Embraer seeks to maintain profit margin on stronger business jets
By Brad Haynes and Roberta Vilas Boas
SAO PAULO (Reuters) - Brazil's Embraer SA (EMBR3.SA: Cotización), the world's No. 3 commercial planemaker, said on Wednesday it was aiming for stable profit margins in 2014 as better pricing on executive jets should offset deep discounts on big regional jet orders.
Embraer shares rose as much as 6 percent on Wednesday, their best session in eight months, as the company issued a steady outlook after better-than-expected earnings.
The planemaker's outlook reinforced the advantages of an increasingly diversified revenue stream, which now depends on airlines for just half of sales.
"The major headwind we have in 2014 is ... the reduction in gross margins on the commercial jets, which remain our main business. So we intend to compensate that with better margins in executive aviation and hopefully also in defense," Chief Executive Frederico Curado told analysts in Sao Paulo.
A handful of blockbuster contracts from major U.S. airlines last year replenished Embraer's depleted order backlog, but raised concerns of deep discounting to win the deals. Curado said a more favorable exchange rate and signs of a recovery in the business jet market could offset the pressure.
Executives also sounded confident of new deals. Curado mentioned "strong order momentum" for commercial jets and promised at least one new aircraft order for every plane delivered in 2014, helping to bolster Embraer's order backlog.
The bullish order outlook and nearly stable forecasts for revenue, production and profit margins followed a rush of aircraft deliveries at the end of last year that helped Embraer meet its 2013 targets. Continuación...