Leeham News and Analysis
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Leeham News and Analysis
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Embraer 2nd Quarter 2023 results show a positive trend
By Bjorn Fehrm
August 14, 2023, ©. Leeham News: Embraer presented its 2Q2023 results today. Commercial aircraft deliveries increased to 24 E-jets jets for 1H2023 compared with 17 E-jets in 1H2022, and Executive jets delivered 38 jets (29) in the period.
Revenue for the group increased by 24% to $2,009m ($1,620m) for the half year. The Services side increased revenue by 12.7% to $666m ($591m). The Defense revenue was 7.7% down at $180m($195m).
Half-year EBIT was $21m (-$263). The company retained the 2023 guidance, which means delivering 65-70 E-jets and 120-130 Executive jets during 2023.
Group results
Group revenue for the quarter was up 27% at $1,292m versus $1,019m in 2Q2022. EBIT was $73m ($-227m). Free cash flow was -$11m compared with $91m in 2Q2022, mainly due to inventory build for 2H2023 deliveries.
The revenue for the different segments is per Figure 1.
Figure 2. Embraer’s segment revenue. Source: Embraer.
The company’s total debt is $3.5bn with $2.3bn in cash.
The company maintained its guidance for 2023: Commercial jet deliveries of 65-70 aircraft, Executive jet deliveries of 120-130 aircraft, Revenues in a range of US$ 5.2 to US$ 5.7 billion, Adjusted EBIT margin of 6.4% to 7.4%, Adjusted EBITDA margin of 10.0% to 11.0%, and adjusted free cash flow of US$ 150 million or better for the year.
Commercial aircraft
The Commercial Aircraft division delivered 17 E-Jets during 2Q2023 compared with 11 for 2Q2022, Figure 3. The E1 and E2 split deliveries for 1H2023 50:50 in units.
Figure 3. Commercial jet deliveries. Source: Embraer.
Commercial aircraft revenue was $472m versus $300m in 1Q2022.
Book to Bill was slightly below one, with the order backlog going from $8.4bn in 1Q2023 to $8.0bn in 2Q2023.
Business Aircraft
The Business jets deliveries were up 42% compared with 2Q2022, Figure 3.
Figure 3. Business jet deliveries. Source: Embraer.
Segment revenue was $378m versus $267m in 2Q2022.
With a Book to Bill of 2:1, the backlog grew to $4.3bn.
Defense & Security
Segment revenue decreased 29% to $82m vs. $115m for 2Q2022. There was one KC-390 delivered to the Brazilian Air Force during the quarter.
Services and Support
Services revenue increased by 6% to $340m vs. $320m 2Q2022, with a gross margin of 24%.
One of the alerts here is that in 2027 the E175 is in theory out of production due to the ICAO limits on old engines. There will probably be a bit of binge ordering but long term sustainability?
The other of course is the P&W engine issues that are not stopping and indeed spread quite a bit.
Rough area to be an mfg in.
I believe I read a post here at Leeham news that Embraer stated that the E175E1 is compliant with the 2027 ICAO rules. Seems to be the case based on the recent company statements.
Seems it was easier before just to upgrade aircraft with newer engines. Like the 767 starting with CF6-80A and P&W JT9D-R4’s and then progressing to the -80C2 and PW4000. The 747 starting with JT9D-3A and on with JT9D-7A , CF6-50, RR RB211 and on with multiple engine options as time progressed. Why not upgrade the ERJ175 with RR Pearl, GE Passport or PW800 engine if they get enough firm orders and keep the weight within limits? It might be harder to certify today as certification rules might have changed?
Hopefully Bjorn weighs in, I am going to guess there is not much improvement with the Pearl Passport or PW800 and they may not have the chops for commercial service.
Business jets don’t require the arduous requirements that LCA do (regional or not).
The Pearl is an odd one but it may be too old a design for current specs in LCA and not enough improvements.
The business jet engines (Pearl, Passport, PW800) are made for long, high speed flights. Thus their cores are not designed for many short hops and their low pressure system is designed with a higher specific thrust (higher overspeed) by using a lower BPR than you would for an RJ engine. You would need to modify the core and redesign the low pressure spool and nacelle to make it suitable for RJ flying. Not worth it it seems.
I know that the BR710 to BR715 was this type of development from bizjet to regional jet. Todays bizjet engines should have learned that these developments happen and have designed the core engines for it, RR Deutschland anyway for the RR Pearl.