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UPDATE 1-Brazil's Embraer cuts revenue forecast on defense delays
July 30, 2015 / 11:44 AM / 2 years ago

UPDATE 1-Brazil's Embraer cuts revenue forecast on defense delays

(Adds details of forecasts, earnings)

By Brad Haynes

SAO PAULO, July 30 (Reuters) - Brazilian planemaker Embraer SA cut its 2015 revenue forecast on Thursday due to delayed military contracts and extended deadlines for its cargo jet program as a government austerity program slashed defense spending.

Embraer lowered its revenue outlook by $300 million to between $5.8 billion and $6.3 billion.

A sharp depreciation of Brazil’s currency also weighed on the value of defense contracts in U.S. dollars, although the boost to export efficiency led the company to hold its targets for operating profit.

Brazil-based Embraer, which reports its results in U.S. dollars, is listed in New York and Sao Paulo.

Embraer has invested in a diversified defense and security division in recent years, winning key contracts to develop the KC-390 military cargo plane, refurbish old fighter jets and set up a border monitoring system deep in the Amazon rainforest.

Defense operations contributed over 23 percent of Embraer sales last year, but fell to just 14 percent of revenue in the second quarter.

Embraer said it now plans to deliver the first KC-390 cargo jets in the first half of 2018, pushing back a deadline originally set for the end of 2016.

Following a first flight in February, the KC-390 flight test campaign is now scheduled to start in the third quarter and last 18-24 months, with certification in the second half of 2017.

Embraer reported a second-quarter profit of $129 million on Thursday, down 10 percent from a year earlier but above the average forecast of $96 million in a Reuters poll of analysts.

Revised defense contracts and fewer deliveries of Embraer’s biggest regional jets weighed on revenue and operating profit.

Net revenue fell 14 percent from a year earlier and earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, fell 32 percent to $178 million, missing an average forecast of $219 million.

Embraer said a currency swing boosted the value of certain receivables, leading to a foreign exchange gain of $50 million in the quarter, up from $4 million a year earlier.

The company reaffirmed its forecast for EBITDA of $730 million-$860 million and EBIT of $490 million-$560 million this year. (Additional reporting by Guillermo Parra-Bernal; Editing by David Clarke and Bernadette Baum)

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