Brazilian airliner manufacturer sitting pretty on $28.6 billion order backlog

Embraer, one of the leading commercial aircraft manufacturers in the world, registered in 1Q04 net sales of US$626.2 million and net income of US$103.3 million, equivalent to diluted earnings per ADS of US$0.59. The order backlog as of March 31, 2004 totaled US$28.6 billion, US$10.9 billion in firm orders and US$17.7 billion in options.

Some of the highlights of the quarter include:

• Net sales for 1Q04 were US$626.2 million, 28.1% higher than the sales of US$488.8 million in 1Q03.
• Net income in 1Q04 was US$103.3 million, 135.1% higher compared to 1Q03.
• The EMBRAER 170 type certification was granted by the Brazilian, US, and European authorities in late February.
• A total of 23 jets were delivered in 1Q04: 22 jets to the Commercial Aviation market, including the first eight EMBRAER 170 deliveries, and one EMB 145 to the Defense market.
• Embraer had previously received a US$88.7 million cash contribution from risk sharing partners for the EMBRAER 170 development, which was recognized in 1Q04 as operating income.
• On February 2, 2004, Harbin Embraer announced the sale of six ERJ 145 models to China Southern Airlines.
• The roll out of the EMBRAER 190, an aircraft seating 98 to 106 passengers, took place during a public ceremony held at Sao Jose dos Campos in February. The EMBRAER 190 took its maiden flight a month later, initiating its flight test campaign.
• In March 2004, Embraer announced the conversion into firm orders of 16 of 50 options for the ERJ 145LR regional jet by Republic Airways Holdings.
• In March, Republic Airways Holdings also ordered 50 EMBRAER 170 aircraft, 13 of which are firm orders and 37 of which are options.

During 1Q04, 23 aircraft were delivered, the same number as were delivered in 1Q03 and seven aircraft less than were delivered in 4Q03. Normally first quarter deliveries are lower than the following quarters.

Embraer's net sales increased by 28.1% as compared with 1Q03, reaching US$626.2 million. Commercial aviation market net sales increased 13.8%, due to the first eight deliveries in March of the EMBRAER 170 model, which has a higher average sales price than the aircraft in the ERJ 145 family.

Defense segment net sales increased 136.8%, from US$55.2 million in 1Q03 to US$130.7 million in 1Q04, due to the recognition of revenues related to the Mexican and Greek government programs for the EMB 145 MP and AEW&C, and the Brazilian government's program for the EMB 145 AEW&C and F-5. Embraer's net sales also include revenues from Customer Services & Other Related Business, which increased 80.3% from US$29.0 million in 1Q03 to US$52.3 million in 1Q04. There were no deliveries to the Corporate Aviation Market in 1Q04.

Embraer maintains its forecast for deliveries of 160 and 170 Commercial, Corporate and Defense aircraft (exclusively government transport aircraft) in 2004 and 2005, respectively. The Company expects to deliver approximately 40% of 2004 deliveries in the first half of the year and the remaining 60% in the second half of 2004, especially due to deliveries of the EMBRAER 170 that started in March 2004.

FMI: www.embraer.com