Brazil’s Embraer Profit Falls On Higher Costs

Brazilian aircraft maker Embraer posted a lower first quarter net profit as production costs increased and deliveries declined. The company said last week that net earnings fell to $29 million. On the operating level, earnings before interest, tax, depreciation and amortization, a measure of cash flow known as EBITDA, fell to $91.4 million from $179 million.

The declines in profit and cash flow were expected since Embraer, which makes regional and executive jets as well as military planes, delivered fewer planes in the quarter. Last month it said it delivered 25 jets in the first quarter, down from 27 a year earlier and 37 in the fourth quarter.

Embraer has hired more workers as it ramps up production, resulting in higher labor costs for training and assembly line work. A strong local currency also reduces the company’s revenue from foreign sales. The Brazilian real has gained consistently against the U.S. dollar over the last year, irking exporters.

Embraer, whose main rival in the regional jet market is Canada’s Bombardier, is the world’s fourth-largest commercial aircraft manufacturer. Embraer finished the first quarter with a firm order backlog of $15 billion, up from $10.4 billion a year earlier and $14.8 billion at the end of 2006.