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Embraer delivered four commercial jets and 13 executive jets (nine light/four large) in 2020’s second quarter, and the company’s firm order backlog at the end of Q2 was US$15.4 billion.
Excluding special items, adjusted earnings before interest and tax (EBIT) and earnings before interest, taxes, depreciation, and amortization (EBITDA) were US$140.5 million and US$120.4 million, respectively, negatively impacted by weak Commercial Aviation results, yielding an adjusted EBIT margin of -26.2 per cent and adjusted EBITDA margin of -22.4 per cent.
The Q2 2020 results include total net negative non-cash special items of US$202 million:
- Additional negative provisions for expected credit losses during the COVID-19 pandemic of US$16.1 million;
- An impairment loss on the Commercial Aviation business unit of US$91.1 million;
- Recognition of previous period depreciation and amortization expense in the Commercial Aviation business of US$101.2 million;
- A positive valuation mark to market of US$6.5 million on the company’s stake in Republic Airways shares.
Q2 2020 adjusted net loss (excluding special items and deferred income tax and social contribution) was US$198.8 million, with adjusted loss per American Depository Share (ADS) of US$1.08.
Embraer reported free cash flow of US$476.2 million in Q2, still affected by working capital needs in Commercial Aviation, but an improvement versus the US$676.5 million usage of free cash flow reported in Q1, due to several initiatives to reduce investments, control working capital, and minimize fixed costs.
Embraer’s liquidity remains solid as the company finished the quarter with total cash of US$2.0 billion and major debt maturities starting in 2022 onwards. The company also finalized the terms of contracts for working capital and export financing with export credit agencies in Brazil and the United States and private and public banks, adding a total of up to US$700 million to its total liquidity. Disbursements of these new financing lines are expected to be completed in the third quarter of 2020 reinforcing Embraer’s cash position in the second half of 2020 and into 2021.
Due to continued uncertainty related to the COVID-19 pandemic, financial and deliveries guidance for the company’s 2020 results remains suspended at this point.
