Annual Report 2001
Total Page:16
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Annual Report 2001 President and CEO Maurício Novis Botelho’s Presentation of the Annual Report DVD Contents 4 Company Profile 6 Financial Highlights 8 Message from the President 14 Embraer in the World 16 2001 – The Year Month-by-Month 20 Commercial Aviation Market 24 Highlight of the Year 26 Defense Market 3 30 Corporate Aviation Market 34 Customer Services 38 Technological and Industrial Management 42 Organizational and Human Resource Management 46 Capital Markets 48 Awards 50 Board of Directors Annex Economic and Financial Performance Company Profile ELEB is located in São José dos Campos and the manufacture of the EMB 120 Brasília aircraft Embraer is the world’s fourth largest commercial aircraft manufacturer, also has laboratories for engineering and quality on a made-to-order basis, as well as light achieving growth through state-of-the-art technology and product control testing. aircraft such as the Ipanema crop duster and and service excellence. NEIVA is an Embraer subsidiary – based in components and sub-assemblies for the ERJ The Company maintains a significant market share thanks to Botucatu, state of São Paulo, responsible for 145/140/135 family of commercial aircraft. a global customer base and strategic international partners. Based on 32 years of experience in design, manufacturing, sales and after-sales service, Embraer delivered approximately 5,500 aircraft to markets throughout the world. Since 1999, the Company has been the largest single Brazilian exporter, with overseas sales of US$ 2.89 billion in 2001. Embraer established a strategic alliance with leading names in the European aerospace industry – Dassault Aviation, EADS, Snecma and Thales, which in 1999 acquired a 20% stake in Embraer’s voting stock. This strategic alliance gives the Company access to new technologies, specially in the defense area, an essential factor in developing new markets. Embraer is structured around three industrial units and two 4 subsidiaries in Brazil (ELEB and NEIVA), with several subsidiaries, 5 branches and offices overseas – in the United States, United Kingdom, France, Australia, China and Singapore. Embraer’s headquarters are located in São José dos Campos, state of São Paulo, 90 kilometers from the city of São Paulo. This facility is responsible for design and manufacture and provides after-sales support to the commercial, corporate and defense aviation markets. The Eugênio de Melo plant, also in São José dos Campos, is responsible for the development and manufacture of tools and conduit systems, as well as the electric wiring plant. The Eugênio de Melo unit also houses most Embraer training facilities, including those dedicated to the Engineering Specialization Program (PEE). Once concluded, the new Gavião Peixoto, state of São Paulo, plant will be responsible for the final assembly of corporate jets and military aircraft. The facility incorporates a runway, which is already being used for flight testing. ELEB (Embraer Liebherr Equipamentos do Brasil S.A.) is a joint venture between Embraer and the German corporation Liebherr. The company designs and manufactures landing gear, hydraulic components and precision equipment. Financial Highlights Share and ADS performance Embraer versus Ibovespa Gross revenue Net income US$ millions US$ millions ON PN Ibovespa Embraer’s preferred shares dropped 27.5% during the year, closing at R$13.20 on December 28, 2001. The average daily trading volume on the São Paulo Stock Exchange (Bolsa de Valores de São Paulo) was R$6.6 million. The Company’s common shares appreciated 1.3%, closing the year at R$12.51 per share with an average daily trading volume of R$4.5 million. The Bovespa Index (Ibovespa) reported a decline of 11.0% over the same period. 6 7 Embraer versus Dow Jones EBITDA Order backlog US$ millions US$ millions ADS DJ The Company’s American Depositary Shares (ADSs), which are traded on the New York Stock Exchange (NYSE), fell 44.3%, closing at US$22.13 at year-end. The average daily volume traded was 379,000 ADSs, or approximately US$10.7 million. Over the same period, the Dow Jones industrial Average declined 7.1%. The ADS share price appreciated Revenue per employee Number of employees US$ thousands 19.6% since trading began on the NYSE on July 21, 2000 at US$18.50. The negative performance of locally listed shares and ADSs, was strongly impacted by the terrorist attacks of September 11 and the subsequent re-scheduling of aircraft deliveries by the Company. Message from the President On Course The strong growth and excellent financial results achieved over the last few years are a clear vindication of Embraer’s strategy of investing in the commercial aviation segment. The Company now ranks as the world’s fourth largest commercial jet manufacturer and for three consecutive years has been the largest Brazilian exporter. During 2001, Embraer’s exports totaled US$ 2,897 million, accounting for 98% of the Company’s revenues. With a strategy based on achieving results through a commitment however, we sought to protect capital expenditure plans involving product development for to customer satisfaction, the Company diversified its product the commercial, corporate and defense segments. We also endeavored to preserve lines and strengthened its commercial relationships. As a result, investments aimed at customer satisfaction and at expanding the range of services Embraer was much better prepared to face the extraordinary provided by the Company, as well as those related to improving productivity and industrial challenges presented in 2001. In spite of the adverse capacity, particularly the new Gavião Peixoto facility. These initiatives also included an circumstances – deceleration in the major world economies, adjustment to headcount, which unfortunately meant laying off 1,800 employees, or 14% particularly aggravated in the case of the aircraft industry by of our direct labor force. Nevertheless, Embraer was still able to report a net gain in the impact of the September terrorist attacks in the United States employment with the creation of more than 700 direct jobs during the year. We successfully – Embraer once again reported solid earnings in 2001. Such met the majority of targets we had set for 2001. We delivered 161 regional jets (one more performance was, in large part, due to the continued delivery than in 2000), achieving our revised post-September 11 goal of 160 aircraft as compared 8 of the highly successful family of ERJ 145/140/135 regional jets, 9 with our original objective for the year, of 205 aircraft. After conducting a careful analysis productivity gains, as well as the effects of the depreciation in conjunction with our customers and reviewing the impacts of the events on their of the Real against the U.S. dollar. businesses, we rescheduled forecasted deliveries for 2001, 2002 and 2003 to respectively Net earnings of R$1,100.9 million (US$468 million) were 70.6% 160, 135 and 145 aircraft, without any cancellation of firm orders. higher compared to 2000 on a 33.6% higher gross revenue of Our potential for realizing future revenues thus remained intact as reflected in Embraer’s R$6,989.2 million (US$2,971.2 million). EBITDA increased 91.3% portfolio of firm orders amounting to approximately US$10.7 billion (US$23.4 billion to R$2,096.8 million (US$891.4 million), with an EBITDA margin including purchase options). The new runway at the Gavião Peixoto facility was inaugurated of 30.0%.The consequences of the terrorist attacks in the United in October and first flight tests were conducted with our aircraft. This plant will become States had a major impact on the airline industry. With the fully operational during the next few years and will comprise the final assembly lines for sudden decline in passenger demand, airline companies military and corporate aircraft, together with a maintenance center and a manufacturing announced layoffs running into the tens of thousands, with a facility for aircraft components and sub-assemblies. With the climate of uncertainty still subsequent domino effect on the aircraft and aircraft component prevailing following the terrorist attacks in the United States, Embraer once again industries due to the rescheduling of aircraft deliveries. demonstrated its commitment to the future of the airline industry on October 29, 2001 with The outcome was the elimination of nearly 200,000 jobs in these the roll-out ceremony for the EMBRAER 170, the first member of the new family of two sectors worldwide. commercial jets comprising the EMBRAER 170/175/190/195 models. This important Embraer reacted promptly and pragmatically to adapt to the more initiative is an indication of our confidence in the ability of the market to recover and the adverse business climate. Acting in partnership with our potential we see for the 70 to 110 seat segment, in line with the growing demand for customers and suppliers, we reviewed our production and medium-sized commercial airliners. We also achieved significant success in the Defense procurement plans and adopted a series of measures to cut costs Market, with the signing of a contract with the Mexican government for one EMB 145 and adjust to the slowdown in the industry. At the same time, AEW&C aircraft for aerial reconnaissance and two EMB 145 MP aircraft for maritime patrolling. Embraer also began work on a Brazilian Air Force (FAB) order for 76 ALX military Message from the President 58.5%, with 13.1% traded on the São Paulo the Company operates in – initially in Stock Exchange – (Bovespa) and 45.4 % on the São José dos Campos region. the New York Stock Exchange – (NYSE). In 2001, Embraer stood out for its support On the community activity side of our of other community programs and cultural business, we continue our commitment to activities.