UPDATE 2-Embraer profit falls on taxes, labor costs
* Profit down as tax burden, labor costs rise from year ago
* Q1 revenue best since 2008, but profit misses forecasts
* Role of defense grows; executive, regional jet demand weak
By Brad Haynes
SAO PAULO, April 26 (Reuters) - Brazil's Embraer, the world's third-largest commercial planemaker, posted a drop in first-quarter profit as a heavier tax burden and rising labor costs offset a strong mix of deliveries.
Profit fell to $62.7 million from $105.1 million a year earlier, according to a securities filing on Thursday, missing an estimate of $79 million in a Reuters survey.
Without the help of a tax credit that boosted profit last year, the manufacturer's bottom line slipped even as it stepped up deliveries of commercial and executive aircraft.
Net revenue rose from a year earlier to $1.156 billion, the company's best first quarter since 2008. Embraer said rising inventories also reflected expectations of growing deliveries in the quarters ahead.
Still, some analysts warn that strong deliveries mask evidence of sluggish demand in the global market for regional jets. Embraer booked new orders for commercial planes at about half the rate it delivered them in the first quarter, drawing down its pipeline of future revenue.
Embraer's order backlog for commercial and executive aviation, a gauge of its ability to weather industry downturns, fell to $14.7 billion in March, slipping below $15 billion for the first time since 2006.
GROWING ROLE OF DEFENSE
While demand for private aircraft and regional jets has yet to fully recover from the 2008 financial crisis, Embraer's renewed focus on its defense and security business was reflected in the segment's surging contribution to revenue.
Defense made up 20.1 percent of total revenue, rising from 16 percent a year earlier and 14.5 percent in the last quarter of 2011.
The company's defense backlog grew to a record $3.4 billion in March, without considering potential government contracts to help secure Brazil's borders and launch a defense satellite, together worth billions.
Meanwhile, the company has tried to bolster the appeal of its private jets with an expanded customer service network, pushing selling expenses up 15 percent from a year ago.
A ten percent wage increase at the end of last year also drove up costs for Embraer, which is struggling to placate a union and retain skilled workers as unemployment hits record lows in Brazil.
Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, slipped 5 percent from a year earlier in dollar terms.
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