ERJ: Embraer Seems Back on Track After Production Glitch
As is often the case with manufacturing something as complicated as aircraft, regional jet maker Embraer (ERJ) recently had some production delays. Although it impacted earnings in 2006, we said “as long as the company can make up for the delay in short order, it should continue to benefit from the strong trend toward smaller jets serving smaller markets.” Today, Embraer Reported First Quarter 2007 Deliveries:
Embraer announces its first quarter 2007 (1Q07) deliveries and Company backlog for the Commercial Aviation, Executive Aviation, and Defense and Government segments.The Company’s firm order backlog increased from US$ 14.8 billion in the fourth quarter of 2006 to a record US$ 15 billion in the 1Q07.
In the same period, deliveries came to 25 jets. Embraer has taken action regarding the supply chain and industrial processes for manufacturing the wings, in order to overcome the difficulties reported last year. The delivery forecast for 2007 is maintained at 165-170 aircraft, of which 40% are expected to be delivered in the first half of the year.
In the first three months of the year, a total of 25 jets were delivered.
Due to our mathematical wizardry, we are able to deduce the forecast for the second quarter as being 41-43 aircraft (the difference between the 25 delivered in Q1 and 40% of 165-170.) The second quarter rate is sufficient to fill the full-year forecast, indicating the company is indeed back on track. In the second half, however, they will also have to make up for the slower Q1.
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[…] Embraer (ERJ), the world’s leading manufacturer of commercial jets up to 120 seats, recorded net sales of US$843.4 million, in the first quarter 2007 (1Q07) and net income of US$26.2 million, equivalent to diluted earnings per ADS of US$0.1412. Analysts had been expecting the company to earn $0.40 on $853 million in sales. As was reported a month ago, the miss resulted from production issues. Due to difficulties with the supply chain of the EMBRAER 170/190 family, Embraer delivered 25 aircraft during the first quarter of 2007, compared to 27 deliveries during the same quarter in 2006. Furthermore, the Company’s industrial costs increased as a result of longer production lead time and higher man/hour labor costs in its production process, including those related to overtime work, in order to achieve the scheduled deliveries. […]