April 4, 2012 / 5:00 PM / 5 years ago

Embraer jumps to four-year high on Brazil stimulus

SAO PAULO (Reuters) - Shares of Embraer (EMBR3.SA), the world's third-largest commercial planemaker, jumped to their highest level in nearly four years after President Dilma Rousseff announced a new package of tax cuts and subsidized loans to boost Brazilian manufacturers.

Embraer's stock rose 4 percent in midday Sao Paulo trading to 15.21 reais ($8.31) per share, its highest price since May 2008, which was the eve of the global financial crisis.

With its payroll tax burden reduced to zero starting in the second half of 2012, Embraer stands to gain about $97 million in profit this year, improving its net margin by 1.7 percentage points, according to Credit Suisse analyst Luiz Otavio Campos.

Embraer's profit margins slipped last year on a stronger local currency and rising labor costs, which have hampered several Brazilian industries.

But analysts say the aircraft maker is better-positioned than other manufacturers in the country thanks to its dominance of the global market for regional jets and steady revenue from government defense contracts.

Embraer also gets nearly half its revenue from exports, which will not be affected by a new levy on domestic revenue meant to offset the payroll tax cut.

$1 = 1.8294 reais

Reporting by Brad Haynes; editing by Matthew Lewis

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