Embraer S.A. (NYSE: ERJ) (B3: EMBR3) has reported 2Q20 adjusted net loss of USD (198.8) million (excluding special items and deferred income tax and social contribution), with adjusted loss per ADS of USD (1.08), the company said.
Excluding special items, adjusted EBIT and EBITDA were USD (140.5) million and USD (120.4) million, respectively, negatively impacted by weak Commercial Aviation results, yielding adjusted EBIT margin of -26.2%% and adjusted EBITDA margin of -22.4%.
The 2Q20 results include total net negative non-cash special items of USD 202 million: 1) additional negative provisions for expected credit losses during the Covid-19 pandemic of USD 16.1 million, 2) an impairment loss on the Commercial Aviation business unit of USD 91.1 million, 3) recognition of previous period depreciation and amortization expense in the Commercial Aviation business of USD 101.2 million, and 4) a positive valuation mark to market of USD 6.5 million on the Company´s stake in Republic Airways shares.
Embraer reported free cash flow of USD (476.2) million in 2Q20, still affected by working capital needs in Commercial Aviation, but an improvement versus the USD (676.5) million usage of free cash flow reported in 1Q20, due to several initiatives to reduce investments, control working capital, and minimize fixed costs.
Embraer delivered four commercial jets and 13 executive jets (nine light/four large) in 2Q20, and the company´s firm order backlog at the end of 2Q20 was USD 15.4 billion.
Embraer´s liquidity remains solid as the Company finished the quarter with total cash of USD 2.0 billion and major debt maturities starting in 2022 onwards.
The company finalized the terms of contracts for working capital and export financing with export credit agencies in Brazil and the United States and private and public banks, adding a total of up to USD 700 million to its total liquidity. Disbursements of these new financing lines are expected to be completed in the third quarter of 2020 reinforcing Embraer´s cash position in the second half of 2020 and into 2021;
Due to continued uncertainty related to the COVID-19 pandemic, financial and deliveries guidance for the Company´s 2020 results remains suspended at this point.