EMBRAER and Brazilian Air Force reduce KC-390 orders with US$50 million impact

RIO DE JANEIRO, BRAZIL – EMBRAER (EMBR3) on Wednesday, February 9, announced it has concluded the renegotiation of contractual addenda with the Brazilian Air Force (FAB) that resulted in the reduction of the total number of KC-390 Millennium to be delivered from 28 to 22 aircraft.

According to EMBRAER, the outcome of the negotiations is expected to result in a reduction in its firm order backlog of approximately US$500 million.

In addition, the manufacturer expects that these addenda could have an immediate impact on EMBRAER’s operating results of up to US$50 million, according to the revised contractual bases.

These amounts will be reflected in the 2021 financial statements, albeit with no immediate impact on the Company’s cash.

“We emphasize that, despite the impacts in 2021, the achievement of the guidance presented by the Company for the year 2021 will not be compromised.”

RENEGOTIATION BETWEEN EMBRAER AND FEDERAL GOVERNMENT

Contracts 002/DCTA-COPAC/2014 and 10/DCTA-COPAC/2014 were signed in 2014 between the Federal Government, EMBRAER and one of its subsidiaries and began to be revised late last year.

At the time, EMBRAER had expressed its intention to pursue legal action regarding the economic and financial rebalancing of contracts.

“EMBRAER reiterates its commitment to the KC-390/C-390 Millennium project, a new generation multi-mission aircraft, as well as its confidence in this product’s export potential, which features unique innovations in its category and has already been acquired by two European nations,” it added.

“Finally, EMBRAER reaffirms its role as a strategic partner of the Brazilian Air Force in the development and deployment of high value-added technological solutions and products, a partnership established over 50 years ago.”

EMBR3 SHARES UP

Despite the company’s performance on the Stock Exchange being negative at the start of 2022, with an accumulated drop of almost 20%, the mood among EMBRAER analysts is optimistic.

XP sees room for the shares traded in Brazil to appreciate 44%. As for shares traded in the United States, Itaú believes in a potential increase of 47% by the end of the year; BTG expects a 40% increase and Citi a 22% rise.