Embraer(US:ERJ)2020-06-01 19:11Financial Data and Key Metrics Changes - Embraer reported consolidated revenues of $634 million in Q1 2020, down approximately 20% from the same quarter last year, primarily due to lower commercial deliveries and a shutdown period in January 2020 [34] - The adjusted net income for Q1 2020 was a loss of $104 million, resulting in a negative margin of 16.4%, significantly impacted by separation costs and higher financial expenses [39] - The company's total cash position at the end of Q1 was $2.5 billion, with a net debt of $1.3 billion and total debt of $3.8 billion, indicating a solid liquidity position [42] Business Line Data and Key Metrics Changes - In commercial aviation, Embraer delivered five E-Jets during Q1 2020, with revenues of $140 million, reflecting the seasonal weakness and operational shutdown in January [24][34] - The executive jets segment delivered nine business jets, generating $130 million in revenue, with a book-to-bill ratio of one to one, indicating stable demand [27] - The defense and security business reported revenues of $149 million, benefiting from improved margins due to the conclusion of the KC-390 development [35][37] Market Data and Key Metrics Changes - The commercial aviation sector experienced significant impacts from COVID-19, but executive jets and defense remained relatively resilient, with no cancellations reported so far [19] - Key markets in Europe and the United States are beginning to resume operations, which is expected to aid in the recovery of regional aviation [19] Company Strategy and Development Direction - The company is focusing on five main areas to emerge stronger from the crisis: employee health and safety, cash preservation, capturing synergies, updating business plans, and building a more efficient organization [7][11] - Embraer is reviewing its five-year strategic plan, with a focus on commercialization and potential partnerships, especially in defense and security [48][73] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by COVID-19 but expressed confidence in the company's liquidity and ability to navigate through the crisis [15][16] - The company expects Q2 to be challenging but anticipates a recovery in Q3 and Q4, contingent on the current scenario [46] Other Important Information - Embraer has been actively involved in social responsibility initiatives, including producing ventilator parts and donating COVID tests to the Brazilian Public Health System [13][14] - The backlog at the end of Q1 2020 was $15.9 billion, slightly down from $16.8 billion at the end of the previous year, indicating several years of deliveries ahead [32] Q&A Session Summary Question: Can you provide the margins by segment? - Executive aviation margins were around 2%, while defense margins were slightly above 10%. Commercial margins were slightly negative due to limited deliveries [44] Question: Will free cash flow be positive for the remaining quarters? - Q2 is expected to be tough, but a recovery is anticipated in Q3 and Q4 [46] Question: How are customer conversations going regarding regional aviation? - There have been deferrals but no cancellations, and the situation is stable for production in 2020 and 2021 [50] Question: What is the demand outlook for business jets? - Business aviation has suffered less than commercial aviation, with few deferrals and potential opportunities for increased demand post-COVID [51] Question: Can you comment on the negotiations with BNDES for a debt facility? - The company is evaluating potential new finance lines but remains confident in its liquidity position [66] Question: What is the expected net debt position by year-end? - The net debt is expected to be slightly higher than last year, but specific numbers are not yet available [80]