Embraer sees return to positive cash flow, lifting shares

Brazilian planemaker Embraer SA(EMBR3.SA)on Friday forecast positive annual cash flow for the first time since 2017, lifting its shares despite a third-quarter loss.

Embraer reported a net loss of $45 million in the third quarter, improving from a loss of $121 million a year earlier. Adjusting for non-cash currency effects and other one-time items, the company booked a net loss of $34 million.

Still, improved working capital efficiency helped Embraer generate $21 million of free cash flow, the first positive third-quarter cash flow in over a decade.

Along with the earnings report, the company raised its 2021 free cash flow forecast to $100 million or more, up from a previous forecast of negative $150 million to zero.

“We are very happy that only one year after the worst downturn in the aerospace history, Embraer will generate positive free cash flow,” Embraer CFO Antonio Carlos Garcia said on a conference call.

Brazil-traded shares in Embraer rose 3% in midday Sao Paulo trading, ahead of a 1.4% rise for the broader Bovespa index. (.BVSP)

The firm reported quarterly net revenue of $958 million, up 26% from a year earlier, supported by double-digit growth across all of its business segments.

The company also said its earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $74 million from negative $1 million a year earlier.

Goldman Sachs analysts said EBITDA, margins and free cash flow all beat consensus estimates, noting that new order bookings were strong in the quarter.

“Revenue was below consensus in the quarter, but on already reported aircraft unit deliveries,” Goldman added.

Embraer said in a securities filing that deliveries and revenues were expected to grow in the fourth quarter, in line with normal seasonal patterns.

The company initially filed results in Brazilian reais before reporting its earnings in U.S. dollars.