UPDATE 1-Embraer cuts sales outlook; makes graft probe provision

viernes 29 de julio de 2016 10:14 GYT

(Updates with details of earnings, outlook, analyst and market reaction, executive comments)

By Brad Haynes

SAO PAULO, July 29 (Reuters) - Brazilian planemaker Embraer SA cut its outlook for executive jet sales this year and set aside $200 million to settle a U.S. graft probe, triggering an unexpected quarterly loss and sending shares to a more than two-year low on Friday.

Embraer said in a securities filing it was nearing a settlement to defer prosecution under the U.S. Foreign Corrupt Practices Act (FCPA) for allegedly bribing officials in the Dominican Republic to secure a deal for defense aircraft.

The provision for that possible deal contributed to a net loss of $99 million in the second quarter, according to a securities filing. The result was far worse than a $129 million profit a year earlier and the average forecast of a $76 million profit in a Reuters poll of analysts.

The world's third-largest commercial planemaker cut its outlook for executive jet sales this year by 10 aircraft, which lowered estimates for revenue, operating profit and cash flow.

Embraer shares tumbled 13 percent in Sao Paulo to their lowest level since October 2013.

"It was no question a messy quarter," wrote RBC analyst Derek Spronck in a note to clients. "This feels like a 'kitchen sink' quarter to us where management needed to reset expectations."

Even without the FCPA provision, earnings before interest, taxes, depreciation and amortization would have fallen 15 percent to $152 million, missing an average forecast of $189 million, which Spronck attributed to weak pricing.

Chief Financial Officer Jose Antonio Filippo told reporters that Embraer was determined to defend pricing on its executive jets in a weak market, which led the company to cut back its deliveries this year.

Weak global growth and a glut of used jets has weighed on demand for new executive aircraft, leading Dassault Aviation cut its delivery forecast for Falcon business jets this month. (Reporting by Brad Haynes; Editing by Frances Kerry)