(Adds CEO comments, share performance)
By Brad Haynes
SAO PAULO, April 29 (Reuters) - Brazilian planemaker Embraer SA assured investors that its business jet division should return to profitability this year after sharp discounting dented first-quarter profits, dragging shares to their lowest in nearly two years.
Embraer reported a first-quarter profit of $104 million in a Friday securities filing, reversing a net loss of $62 million a year earlier and beating an average forecast of $60 million in a Reuters poll of analysts.
However, Chief Executive Frederico Curado acknowledged the executive aviation unit had an operating loss as it unloaded a half dozen Legacy 650 jets, which are built on an old regional jet platform and have struggled to compete against newer rivals.
Embraer's large business jet deliveries during the rest of the year will be concentrated in the freshly designed Legacy 450 and 500, helping to return the division to profitability, Curado told analysts on an earnings call.
Embraer shares fell 5 percent in midday trading to their lowest levels since July 2014. The stock has dropped more than 30 percent this year as a rebounding Brazilian currency hurts the profitability of Embraer's export-focused business.
A deep recession and severe political crisis have also raised concerns about the continuity of Embraer's domestic defense programs, but Curado said contracts should be secure whether or not President Dilma Rousseff is ousted.
First-quarter revenue rose 24 percent on strong deliveries of larger business jets, yet the surge was driven mostly by the unprofitable Legacy 650. Chief Financial Officer Jose Antonio Filippo said the company was defending healthier profit margins on its newer Legacy jets and the entry-level Phenoms.
Earnings before interest, taxes, depreciation and amortization rose 12 percent to $168 million, slightly below an average forecast of $175 million.
On a broader gauge of operating profitability, including depreciation and amortization, the executive jet unit lost around $20 million, Curado said on the earnings call.
Brazil's currency gained nearly 10 percent in the quarter, posing long-term challenges for Embraer, but boosting net income due to income tax relief of $32 million. Few analysts consider the quarterly accounting effect in their models. (Reporting by Brad Haynes; Additional reporting by Priscila Jordao; Editing by David Goodman and W Simon)