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Embraer warns of negative cash flow in 2014

Jan. 15, 2015, Sao Jose dos Campos, Brazil - Brazilian aerospace giant Embraer SA said its free cash flow turned negative in 2014 on lower revenues and extended payment deadlines.

January 15, 2015  By The Globe and Mail

The maker of regional jets and rival of Montreal-based Bombardier Inc. said on Wednesday it no longer expects to generate the free cash flow in the lower double digits it guided for back in February of 2014.

It now says that, based on preliminary information for fiscal 2014, it anticipates negative free cash flow of about $400-million (U.S.).

The company attributed the decrease “mostly due to lower revenues, as compared to earlier estimates, and an increase in accounts receivables, reflecting extended payment cycles by some clients.”

In a separate news release, Embraer said it delivered 30 commercial and 52 business jets in the fourth quarter of 2014, compared with 32 and 53 aircraft, respectively, in the same period for 2013.


For the year, Sao José dos Campos, Brazil-based Embraer said it delivered 92 commercial jets and 116 business jets, compared with 90 and 119, respectively, in the year-earlier period.

Embraer’s new line of E-jets is aggressively competing with Bombardier’s regional aircraft and also represents a threat to Bombardier’s new C Series airliner, slated for entry into service by the end of this year.

Cormark Securities analyst David Newman says in a research note Wednesday he expects Bombardier to post 91 aircraft deliveries in the fourth quarter – up from 83 last year – compared with Embraer’s 82.

“We anticipate ongoing improvements in [Bombardier’s] financial performance, given solid deliveries, according to our tracking for Q4/14, a healthy backlog, a growing foreign exchange tailwind, significant cost savings from its recent reorganization and restructuring ($268 MM) plan, and expected decline in capex and commensurate pick-up in [free cash flows], and improved execution, especially on the CSeries flight test program.”


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