4 q03
TRANSCRIPT
4Q03 and Full Year of 2003 Earnings ResultsEMBRAER
Maurício BotelhoPresident & CEO
March 18th, 2003
Forward Looking Statement
This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,”“expects” and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.
2003 Highlights
Worldwide Aviation Industry continued to experience great difficulties in 2003. Combined with the after effect of the war in Iraq and the SARS, caused full recovery of world airline traffic to be further postponed;
Commercial Aviation experienced its greatest crisis, with major airlines accumulating losses the worldwide;
High risk rating for the industry, led to a lack of funds available for structuring sales financing.
Environmental Highlights
“Low-fare, low-cost” and regional airlines stood out in this adverse scenario, with their consistent and profitable growth;
Several companies are considering including new 50- to 100-seat commercial jet aircraft in their plans for recovery and modernization.
Environmental Highlights
Firm backlog increased fromUS$ 9.0 billion to US$ 10.6 billion;
Highlights
20012002
2003
10,7
9,0
10,6
20012002
2003
(22)
104
222
Backlog
Net Cash
20012002
2003
597 736
356
AR
US$ 136 million net income and US$2,144 million in sales
Net cash doubled, reaching US$222million;
Short term accounts receivable decreased48%, reaching US$ 356 million.
Commercial Aviation - Highlights
The Mexican airline Aerolitoral placed five firm orders and 25 options for the ERJ 145, with first deliveries projected for 2004;
Firm order for 85 EMBRAER 170s and 50 options by USAirways;
Firm order for 100 EMBRAER 190 aircraft and 100 options by JetBlue;
Others agreements in 2003 with LOT Polish Airlines, with the German Cirrus and with an undisclosed customer, involving a total of 17 firm orders and 22 options for the EMBRAER 170;
Air Canada signed a proposal for the purchase of 45 EMBRAER 190 aircraft and options for an additional 45 units.
Commercial Aviation - Highlights
33 %61 to 90 seats
23 %91 to 120 seats
45 %30 to 60 seats
Embraer’s Market Share:
Commercial Aviation - Highlights
Postponement of ERJ 145 XR deliveries to ExpressJet(Continental Express), a decrease to 36 units from 48 in 2003;
SWISS deferred the EMBRAER 170 deliveries for one year and reduced the total number of aircraft on order to 30 firm orders from 60 (15 EMBRAER 170 and 15 EMBRAER 195),and to 20 options from 100;
The EMBRAER 170 type certification postponement by the Brazilian, US, and European regulators forced Embraer toreadjust its delivery schedules;
Corporate Aviation - Highlights
Legacy was certified in a modular interior concept;
New Legacy executive version range is 3,250 nautical miles.
Corporate Aviation - Highlights
The first aircraft sale to a Swiss company and the first sale to a fractional ownership company, Flight Options;
The American company Indigo cancelled its contract in May for 23 firm orders and 50 options for the shuttle version of the Legacy;
Defense - HighlightsThe first EMB 145 AEW&C aircraft ordered by the Mexican government introduced to the Mexican authorities and performed its first flight
The delivery of the first EMB 145 AEW&C to the Greek air force’sEuropean subcontractor;
Delivered the three remaining ISRaircraft to the Brazilian SIVAMProgram;
Defense - HighlightsAnnounced intention to open an industrial plant in Jacksonville, Florida for the assembly of aircraft for the United Statesdefense and national securities markets;
Joined the Lockheed Martin team for its proposal to supply theU.S. Army with a next-generation of Aerial Common Sensor (ACS);
Sale of five especial version Legacy Aircraft to the Indian Government
A contract was executed in December for the sale of two ERJ 145 aircraft to SATENA, a Colombian state-owned airline;
The first EMBRAER 190 completed fuselage assembly in October;
Two EMBRAER 175 Prototypes flewin 2003;
The first ERJ 145 aircraft produced by Harbin Embraer Aircraft Industry Company Ltd – HEAI, was rolled outand took its maiden flight;
Industrial Highlights
The serial production of the ALX Super Tucano aircraft ordered by the Brazilian Air Force began at the Gavião Peixoto industrialplant;
Delivered to Alitalia Expressthe 700th aircraft of the ERJ 145 family;
The ERJ 135 was certified to operate at London City airport inEngland;
Industrial Highlights
EMBRAER 170 receives provisional type certificate from CTA and FAA;
Financial - HighlightsConcluded a EETC Continental transaction in the U.S. CapitalMarkets envolving its receivables guaranteed by the ERJ 145 XR.US$414.6 million total amount - four times over subscribed.
US$200 million 7-year term syndicated loan, with commercial and political risks guaranteed NEXI, the Japanese export credit agency;
Accounts Receivables decreased 52%, from US$736 million in 2002 to US$356 million in 2003. Result achieved mainly due tothe BNDES support in financing a significant part of Embraer’s exports.
Results & Performance
Delivery of jets
4
32
59
96
160 161
131
101
1996 1997 1998 1999 2000 2001 2002 2003
Net Revenues and Gross Margin
77% 36% 50% 6%Annual Variation
-14%
2,143.5
1,353.5
1,837.3
2,927.02,525.8
2,762.2
37.7%
39.4%39.6%
32,0%32,0%
28,3%
1998 1999 2000 2001 2002 2003
US$ million
-15%
Net Revenue per Segment and Market
Exports95%
Brazil5%
Defense Aviation
12%
Customer Services and other related
business8%
Executive Aviation
11%
Commercial Aviation
69%
REVENUES PER SEGMENT
FY2003
GEOGRAPHIC BREAKDOWN
FY 2003
274.9
469.6
651.4
462.1
368.0
171.7
12.8%
18.6%
22.3%
16.7%
20.0%
12.7%
1998 1999 2000 2001 2002 2003
Income from Operations
250% 114% 26% 41%Annual Variation
-28%
US$ million
-41%
Net Income
4,618% 61% 37% 2%Annual Variation -32%
136.0
222.6
328.4320.7
234.5
145.36.3%
8.8%
11.2%11.6%
10.7%
12.8%
1998 1999 2000 2001 2002 2003
US$ million
-39%
Foreign Currency76%
Brazilian Currency24%
DebtTotal Debt of US$1,043.7 million
Considering Currency Swaps:
Average cost in R$ = 16.7% pa (76.5% CDI)
Average cost in US$ = 4.6 % pa
Debt Maturity
206115
105101
517
1044
Total Short Term 2005 2006 2007 2008 on
In US$ million
Short Term50%Long Term
50%
Loan Average Maturity: 2 years and 2 months
Net Cash (Debt) PositionUS$ million
(212)
43
(178)
222104
-22
-333-415
733
1998 1999 2000 2001 2002 Mar.31,2003
June31,2003
Sep.31,2003
Dec.31,2003
Short-term Trade Accounts ReceivableUS$ million
117 160
597
736
913
790
981
356
1999 2000 2001 2002 Mar.31,2003 June 30,2003
Sep. 30,2003
Dec. 31,2003
Inventories
1021 102911731127
880
1038
616
773
1999 2000 2001 2002 Mar. 31,2003
June 30,2003
Sep. 30,2003
Dec. 31,2003
US$ million
Customers and Orderbook
181
144
20
17
Firm Backlog
7101393502891Total
5311150475675ERJ 145
741142094ERJ 140
1051297122ERJ 135
DeliveriesTotalOptionsFirm Orders
ERJ145 Family Orderbook
December / 2003
EMBRAER 170/190 Family Orderbook
260150110EMBRAER 190
550305245Total
453015EMBRAER 195
245125120EMBRAER 170
TotalOptionsFirm Orders
December / 2003It doesn’t include Air Canada order
BacklogUS$ billion
1.2 3.0 4.16.4
11.4 10.7 9.0 10.6
11.3
12.7 12.713.2
17.5
1996 1997 1998 1999 2000 2001 2002 2003
OptionsFirm Orders
1.23.0
4.1
17.7
24.1 23.422.2
28.1
Capex and Productivity
US$ million
PP&E & R&D
64.8
111.0
143.8
114.2
60.1
173.2158.5
113.7
69.6
18.8
1999 2000 2001 2002 2003
PP&E
R&D
Production CycleIn Months
3.43.7
5.04.95.5
6.06.0
8.0
1996 1997 1998 1999 2000 2001 2002 2003
Planned Investments
R&D Total
- Commercial Aviation
- Corporate Aviation
- Others
Defence
20052004
174
139
16
19
42
119
72
27
20
54
Productivity and PP&E 64 81
TOTAL 280 254
US$ million
Defence Investments are funded by their contracts and are not includedin the R&D expenses, but in Cost of Sales and Services.
4
32
59
96
160 161
131
101
160170
1996 1997 1998 1999 2000 2001 2002 2003 2004 E 2005 E
Jet Deliveries
53% 48%
37%
12% 15%
35%
2004 2005
ERJ 145 Family EMBRAER 170 Family Corporate
160 expected deliveries for 2004 and 170 for 2005
Deliveries Forecast
Investor RelationsPhone: 5512 [email protected]