* Planemaker's Q3 net income $65 mln vs forecast $103 mln
* Restructuring for Chautauqua, American Airlines weighs
* Sees private jet deliveries rebounding, inventories high
* Updates on SEC, DOJ investigation; makes no provisions
By Brad Haynes
SAO PAULO, Oct 23 Brazil's Embraer,
the world's third-largest commercial planemaker, missed
estimates for its quarterly profit on Tuesday as it helped to
restructure aircraft financing for a U.S. regional airline.
Embraer reported third-quarter net income of $65.2 million
in a securities filing, missing the average estimate of $103
million in a Reuters survey of nine analysts.
The company said last month it was working with U.S. carrier
Chautauqua Airlines, a subsidiary of Republic Airways Holdings
, to ease leasing costs for a fleet of regional jets on
which Embraer had offered financial guarantees. The cost of that
restructuring reduced earnings by $41.9 million.
Still, the planemaker remained confident in its full-year
projections, despite canceled orders and slow deliveries.
"The company believes it is in line to meet its 2012 revenue
guidance," Embraer said in the filing, adding that the expected
mix of fourth-quarter deliveries meant it was well-positioned to
deliver on its profit margin targets.
Embraer is grappling with a fragile global economy that is
sapping demand for its executive aircraft and hurting the
commercial airlines that fly its regional jets.
The company's net cash position shrank in the quarter as it
paid $49.5 million due to the Chapter 11 bankruptcy of American
Airlines' parent company AMR Corp, which is
renegotiating the leases on its fleet of Embraer regional jets.
Embraer booked a $361 million provision for such expenses at
the end of 2011, leading to a $92 million fourth-quarter loss.
In corporate jets, where canceled orders have threatened the
full-year delivery target, Embraer said it expected rebounding
deliveries at the end of the year to reduce stocks.
Still, the manufacturer said inventories may end 2012 at a
higher level than where they began the year. Embraer forecast
between 195 and 215 deliveries of commercial and executive jets
this year, but delivered just 129 in the first nine months.
Slower deliveries and the restructured aircraft financing
dragged on earnings before interest, taxes, depreciation and
amortization (EBITDA), a gauge of operating profit, which
slipped 12 percent from a year earlier to $166 million.
One bright spot for Embraer is its defense unit, which the
company noted was outperforming its targets and contributing
more than 18 percent of revenue, up from 14 percent a year
The division's top executive told Reuters recently that the
unit would likely generate revenue near $1 billion in 2012,
beating an annual target of $900 million to $950 million.
Embraer's net income from July to September rose 19 percent
from the prior quarter. Revised earnings from a year earlier
showed a narrow $1.9 million net profit in the third quarter of
2011, when a currency tumble wiped out most earnings.
The company also said it saw no need to make provisions at
this time for possible fines or sanctions in connection with a
bribery investigation by the U.S. Securities and Exchange
Commission and Department of Justice, adding that it was not now
possible to estimate the duration, scope or results of the
In an update to investors on the investigation, which
Embraer disclosed last November, the planemaker said its outside
counsel continued to investigate the case and provide
information to U.S. authorities.
Embraer recognized that if it was found guilty of
violations, it could face steep fines or other sanctions, but
added: "Our management, based upon the opinion of our outside
counsel, continues to believe that there is no basis for
estimating reserves or quantifying any possible contingency."