ATW Daily News

Embraer profit dip tied to production issues

Monday March 26, 2007

Embraer reported $390.1 million in 2006 net income, a 13% drop from the previous year, which the company attributed to rising costs and fewer deliveries. It reported net sales of $3.8 billion compared to sales of $3.83 billion in 2005, while the firm order backlog increased 11% to $14.3 billion. Fourth-quarter net income was down 20.3% to $124.4 million on an 8.9% fall in net revenue to $1.08 billion.

The Brazilian manufacturer had expected to deliver up to 145 aircraft in 2006 but that fell to 130 due primarily to production problems related to the wing assembly, President and CEO Mauricio Botelho said (ATWOnline, Oct. 9, 2006). "We had strong difficulties with the supplier," he said. "By July last, we took control of the operation, changed management, processes, systems and tooling. We now have things under control." The work had been contracted to Kawasaki Heavy Industries.

Embraer raised its 2007 delivery forecast to 165-170 aircraft from 150. Botelho said an order from Hainan Airlines for 50 ERJs and 50 E-190s (ATWOnline, Aug. 31, 2006) represented an endorsement of its strategy "to penetrate the Chinese market." He added that it also gave the company a foot in the door "before a Chinese competitor could develop their own aircraft." Embraer began an ERJ-145 joint production venture with Harbin Aircraft Industry in 2002.

by Sandra Arnoult

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