Presentation for Salomon Smith Barney Latin Equity Conference
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Transcript of Presentation for Salomon Smith Barney Latin Equity Conference
Salomon Smith Barney Latin Conference
March 7 & 8, 2002
Maurício Novis BotelhoPresident & CEO
Salomon Smith Barney Latin Conference
March 7 & 8, 2002
Maurício Novis BotelhoPresident & CEO
The Company
Foward Looking Statements
This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our markets; management’s expectations and estimates concerning our future financial performance, financing plans and programs, and the effects of competition; successful development and marketing of the Embraer 170/190 jet family; our level of debt; anticipated trends in our industry; our expenditure plans; inflation and devaluation; our ability to develop and deliver our products on a timely basis; and existing and future governmental regulation.
We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors, In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.
Q Fourth largest commercial aircraft manufacturer in the world, with leading aerospace products and technology
Q Premier global customer base - strong market share
Q Strong global partners
Q Outstanding financial performance
Q Largest exporter in Brazil in 1999, 2000 & 2001
Company Highlights
Commercial Market
ERJ 135/ 140/ 145 Jet Family
n 37, 44 and 50-seat jet family
n 96% commonality among aircraft
As of January 31, 2002:
n 866 firm orders and 361 options
n 512 aircraft delivered since ‘96
Commercial Market
EMBRAER 170/ 175/ 190/ 195 Jet Family
n 70,78, 98 and 108-seat jet family
n 112 firm orders and 202 options on January 31, 2002
n Nearly two-thirds of development costs borne by risk sharing partners
n Deliveries scheduled to begin in late 2002 with EMBRAER 170
Corporate Market - Legacy
Q Corporate Jet based on the ERJ 135 Q First delivered in January, 2002 Q 167 units sold (73 firm orders and 94 options – as of
February, 2002)
Q Executive
Q Corporate Shuttle
Q Transport for Authorities
Versions
Proteus Airlines
Global Customer Base
Le Bourget - FranceDallas - USA
Weybridge,UK
Global PresenceGlobal Presence
Fort Lauderdale-USA
São José dos Campos
Gavião PeixotoBotucatu Eugênio de Melo
West Palm Beach -USA
Melbourne- Austrália
Cingapure
Beijing - China
ERJ 145 Family: 4 Partners & 350 Suppliers
EMBRAER 170/190: 16 Partners & 22 Suppliers
Industrial Partners and Suppliers
The Airline Market
An Industry in Transition
Industry in Transition (after Sept.11)Industry in Transition (after Sept.11)
Capacity Management
QParked Aircraft
QDelivery schedules being re-negotiated (regional jets to a much lesser extent)
QRightsizing capacity vs. demand: regional jets being used in the USA to maintain presence in markets with decreased demand
QCash Management: focus on return to profitability in a low-yield environment
Source: RAA, FAA
U.S. Regional Airlines% of Domestic Traffic
US Regional Enplanements IncreasingUS Regional Enplanements Increasing
PassengerEnplanements
(Millions)
19701970 19851985 20002000 2010F2010F
00
200200
400400
600600
800800
1,0001,000
3 %3 %7 %7 %
12 %12 %14%14%
Regional
Major
5%
-3%-1% -1%
-3% -2%
0%3%
-33%
-21%
-18%
-13%
17%
9%7%
2% 2% 1%
6%
13%
-23%
-2%
5%
14%
-40%
-30%
-20%
-10%
0%
10%
20%
jan/01 Feb Mar Apr May jun/01 Jul Aug Sep Oct Nov Dec/2001
RP
M G
row
th -
Yr/
Yr
% C
han
ge
Domestic ATA Regional RAA
Commercial Airline Market - USACommercial Airline Market - USA
Source: Top Regionals, ATA
9%
6%5%
7% 6% 6%4% 4%
-3%
-13%-15%
-14%
13%
5%
7%
9%
4%
7% 7%6%
1%
-7%
1%
-3%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
jan/01 Feb Mar Apr May jun/01 Jul Aug Sep Oct Nov Dec/01
RP
K G
row
th -
Yr/
Yr
% C
han
ge
Intra-European AEA Regional ERAA
Commercial Airline Market - EuropeCommercial Airline Market - Europe
Source: ERAA, AEA
Jet Replacement
Industry in Transition (after Sept.11)Industry in Transition (after Sept.11)
Rightsizing capacity vs. demand: Routes transferred to RJs
Turboprop Replacement
Source: Back OAG (American, Continental, Delta,United, and US Airways)
Jet Replacement
Source: Back OAG Air France, Alitalia and British Airways
Turboprop Replacement
Industry in Transition after Sep 11Industry in Transition after Sep 11
Rightsizing capacity vs. demand: Routes transfered to RJs
The New Jet Family
4040
00
19901990 19951995 20002000 2010F2010F
3030
2020
1010
5050
Average Seating Capacity
Source: FAA, RAA, Embraer
US Regional Aircraft Size IncreasingUS Regional Aircraft Size Increasing
Seats per Aircraft
00
1010
2020
3030
4040
5050
6060
7070
8080
19901990 19951995 20002000 2010F2010F
Average Seating Capacity
Source: ERAA, Embraer
Seats per Aircraft
European Regional Aircraft Size IncreasingEuropean Regional Aircraft Size Increasing
EMBRAER 17578 Seats
EMBRAER 17578 Seats
EMBRAER 170
70 Seats
EMBRAER 170
70 Seats
EMBRAER 190
98 Seats
EMBRAER 190
98 Seats
EMBRAER 195
108 Seats
EMBRAER 195
108 Seats
Anticipating Market NeedsAnticipating Market Needs
120
160
Seat Capacity
Stage Length (nm)
40
80
200 400 600 800 1000 1200 1400
0
EMBRAER 170/190
30 Seat Tprops
50 Seat ERJ
Narrow Body Large Aircraft
37 - 44 Seat ERJs
Filling the Seat Capacity GapFilling the Seat Capacity Gap
Q Better than mainline jet comfort in all-business cabin concept
Q Cabin features:Q no middle seatQ large headroomQ easier access to bins and
seatsQ faster boarding and deplaning
Q Cabin can accommodate roll-on bag for each passenger
Q Superior ground service access and baggage handling
Q Highest total baggage volume and highest baggage volume per passenger in its category Actual mockup picture
EMBRAER 170/190 Cabin Specs.EMBRAER 170/190 Cabin Specs.
Backlog & Demand Forecast
FirmBacklog
FirmBacklog
25
ERJ 145 Family OrderbookERJ 145 Family Orderbook
ERJ 135
ERJ 140
ERJ 145
Total
ERJ 135
ERJ 140
ERJ 145
Total
As of January/2002
OptionsOptions TotalTotal DeliveriesDeliveries
121121
571571
174174
866866
4747
269269
4545
361361
FirmFirm
168168
840840
219219
1,2271,227
8989
399399
2424
512512
3232
172172
150150
354354
Firm Options Total
EMBRAER 170 82 130 212
EMBRAER 190 30 72 102
Total 112 202 314
Firm Options Total
EMBRAER 170 82 130 212
EMBRAER 190 30 72 102
Total 112 202 314
EMBRAER 170/190 Family OrderbookEMBRAER 170/190 Family Orderbook
As of January/2002
World (30-120 seat segment): 8,695 jets (US$200 Billion)World (30-120 seat segment): 8,695 jets (US$200 Billion)
SegmentSegment 2002-20112002-2011 2012-20212012-2021
30 - 6030 - 60 1,8101,810 1,7351,735
61 - 9061 - 90 1,0851,085 1,2851,285
91 - 12091 - 120 1,1901,190 1,5901,590
TotalTotal 4,0854,085 4,6104,610
Market Forecast 2002 – 2011World Deliveries by Segment - JetsMarket Forecast 2002 – 2011World Deliveries by Segment - Jets
Market Forecast 2002-2011Market Forecast 2002-2011
30-120 Seats: 4,085 Jets30-120 Seats: 4,085 Jets
AsiaPacific
2456%
AsiaPacific
2456%
Europe96024%
Europe96024%
LatinAmerica3458%
LatinAmerica3458%
China275
7%
China275
7%Africa &Middle East1303%
Africa &Middle East1303%
USA, Canada& Caribbean2,13052%
USA, Canada& Caribbean2,13052%
Financials
(US$ Million)
Firm Orders on Backlog
647 729 1,227
3,011 4,112
6,367
10.662 11,449
0
2000
4000
6000
8000
10000
12000
14000
94 95 96 97 98 99 00 01
Jet Deliveries - Units
4
32
60
96
160
135145
161
0
20
40
60
80
100
120
140
160
180
1996 1997 1998 1999 2000 2001 2002E 2003E
Growth:97/96: 98%98/97: 76%99/98: 37%00/99 54%
Gross Sales
390772
2,8592,406
1,861
1,362
0
500
1000
1500
2000
2500
3000
3500
96 97 98 99 00 9M01
US$ Million – Corporate Law
(US$ Million)
Trade Balance Contribution
(*) Source: Decex
193 264
634
1.173
1.692
2.702
2.897
147220
469
881
1.178
1.352
1.843
-
500
1.000
1.500
2.000
2.500
3.000
95 96 97 98 99 (*) 00 (*) 01 (*)
US
$M
illl
ion
Export Import
Revenue by SegmentRevenue by Segment
2002 (F)
Corporate10%
Defense12%
Parts & Services /
Others7%
Commercial71%
2003 (F)
Corporate12%
Defense12%
Parts & Services /
Others7%
Commercial69%
9 Months 2001
Corporate2%
Defense5%
Parts & Services /
Others6%
Commercial87%
Towards Diversification
EBITDA means Net Income before Interest, Income Taxes, Non-Operating Expenses, Depreciation and Amortization
EBITDA
-93
47162
274
400
596
780
-400
-200
0
200
400
600
800
1000
95 96 97 98 99 00 9M01
US$ Million – Corporate Law
Net Income
-31
114
227
354353
-122
-200
-150
-100
-50
0
50
100
150
200
250
300
350
400
450
96 97 98 99 00 9M01
US$ Million – Corporate Law
(US$ Million)
Net (Debt) Cash
139
-289 -249 -329
732
-415-500
0
500
1000
96 97 98 99 00 Sep. 01
(US$ Million)
Productivity EffortsProduct Development
Investments
60%
40%
98 104 122147
283213
81
050
100150200250300
95 96 97 98 99 00 01
Investment Forecast
(US$ Million) 2002 2003 2004 2005 2006 Total
Products under Development 204 183 171 166 168 892
Commercial Programs 138 105 61 34 27 365
Corporate Programs 15 6 2 2 2 27
Defense Programs 51 72 109 130 139 501
Segments 3 2 2 2 2 11
Technology Development 6 6 6 6 6 30
TOR (Transformation of the Organization) 2 2 - - - 4
Property, Plant & Equipment 116 69 59 50 51 345
TOTAL 331 262 238 224 227 1282