Business Context and Reporting Period
This Form 6-K filing by Embraer S.A. serves as the notice and materials for the Annual General Shareholders' Meeting scheduled for April 26, 2022. The document summarizes the company's financial performance and operational status for the fiscal year ended December 31, 2021. Embraer is a Brazilian aerospace manufacturer with operations in Commercial Aviation, Executive Aviation, Defense & Security, and Services & Support. The company is widely held with no controlling shareholder, though the Brazilian Federal Government holds one golden share.
Key Financial Metrics (Fiscal Year 2021)
| Metric | 2021 (R$ million) | 2020 (R$ million) |
|---|---|---|
| Net Revenue | 22,669.7 | 19,641.8 |
| Gross Profit | 3,539.1 | 2,407.0 |
| Gross Margin | 15.6% | 12.3% |
| Operating Profit (EBIT) | 1,054.7 | (1,681.0) |
| Net Loss | (267.7) | (3,596.2) |
| Net Loss Attributable to Shareholders | (274.8) | (3,616.0) |
| EBITDA | 2,109.9 | (177.1) |
| Cash and Cash Equivalents | 14,703.5 | 14,303.1 |
| Total Debt | 22,472.1 | 23,114.6 |
| Net Debt | (7,768.6) | (8,811.5) |
| Shareholders' Equity | 15,484.6 | 15,145.5 |
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 15.4% year-over-year, driven by a 10% increase in aircraft deliveries (141 total in 2021 vs. 130 in 2020) and a 29.3% surge in Services & Support revenue.
- Profitability Turnaround: The company returned to operating profitability with an EBIT of R$1,054.7 million, a significant improvement from the R$1,681.0 million operating loss in 2020. Gross margin expanded to 15.6% from 12.3% due to better product mix and production efficiency.
- Net Loss Reduction: Net loss narrowed significantly to R$267.7 million from R$3,596.2 million in 2020. This improvement was driven by better operating results, though partially offset by exchange rate effects on non-monetary assets.
- Debt Management: Total consolidated debt decreased slightly to R$22,472.1 million. Net debt improved to R$7,768.6 million (negative balance) from R$8,811.5 million in 2020.
- Segment Performance: Commercial Aviation revenue grew 22.8%, and Executive Aviation grew 9.3%. Defense & Security revenue declined 8.0% due to a reduction in the KC-390 Millennium contract value with the Brazilian Air Force.
Guidance, Outlook, and Risks
- Strategic Divestment: Embraer entered a binding agreement to sell its industrial plants in Évora, Portugal (EEM and EEC) to Aernnova Aerospace for approximately US$172 million. The transaction is expected to close in Q1 2022.
- Urban Air Mobility (UAM): The company signed a Business Combination Agreement with Zanite Acquisition Corp. to list its UAM business (Eve) on the NYSE. The transaction is expected to close in Q2 2022.
- Program Pause: Development of the E175-E2 commercial jet has been paused for three years due to market conditions and pilot union discussions regarding maximum take-off weight. The aircraft is expected to enter service between 2027 and 2028.
- Legal Contingency: Embraer continues to pursue arbitration against Boeing regarding the termination of their 2019 strategic partnership. There are no guarantees regarding the outcome or compensation.
- Management Compensation: Shareholders are asked to approve an aggregate annual compensation limit of R$72 million for management for the period May 2022 to April 2023, an increase from the previous R$65 million limit, largely due to stock-based compensation appreciation.
Investor Verification Checklist
- Boeing Arbitration: Verify the current status and potential financial impact of the ongoing arbitration with Boeing regarding the terminated strategic partnership.
- Portugal Divestment: Confirm the closing timeline and final valuation adjustments for the sale of the Évora facilities to Aernnova.
- E175-E2 Program: Assess the long-term impact of the three-year pause on the E175-E2 development program on future Commercial Aviation revenue projections.
- UAM Transaction: Review the terms of the SPAC merger with Zanite Acquisition Corp. and the valuation of the resulting "Nova Eve" entity.
- Debt Covenants: Confirm continued compliance with financial covenants, specifically the net indebtedness/EBITDA ratio, given the high leverage levels.