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Embraer Warns of 2018 Margin Dip in Commercial Aircraft


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May 3, 2017

by Gregory Polek


Embraer has warned of lower profit margins and delivery rates in its commercial airliner business for next year, when it begins the process of integrating production of the E190-E2 into its current E-Jet line. Speaking during the company’s May 2 first quarter earnings call with securities analysts, Embraer CEO Paulo Cesar Silva expressed caution in his 2018 outlook, suggesting financial uncertainties associated with the shift from producing conventional E-Jets to the new E2s.

Whenever we have a transition from one aircraft program to the other, it’s not easy; it’s a challenge because of the ramp-up of the new program,” said Silva. “So we are working on that and we may see some lower margins in 2018 or maybe a little bit [fewer] aircraft delivered in ’18.

So we still have to wait a little bit more in terms of our projected deliveries. However in terms of margins, I think we should expect lower margins in Commercial Aviation in ’18 versus 2017, which is still a very good margin.”

Silva added that margins should rebound in 2019, after the company resolves any inefficiencies associated with the transition from the E1 to E2.

During the first quarter of this year Embraer delivered 18 E-Jets and continues to forecast between 97 and 102 total deliveries for the year. Silva cited “good activity” in the U.S. and globally in terms of the current E175 but said that next year carries “uncertainties.”

In terms of the program’s production plan, Embraer has taken what Commercial Aircraft COO Luis Carlos Affonso characterized as a conservative approach, first building E1s on the so-called hybrid production line to limit risk of introducing the E2s onto a newly reconfigured workstation arrangement. The company plans to start assembling the first production E190-E2 some time during the second half of this year. Although Affonso said the company has decided how many production airplanes it plans to build during the first year, he chose not to reveal the rate, saying only that, again, Embraer will not risk a too ambitious approach.

I would say we have taken a relatively conservative approach in terms of production ramp-up for the first year,” Affonso told AIN during an interview earlier this year. “So our ramp-up is not too steep in the first year; we did not yet make public how many we will build but we don’t want to accelerate too much. So one of the consequences of that is that we’ll have more time to start building the production airplanes. So then the first airplane will be more mature; it will be more advanced in our test campaign.”


Reduziram bem as entregas nesse último trimestre, 32 para 18. Poucas encomendas em carteira pra manter a produção na faixa dos 120 aviões por ano.

Backlog 31/12/16: http://ri.embraer.com.br/Download.aspx?Arquivo=GYz8wYZLEmnz3ckFFfbo5Q==

31/03/17: http://ri.embraer.com.br/Download.aspx?Arquivo=qbXmS2fMKqodWNoHmkSN1w==

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