property, plant and equipment came to $91.8 million, up 169.2% year over year and 39.3% sequentially.
Embraer S.A. was formerly known as Empresa Brasileira de Aeronautica S.A. and primarily engages in designing, manufacturing and selling aircraft and aviation-related structural parts to the world’s commercial aviation, executive aviation and defense markets.
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