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Embraer releases fourth quarter and fiscal year 2007 results

March 14, 2008, São José dos Campos, Brazil – Embraer recorded fourth quarter 2007 net sales of US$1,875M net sales for FY 2007 of US$5,245.2M.


March 14, 2008
By Carey Fredericks

March 14, 2008, São José dos Campos, Brazil – Embraer recorded fourth
quarter 2007 (4Q07) net sales of US$1,875.0 million and net sales for FY 2007 of
US$5,245.2 million. Net Income for 4Q07 and for the full year totaled US$200.9 million
and US$489.3 million, equivalent to diluted earnings per ADS of US$1.0838 and
US$2.6400, respectively.

In 4Q07, Embraer added new customers to the firm order backlog for the EMBRAER
170/190 jets family after signing sales contracts with Suzuyo & Co., from Japan; TACA,
from El Salvador; NAS Air, from Saudi Arabia; and Virgin Nigeria, from Nigeria, as well
as Lufthansa and Air France/KLM. The Executive Aviation segment continued to grow,
especially for the Phenom family, with more than 700 firm orders, on December 31,
2007. During the same period, the Defense and Government segment signed contracts
with Thailand’s Army and Navy.

The firm order backlog on December 31, 2007, increased 9.3% over the previous
quarter, and reached a record high of US$18.8 billion, and highlighted sales to the
Executive Aviation market and the favorable performance of the EMBRAER 170/190
family. Our backlog accumulated a total of 764 firm orders and 786 options booked.

In 4Q07, Embraer delivered 61 jets for the Commercial Aviation, Executive Aviation and
Defense and Government segments. Total deliveries in 2007 were 169 jets, the highest
deliveries in a year in the Company’s history, which was consistent with Embraer’s
delivery guidance of 165 to 170 aircraft announced in 2007. Embraer reaffirms its
delivery guidance for 2008 of between 195 and 200 aircraft, for the Commercial Aviation,
Executive Aviation and Defense and Government segments, and 10 to 15 Phenom 100
jets. The certification process for the Phenom 100 is expected to be concluded in the
second half of 2008, as planned.

Net revenues for 4Q07 totaled US$1,875.0 million, a 77.0% increase compared to
US$1,059.6 million for the fourth quarter of 2006 (4Q06). Deliveries for 4Q07 totaled 61
aircraft, a 64.9% increase compared to 37 jets delivered in 4Q06. For fiscal year 2007,
net revenues totaled US$5,245.2 million, a 39.5% increase compared to fiscal year 2006
revenues of US$3,759.5 million.

To meet the deliveries scheduled for 2007 and to improve its production capacity,
Embraer hired and trained approximately 4,500 new employees, implemented a new
third shift and widely used overtime work, resulting in an increase of the Company’s
production costs and, consequently, a reduction in its margins. Gross Margin for 4Q07
totaled 23.4%, representing a decrease from the 24.5% gross margin of 4Q06, and an
increase from the 21.8% gross margin of the third quarter of 2007 (3Q07). For fiscal year
2007, gross margin totaled 22.5% representing a decrease when compared to fiscal
year 2006, mainly due to the production difficulties previously reported.

Income from operations reached US$178.8 million in 4Q07, 113.6% above the US$83.7
million recorded for the same period last year. The increase is due to the higher number
of deliveries in the quarter and to a favorable decision for the Company in a tax dispute
that permitted it to reverse US$29.7 million in provisions. In 2007, income from
operations was US$455.7 million, an increase of 32.9%, over the US$342.8 million in
2006, for the same reasons.

The increased operating results led to increases in net income, which was US$200.9
million in 4Q07, in comparison with US$124.4 million in 4Q06. Due to the increase in
production costs, net margin decreased to 10.7% in 4Q07, compared to 11.7% in 4Q06.
For the same reasons, net income increased to US$489.3 million in 2007 from
US$390.1 million in 2006, and net margins decreased to 9.3% from 10.4%, respectively.
For the year ended December 31, 2007, the Company maintained its high level of
liquidity, and its cash position at the end of 2007 was US$740.1 million.