Embraer S.A. Material Fact - Contract Amendments

Rhea-AI Summary

Embraer S.A. announced updates regarding contracts with the Brazilian Federal Government concerning the delivery of KC-390 Millennium aircraft. The total number of aircraft to be delivered has been reduced from 28 to 22, leading to an estimated backlog reduction of US$500 million. The amendments are projected to impact operating results by up to US$50 million, reflected in the 2021 Financial Statements, though cash flow remains unaffected. Embraer affirms its dedication to the KC-390 project and its strategic partnership with the Brazilian Air Force.

Positive

• Reduction in backlog by approximately US$500 million.
• Potential immediate impact of US$50 million on operating results.
• Continued commitment to KC-390 project and export potential.

Negative

• Reduction in total aircraft from 28 to 22 may indicate diminished contract value.

SÃO JOSÉ DOS CAMPOS, Brazil, Feb. 9, 2022 /PRNewswire/ -- Embraer S.A. (B3: EMBR3, NYSE: ERJ) ("Embraer" or "Company") hereby updates the information disclosed in the Notice to the Market on November 12, 2021 regarding the Contracts 002/DCTA-COPAC/2014 and 10/DCTA-COPAC/2014, entered into in 2014 among the Brazilian Federal Government, Embraer and one of its subsidiaries ("Contracts").

After the disclosure of the afore mentioned Notice to the Market, Embraer and the Brazilian Air Force engaged in intense discussions on the subject, the complexity of which required a large number of meetings with the participation of various representatives of both parties.

The successful negotiation process resulted in the execution of amendments to the Contracts to, among other matters, (i) reduce from 28 to 22 the total number of KC-390 Millennium aircraft to be delivered under the terms of the Contracts; and (ii) adjust other contractual clauses as compensation for the reduction mentioned in the previous item to mitigate the impacts for the Company.

The Company's Management estimates that the result of the negotiations reflected in the amendments to the Contracts will generate a reduction in the backlog of approximately US$500 million. Such amendments may result in an immediate impact on Embraer's operating results of up to US$50 million and will be reflected in the 2021 Financial Statements, with no immediate effect on the Company's cash account. We emphasize that the impacts in 2021 do not compromise the achievement of the guidance disclosed by the Company for the year 2021.

Embraer reiterates its commitment to the KC-390/C-390 Millennium project, a new generation multi-mission aircraft, as well as its belief in the export potential of this product, which brings unique innovations in its category and which has already been acquired by two European nations.

Finally, Embraer reiterates its role as a strategic partner of the Brazilian Air Force in the development and implementation of high value-added technological solutions and products, a partnership established more than 50 years ago.

Antonio Carlos Garcia
Executive Vice-President and CFO

 

View original content:https://www.prnewswire.com/news-releases/embraer-sa-material-fact---contract-amendments-301479271.html

SOURCE Embraer S.A.

FAQ

What changes were made to the KC-390 contracts by Embraer?

Embraer reduced the total number of KC-390 aircraft to be delivered from 28 to 22.

How much will the backlog decrease due to the contract amendments?

The backlog is estimated to decrease by approximately US$500 million.

What is the expected immediate impact on Embraer's operating results?

The amendments may result in an immediate impact of up to US$50 million on operating results.

Will these contract amendments affect Embraer's cash flow?

No, the amendments will not have an immediate effect on the Company's cash account.

How does Embraer view the KC-390 project after the contract changes?

Embraer reaffirms its commitment to the KC-390/C-390 Millennium project and its export potential.