Brazil's Embraer books $58.9m Q1 loss on tax, weaker real

Brazilian aircraft manufacturer Embraer on Thursday booked a $58.9 million first quarter net loss on higher tax costs exacerbated by a weakened real, which has lost a fifth of its value against the dollar this year.

Embraer, the world's third-largest commercial plane maker behind Boeing and Airbus, made its second quarterly loss in the past three quarters. The firm had posted profits of $112.3 million in Q1 last year.

Embraer said the latest figures related to higher tax obligations stemming from dollar-denominated assets, delivering a $118 million hit compared with a $17.7 million benefit in the same period last year.

"The rise in tax-related costs results from the currency variation since the start of 2015, since when the real has depreciated 21 percent," Embraer said in a statement.

Were it not for the deferred tax element and social contributions Embraer said it would have delivered a $48.3 million profit.

Nonetheless, with the bulk of its revenue pegged in the US currency, a higher dollar could in the longer term benefit the company.

Founded in 1969, Embraer was privatized in 1994, although the government is a shareholder and has a seat on the board. The company, headquartered at Sao Jose dos Campos near Sao Paulo, is quoted on the Sao Paulo and New York stock exchange.

Embraer reported Q1 earnings of $1.0559 billion, down from 1.2423 in Q1 2014, in a quarter which saw it deliver 20 commercial and 12 executive aircraft. Its order backlog stood at $20.4 billion, compared with $19.2 billion at the end of 2014 and $20.9 billion for Q1 2014.

Commerical aviation provided 62.7 percent of earnings with defense contracts accounting for a further 20.2 percent. Executive jet business accounted for a 15.8 share of business.

A major order last month saw Embraer agree to provide airliner KLM's Cityhopper intra-European service with 17 planes for $764 million with an option for 17 more.

The firm is also beefing up its presence in the military market following February's inaugural flight of Embraer's new KC-390 military transport.

The carrier offers an alternative to the US Hercules C-130 and Brazil hopes the new plane will strengthen its position on the international defense and security stage.