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IR Institutional Presentation - July 2013

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  • 1. Job PositionPhone: +55 12 3927 4404 | investor.relations@embraer.com.br | www.embraer.comJuly/13
  • 2. Corporate and Business Strategy• Product strategy.• Diversification and expansion of customer base.• Excellence in Customer Experience (ECE).• Market share growth.• Margins improvement.• Product strategy and customer support focus.• Organic growth.• Margins enhancement through the P3E.• Business and revenues diversification.• Establish Embraer as the defense house of Brazil.• Organic growth and acquisitions.2
  • 3. 3721 1983 7716 22429812682008 2009 2010 2011 2012 1Q13165125101 105171062008 2009 2010 2011 2012 1Q13Aircraft DeliveriesLarge Jets - Legacy & LineageLight Jets - PhenomCommercial Jets Executive Jets32013 deliveries estimates• 90 - 95 commercial jets• 25 - 30 executive large jets• 80 - 90 executive light jets
  • 4. 6,3355,498 5,364 5,8031,0866,1782008 2009 2010 2011 2012 2013 YTDNet RevenuesUS$ Million2008: USGAAP2009-2012: IFRS42013 Outlook: US$ 5.9 – 6.4 Billion
  • 5. Revenues Breakdown561% 65% 61%23% 19% 21%15% 15% 17%1% 1% 1%2010 2011 2012Net Revenues by Segment Net Revenues by RegionCommercial AviationExecutive Aviation OthersDefense & SecurityRevenuesUS$ Billion 5.80 6.185.36RevenuesUS$ Billion5.80 6.185.3613% 20% 24%33% 25%31%13% 17%14%15% 11% 3%9% 11% 14%5% 9% 5%12% 7% 9%2010 2011 2012North America BrazilEuropeAsia PacificSouth &Central AmericaAfrica &Middle EastChina
  • 6. Firm Order Backlog6US$ Billion14.712.9 12.4 12.5 13.31Q12 2Q12 3Q12 4Q12 1Q13
  • 7. 7
  • 8. Embraer Commercial AviationOVER 80 AIRLINES IN MORE THAN 50 COUNTRIES8
  • 9. Product Portfoliocapacity: 70 to 80 seatsrange: 2,100 nm (3,900 Km)capacity: 78 to 88 seatsrange: 2,000 nm (3,700 Km)capacity: 98 to 114 seatsrange: 2,400 nm (4,500 Km)capacity: 108 to 122 seatsrange: 2,200 nm (4,100 Km)capacity: 37 seatsrange: 1,750 nm (3,250 Km)capacity: 50 seatsrange: 1,550 nm (2,900 Km)capacity: 50 seatsrange: 2,000 nm (3,700 Km)capacity: 44 seatsrange: 1,650 nm (3,050 Km)9
  • 10. E-Jets Customer Base Evolution10
  • 11. 11E-Jets Family Order Book – 1Q13E-JETS Firm orders Deliveries Firm BacklogEMBRAER 170 193 184 9EMBRAER 175 245 165 80EMBRAER 190 556 459 97EMBRAER 195 142 117 25Total 1,136 925 211
  • 12. Worldwide Distribution120%10%20%30%40%50%20002001200220032004200520062007200820092010201120122013E-Jets Customer Base by Business Model(% of E-Jets Fleet+Backlog)Firm OrdersCommercial Jets – Net Orders Market ShareConsidering Accumulated Net Orders60-120 Seats Jets20%32%48%BacklogEurope & CISMiddle East & AfricaLatin AmericaNorth AmericaAsia Pacific & China42%26%12%Low Cost CarriersRegional AirlinesNetwork Airlines7%14%7%26%16%37%7%17%32%20%24%
  • 13. E-Jets Deploymenthelping airlines to be more efficient13
  • 14. Embraer Market Forecast (2012-2031)NorthAmerica84032%NorthAmerica2,19532%LatinAmerica31512%LatinAmerica67010%Europe58022%Europe1,46022%Russia /CIS1556%Russia /CIS4457%Africa803%Africa2103%MiddleEast1054%MiddleEast3054%AsiaPacific2108%AsiaPacific5057%China34013%China1,00515%Projected Deliveries- JetsMarket Segment(Seats)2010–2019Deliveries30-60 6061-90 1,01591-120 1,55030-120 2,625Market Segment(Seats)2012–2031Deliveries30-60 40561-90 2,62591-120 3,76530 - 120 6,795• Scope Clauses relaxation allowing 80-seater aircraft as a natural growth of RJ50s in the US• Right-sizing of narrow-body operations• Regional aviation development in Emerging Markets• Acceleration of replacement of old & inefficient jetsAround 6,795 jet deliveries (30-120 seats) in the next 20 years (US$ 315 bi)14
  • 15. Competition 61-120 seats – New Scenario15
  • 16. 17Right Capacities to Match Market Demand708090100110120130+1 rowsame+3 rows20%20%97 Seats DC106 Seats SCE190-E2118 Seats DC132 Seats SCE195-E280 Seats DC88 Seats SCE175-E2
  • 17. 18E2 New Features – Not Just a Re-engineE175-E2 E190-E2 & E195-E2New WingMore efficient, high aspectratio metallic wing. Rakedwing tip.Improved Avionics4 larger 13”x10” displaysand touchscreen controlsMain Landing GearEnabling larger engines.Gear doors for improvedfuel efficiencyOptimized Wing/EngineDifferent wing and engine combinations for E175-E2 and E190/195-E2New EnginesLarger fan diameter andimproved fuel efficiency
  • 18. 19 >>RangeE190-E2E195-E2E175-E2Range (NM)Full PAX (SC), LRC, typicalreserves, 100 nm alternate1, 920 1,920E175 E175-E22,350 2,800E190 E190-E22,000 2,000E195 E195-E2>>
  • 19. 20E-Jets & E-Jets E2 Pilot Commonality Highest Commonality amongE-Jets E2 models (AAA) Fewer than 3 days transitiontraining between the two E-Jetgenerations Full Flight Simulator or High-Level Flight Training DeviceNot required
  • 20. 21Main SuppliersNew GenerationPower PlantImproved AvionicsFlaps and Slats ActuationSystems; AMSHorizontal StabilizerActuation SystemWheels & Brakes;APU; Electrical SystemFly-by-wirePrimary Flight ControlsAft fuselage segments,rudder and elevatorsVertical and horizontalstabilizersAilerons and Spoilers
  • 21. 22Fuel Burn ImprovementsFuel Burn per SeatE175-E2 (80 seats)vs. E175 (76 seats)E190-E2 (97 seats)vs. E190 (97 seats)E195-E2 (118 seats)vs. E195 (106 seats)-16%-23%-16%0%-5%-10%-15%-20%-25%Target values for 600 nm sector; Dual Class configuration;
  • 22. 23New Competitive Scenario180+16014012010080SSJ95/100MRJ90ARJ21CRJ900CRJ1000CRJ700Capacity(Single Class)737-7 MAXA319neoA320neo737-8MAXCS100CS300E175-E2E190-E2E195-E2
  • 23. 24Applications & Market Size20-Year Market Forecast (70 to 130-seat Jets) - 6,400 Deliveries* Most efficient “hub feeder” Lower cost-per-seat than current Turboprops Efficient complement to narrowbody operations New market developer Capacity growth for current E-Jet operators Similar cost-per-seat to A320neo and 737-8 Max Low Cost operation in mid-density marketsE190-E2E195-E2E175-E2* Embraer market forecast
  • 24.  Embraer investment on research, development and CAPEX for the E-Jets E2 family will be US$ 1.7 billion Investment will be supported by Embraer’s cash generation and debt Investments span from 2013 - 2020 with more concentration in 2014 -201725Program Investment
  • 25. 26List Prices (US$ Million)Preliminary Information as of January, 2013 -- US$ 3.3/USGal, 10 years NPV @ 9% rateBetter Fuel Consumption Gain• E175 E2: US$ 4.8M• E190 E2: US$ 7.0M• E195 E2: US$ 6.5MMaintenance Cost Reduction Gain• US$ 1.0~1.5ME175AR (8E5): 42.9E190AR (10E5):47.4E195AR (10E5): 50.1E-JetsE175-E246.8E190-E253.6E195-E260.4delta: 3.9 Mdelta: 6.2 Mdelta: 10.3 ME-Jets E2Seat Capacity Increase Gain• E175 E2: US$ 1.6M (4 seats)• E195 E2: US$ 4.8M (12 seats)
  • 26. 27Entry into ServiceE195-E2 EIS | 2019E190-E2 EIS | 1H 2018E175-E2 EIS | 2020
  • 27. Embraer Executive JetsMORE THAN 600 AIRCRAFT IN-SERVICE WORLDWIDE29
  • 28. Product Portfolio30LargeAircraft ModelPhenom 100Phenom 300Legacy 450Legacy 500Legacy 600Lineage 1000Seats / Rangeup to 8 occupants/1,178 nmup to 11 occupants/1,971 nm7 to 9 passengers/2,300 nm8 to 12 passengers/3,000 nm13 to 14 passengers/3,400 nm13 to 19 passengers/4,500 nmEntryLightMid-lightMid-sizeUltra-largeSuper mid-sizeCertified: 2008Certified: 2009Under developmentCertified: 2001Certified: 2008Ultra-long rangeCompetitors• Cessna - Mustang/M2• HondaJet• Cessna - CJ2+/CJ3/CJ4• Bombardier - Learjet 40XR/70• Bombardier - Learjet 45XR/75• Cessna - XLS+/Latitude• Bombardier - Learjet 85• Cessna - Sovereign• Gulfstream – G150• Bombardier - CL605/GL5000• Dassault – Falcon2000LXS/900LX• Gulfstream - G350/G450• Airbus - ACJ 318/319/320• Boeing – BBJ/BBJ2/BBJ3Legacy 650 13 to 14 passengers/3,900 nmCertified: 2010• Bombardier - GL6000/GL7000/GL8000• Gulfstream – G500/G550/G650• Dassault – Falcon 7X• Bombardier - CL300/CL850• Cessna – X/Longitude• Dassault - Falcon 2000S• Gulfstream - G280
  • 29. Market ShareOthersHawker-BeechEmbraerGulfstreamDassaultCessnaBombardierDeliveries share (units)Revenues share (US$ - based on B&CA list prices)Market Revenues 2012: US$ 17.7 billionEmbraer Revenues: US$ 1.3 billionMarket Deliveries 2012: 663 unitsEmbraer Deliveries: 99 units31
  • 30. Economic Indicators322.189-5001.0001.5002.0002.500Q32001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012USCorporateProfits(Billionsofdollars)U.S. Corporate Profits5,97,0 7,2 7,0 7,27,78,28,89,610,18,610,110,8 11,01998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011MillionNorth America Europe Asia-Pacific Latin america Middle East AfricaWorldwide HNWI PopulationNew record levels
  • 31. 2013-2022 Market Forecast – New Jets33$-$5$10$15$20$25$30$35$402000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022US$Bi(E.C.2012)7,900 ~ 9,300 jets  US$ 205 ~ 246 billion over the next 10 yearsSource: EmbraerForecastSlow Growth9,300 unitsUS$ 246 BiContinued Crisis7,900 unitsUS$ 205 Bi$-$5$10$15$20$25$30$35$402000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022$-$5$10$15$20$25$30$35$402000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
  • 32. 2013-22 Market Forecast34
  • 33. Business Jets Pre-owned Market Inventory35Source: Jetnet and Embraer Analysis, January 2013.0%4%8%12%16%20%24%28%0500100015002000250030003500Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q12000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013%ofactivefleetUnitsFleet older than 10 yrs Fleet from 6 to 10 yrsFleet up to 5 yrs PositionsFleet up to 5 yrs and positions Total fleet % for saleUp to 10 yrs % for sale12.8%2425 jets8.5%660 jets2008: Net increase of 1100 a/c2009: Net increase of 33 a/c2010: Net decrease of 155 a/c2011: Net decrease of 140 a/c2012: Net decrease of 43 a/c2013: Net decrease of 41 a/c
  • 34. Service Center Network36Embraer Service Center (5)Authorized Service Center (62)12 new centers worldwide in 2012
  • 35. OVER 52 ARMED FORCES IN 50 COUNTRIESEmbraer Defense & Security38
  • 36. Embraer Defense & Security, partners and affiliated companiesEmbraer Defense & SecurityUAV’s Satellite Land SystemsRadar39
  • 37. Embraer Defense & Security ResultsNão contabiliza as receitas provenientes da OGMA nos anos de 2006 a 2010.Revenues Evolution (US$ Million)EBIT Evolution (%) Backlog Evolution (US$ Billion)CAGR 29%40
  • 38. Brazil: 99Colombia: 25Dominican Republic: 8Chile: 12Ecuador: 18Indonesia: 16Greystone (TacAir): 1Mauritania: undisclosedBurkina Faso: 3Angola: 6USA: 20Guatemala: 6Super TucanoTotal Market Forecast:344 aircraft / US$ 4.1 billion1,7008401,600Medium-termLong-termShort-termAddressable Market Forecast 2025(US$ million)Partnership with Boeing to provide weapons integration, increasing capabilities of the aircraft.41• Firm orders: more than 210 aircraft• More than 170 aircraft delivered
  • 39. EMBRAER KC-390• A new tactical military transport and tanker aircraft• First flight in 2014• Six countries letters of intent, totalizing 60 aircraft• Agreement with Boeing to share technical knowledge andevaluate markets for joint sales efforts.• The Brazilian Air Force (FAB) and Embraer concluded thePreliminary Design Review (Set/12) and the Critical DesignReview (Mar/13).Brazil(28)Colombia(12)Argentina(6)Chile(6)Portugal(6)Czech Rep.(2)Total Market Forecast 2025:728 aircraft / US$ 50+ biRef. April1342
  • 40. A1-MF-5M A-4Brazilian Navy A-412 aircraft2 prototypes at GPX-CSBrazilian Air Force A-1M43 aircraft16 received by Embraer for the modernizationBrazilian Air Force F-5M46 a/c + 11 a/c (2nd batch)45 already deliveredBrazilian Air Force E-995 a/c aircraft EMB 145 AEW&C* Considering the market for Tucano modernizationModernization ProgramsAddressable Market Forecast 2025(US$ million)Total Market Forecast*:228 aircraft / US$ 1.5 billion437567505Medium-termLong-termShort-termRef. dec/1243
  • 41. SISFRON implementationEmbraer Defense & Security has 100% of participationNew PortfolioCommand and Control SystemsOnboard SystemsSimulation SystemsElectronic Warfare SystemsIntelligence SystemsAir Traffic Management and Control SystemsJV with Elbit/AEL Systems where Embraer Defense &Security has a major participationUAS, simulators and modernization of avionics systemsAir, ground and sea surveillance radarsRemote sensingEngine and Component MaintenanceOverhaul and ModernizationAerostructure Manufacturing and AssemblingJV between Embraer Defense & Security (51%) andTelebrasSatelliteSecurity of CriticalInfrastructurePublic Security(sporting events, cities, states)SystemsSISFRONSisGAAZ44
  • 42. SISFRONIntegrated Borders Monitoring SystemFirst phase: US$ 420 MillionTotal estimate: US$ 4 BillionComprising radars, communication networks, C4I,unmanned air vehicles (UAV) and armored vehiclesBrazilian Army PrioritiesComm9% UAV12%SW20%Sensors59%SatelliteEstimate: US$ 400 MillionParticipation in the first Brazilian Geostationary SatelliteRef. dec/1245
  • 43. New Business•SisGAAz (“Blue Amazon” Integrated ManagementSystem)•Security of Critical Infrastructure•Public Security (sporting events, cities, states)2020Revenues Breakdown Evolution201246
  • 44. 2013 Consolidated OutlookNet RevenuesEBIT EBITDAUS$ 530 – 610 MillionUS$ 5.9 – 6.4 BillionUS$ 770 – 900 MillionEBITDA margin 13.0% – 14.0%EBIT margin 9.0% – 9.5%48
  • 45. 49Deliveries: 80 to 90 light jets25 to 30 large jetsNet RevenuesDeliveries: 90 to 95 E-jetsNet Revenues US$ 3.20 – 3.35 BillionOther Revenues US$ 50 – 100 MillionUS$ 1.40 – 1.60 BillionNet Revenues US$ 1.25 – 1.35 Billion2013 Business Units Outlook
  • 46. 2013 Investment OutlookTOTAL INVESTMENTS: US$ 580 MillionResearch US$ 100 MillionDevelopment US$ 300 MillionCAPEX US$ 180 Million50
  • 47. Net Revenues / SG&A ExpensesNet Revenues - US$ Million SG&A Expenses - US$ MillionSelling ExpensesG&A Expenses522013 YTD: 1,0861,1521,7151,4021,8981,0861Q12 2Q12 3Q12 4Q12 1Q13108 118 11114371755975108531Q12 2Q12 3Q12 4Q12 1Q131702181791931612013 YTD: 161
  • 48. Income from Operations / EBITDAIncome from Operations - US$ Million EBITDA - US$ MillionEBIT EBIT Margin EBITDA EBITDA Margin532013 YTD: 40 / 3.6%86197101228407.4%11.5%7.2%12.0%3.6%1Q12 2Q12 3Q12 4Q12 1Q132013 YTD: 100 / 9.2%14826516831010012.8%15.5%12.0%16.3%9.2%1Q12 2Q12 3Q12 4Q12 1Q13
  • 49. (76) (50)(163)(50)(69)157(30)439(83)(40)(65)(55) (58)(75)(68)(174)27(138)202(201)1Q12 2Q12 3Q12 4Q12 1Q13Net Income / Free Cash FlowNet Income - US$ Million Free Cash Flow - US$ MillionNet MarginNet IncomeFree cash flowAdditions to PP&ENet cash generated (used) by operating activities*Additions to Intangible54* Net of Financial assets adjustment2013 YTD: (201)2013 YTD: 30 / 2.8%10563 58123309.1%3.6% 4.1%6.5%2.8%1Q12 2Q12 3Q12 4Q12 1Q13
  • 50. 74% 78% 83% 84% 85%26% 22% 17% 16% 15%4.26.1 6.0 5.85.11Q12 2Q12 3Q12 4Q12 1Q13Indebtedness Profile / Net CashIndebtedness Maturity Net Cash - US$ MillionLong-term Short-termLoans Average Maturity (Years)55US$ 2.46 BillionTotal Debt 1Q13 Total Cash 1Q13 US$ 2.56 Billion301 290123309981Q12 2Q12 3Q12 4Q12 1Q13
  • 51. 2,6522,530 2,5852,1572,5101Q12 2Q12 3Q12 4Q12 1Q13Inventories56US$ Million2008: USGAAP2009-2012: IFRS
  • 52. Investments57216845100300180RESEARCH DEVELOPMENT CAPEX2013 Outlook: US$ 580 Million2013 Outlook2013 YTDUS$ Million 2013 YTD: 134
  • 53. EPADS and Pay Out582.142.571.830.621.9252%26%34%116%26%2008 2009 2010 2011 2012EPADS Pay Out2008: USGAAP2009-2012: IFRSUS$
  • 54. LocalShareholders28%InternationalShareholders72%727,204,643 Voting SharesOwnership Structure59March 31, 2013NYSE50%BM&FBOVESPA50%
  • 55. Sustainability InitiativesBrazilian Alliance for Bio-fuelReforestation ProjectsISO 14001 and OHSAS18001 Certifications1st ethanol poweredaircraft in the WorldIpanemaRecyclingCorporate ValuesGreener TechnologySocial Activities61
  • 56. P3E - Lean Results62E-Jets Final Assembly Line TransformationE-Jets Wing Junction Line TransformationPerformance Indicators 2008(15 ac/month)2009(10 ac/month)2012(10 ac/month)Number of positions 12 5 4Cycle time (days) 18 10 8Work in Process(US$ Mi)212 95 68Number of non-conformity per a/c32 1.7 0.76Overtime(% of work hours)10 1.5 0
  • 57. P3E ResultsKaizen - E-Jets Cycle Reduction Cost of Non Quality Reduction57%6340% reduction on the production cycle40%44% reduction on CNQ
  • 58. Cost: US$ 21.4 miBenefit: US$ 200.7 mi“Boa Ideia” Program Evolution64
  • 59. Forward Looking StatementThis presentation includes forward-looking statements or statements about events orcircumstances which have not occurred. We have based these forward-looking statementslargely on our current expectations and projections about future events and financial trendsaffecting our business and our future financial performance. These forward-lookingstatements are subject to risks, uncertainties and assumptions, including, among other things:general economic, political and business conditions, both in Brazil and in our market. Thewords “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,” “expects” andsimilar words are intended to identify forward-looking statements. We undertake noobligations to update publicly or revise any forward-looking statements because of newinformation, future events or other factors. In light of these risks and uncertainties, theforward-looking events and circumstances discussed in this presentation might not occur. Ouractual results could differ substantially from those anticipated in our forward-lookingstatements.66