Brazil's Embraer to meet guidance this year, CEO says

Embraer

Embraer SA, the world's No. 3 planemaker, is close to meeting revenue and profitability targets for this year, Chief Executive Frederico Fleury Curado said on Wednesday, an indication that robust defense orders are offsetting a plunge in demand for regional and executive jets. Defense, Embraer's fastest-growing segment, is likely to end the year with revenue above $1 billion, beating initial estimates of $950 million, Curado told reporters at a company event. The Brazilian company, which is the world's largest manufacturer of regional aircraft, forecast net revenue of $5.8 billion to $6.2 billion this year.

Curado's remarks highlight the growing importance of defense in Embraer's business model, which in the past year became less dependent on the sale of regional and executive jets. "Even slight" gains in revenue will be pursued next year, Curado said.

Payroll, which contributed to a significant jump in costs in recent years, will likely remain stable in 2013, he added. A weaker exchange rate is helping dilute the cost of payroll - which is chiefly denominated in Brazilian reais - and enhancing Embraer's ability to remain profitable despite a crisis in global aviation.

The company is aiming for earnings before interest, tax, depreciation and amortization - a measure of operational profitability known as EBITDA - to equal between 12.5 percent and 13.5 percent of revenue this year.

U.S.-traded shares of the São José dos Campos, Brazil-based company fell 1.5 percent to $25.77 in late morning trading in New York. Common shares of Embraer sank almost 2 percent in São Paulo.

Paulo Cesar de Souza e Silva, who heads Embraer's commercial aviation unit, said at the event that terms of AMR Corp unit American Airlines' auction to buy as many as 200 new regional planes should be announced in coming weeks. Embraer is in "preliminary talks" with American Airlines on that contract, Silva added.

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