Marcelo Motta

Marcelo Motta inquired about the factors impacting the executive aviation segment's EBIT margin, specifically asking if the higher costs were structural or a one-off event. He also asked for clarification on what contributed to the improved EBIT margin in the defense segment.

Answer

Head of Investor Relations Gui Paiva noted that cost inflation is a persistent industry trend affecting executive aviation. CFO Antonio Carlos Garcia added that U.S. import tariffs, which were not present a year ago, impacted the executive aviation margins by 2-3.5%. For the defense segment, Gui Paiva attributed the improved EBIT margin to higher KC-390 volumes and a favorable client mix, with increased participation from foreign clients.

Marcelo Motta from JPMorgan asked for clarification on the EBIT margin performance in the executive aviation segment, specifically whether the impact of higher costs and product mix is structural or a one-off event. He also requested an explanation for the factors that contributed to the improved EBIT margin in the Defense & Security segment.

Answer

Gui Paiva, Head of Investor Relations, explained that cost inflation in executive aviation is a continuing industry trend, leading to expected fluctuations. He attributed the improved defense EBIT margin to higher KC-390 volumes and a favorable client mix with increased foreign client participation. CFO Antonio Carlos Garcia added that U.S. import tariffs, impacting margins by 2-3.5%, also explain the executive aviation margin deviation compared to the prior year.

Marcelo Motta of JPMorgan Chase & Co. asked about Embraer's outlook for the second half of the year, questioning the potential for an upward guidance revision given the strong first half and the stated challenges of FX volatility, tariffs, and inflation.

Answer

Antonio Garcia, EVP - Financial & IR, responded that the company is maintaining its guidance. He explained that significant headwinds are expected in the second half, including the impact of the remaining 80% of tariffs, a stronger Brazilian real increasing costs, and higher-than-planned inflation. He stated that Embraer prefers to wait for these factors to evolve before considering a guidance revision.

Marcelo Motta of JPMorgan Chase & Co. asked for quantification of the one-time impact from supplier credits on the Commercial Aviation segment's margin.

Answer

CFO Antonio Carlos Garcia clarified that the one-time impact from supplier credits positively affected the Commercial Aviation segment's margin by 3 percentage points (300 basis points) during the quarter.

Marcelo Motta from JPMorgan Chase & Co. asked for the top-line outlook for the Services and Defense segments, specifically regarding the KC-390 production rate and the OGMA engine shop ramp-up.

Answer

Head of IR Guilherme Paiva stated that KC-390 production is gradually increasing towards a target of nearly 10 aircraft per year by 2030. He also confirmed the OGMA GTF engine shop is on track to reach $250 million in revenue in 2026 and $500 million by 2028. CFO Antonio Garcia added that the company is positioned to reach the high end of its overall revenue guidance.

Marcelo Motta inquired about the revenue outlook for the Defense & Security division in the second half of 2024, asking if acceleration is expected and what the key drivers, such as Super Tucano orders, would be.

Answer

CFO Antonio Carlos Garcia confirmed that Embraer anticipates Defense & Security revenue to be around $600 million for the year. He cited the confidence in delivering four C-390s and noted that the recent Super Tucano order for Paraguay will contribute significantly in the second half, as a large portion of the aircraft were already in inventory.

Marcelo Motta from JPMorgan Chase & Co. inquired about Eve's capital needs beyond 2026, the potential use of its shelf registration, and what de-risking events could improve the sector's outlook.

Answer

CFO Eduardo Couto reiterated a strong liquidity position, with total liquidity extending to mid-2027. He stated that while more capital will be needed for certification, the company is not in a hurry. He noted that besides the S-3 shelf registration, they are also exploring long-term loans and other funding options available through their relationship with the Embraer Group.

Marcelo Motta inquired about the production capacity covered by the initial $80-90 million CapEx for the Taubaté plant and asked about the company's liquidity strategy.

Answer

CEO Johann Bordais clarified that the initial $80-90 million investment will achieve about half of the plant's total capacity (240 eVTOLs annually), with an additional $30-40 million needed to reach full capacity. CFO Eduardo Couto stated that with a record $445 million in liquidity, providing a three-year runway, the company feels comfortable and is not planning any new capital raises in the short term.

Asked for an explanation for the higher G&A to revenue ratio in the quarter and for an outlook on the second quarter, including any signs of a slowdown in April.

Answer

The Q1 SG&A was higher due to some one-off costs and the absence of a prior-year upside, but the company expects to manage the rate back down over the rest of the year. For Q2, the trends from Q1 are continuing, with pressure in the North American truck market being offset by positive mitigation effects in other regions.