Brazil's Embraer Swings to Second Quarter Loss

07/31/2018 - 15h31

Brazilian plane maker Embraer, which this month struck a joint venture with America's Boeing, swung to a second-quarter loss after declines in deliveries of its commercial and executive jets and a heavy fall in sales in its defence unit.

The group posted a net loss of R$467m (US$ 125m) in the second quarter of 2018, down from a net income of R$200m in the same period last year.

In the second quarter of the year, the company delivered 28 commercial jets and 20 executive jets versus 35 and 24, respectively, a year ago. Revenues from its defence division tumbled 90 per cent to R$101.9m.

Earlier in July, after months of being locked in negotiations, Embraer and Boeing inked a joint venture deal worth $4.75bn. The agreement would hand 80 per cent of the Embraer's commercial jet operation to Boeing, which in turn would gain a strategic foothold in the market for smaller regional jets.

But the companies are still waiting for Brazilian government's blessing for the tie-up, as Embraer's deep involvement in the defence industry of Latin America's largest country and its role as a "national champion" make it one of Brazil's most strategic assets - and a very sensitive one ahead of presidential elections.

Embraer is a private company, but the Brazilian government holds a special share with power to veto decisions. The proposed deal with Boeing excludes the defence unit of Embraer, but critics are concerned, among other things, about the company's financial health if it is stripped off its commercial jet business.

The deal has been under fire from leftist politicians ahead of Brazil's most uncertain election in decades.