Embraer formalizes C-390 sales to Austria, Netherlands; deliveries from 2027
Adds share reaction, analyst comment in paragraphs 7-8
Deliveries to start in 2027 and conclude by 2030
Embraer aims to increase C-390 production to 12 aircraft annually by 2030
Analysts at Citi praise the deal amid rising global military spending
By Gabriel Araujo
July 22 (Reuters) -Brazilian planemaker Embraer EMBR3.SA on Monday signed a contract to formalize the sale of nine C-390 Millennium military aircraft to the Netherlands and Austria, further expanding its defense order backlog.
The two European countries had previously selected the aircraft to replace their aging fleets of Lockheed Martin's LMT.N Hercules C-130s, but a final deal with both nations placing a joint order was still pending.
The firm order announced at the Farnborough Airshow includes five aircraft to the Netherlands and four to Austria, with deliveries expected to commence in 2027 and conclude by 2030, according to the Brazilian firm.
"It is one of the most important days in the history of Embraer Defense & Security as it represents our largest contract for C-390 exports," Embraer's defense head, Bosco da Costa Junior, told Reuters.
Expanding its presence abroad with more C-390 sales has been a key goal of Embraer's defense division, including selling the military transportation airplane to NATO members such as the Netherlands.
In addition to the two European countries and Embraer's home country Brazil, nations such as Portugal, Hungary, the Czech Republic and South Korea have also tapped the aircraft for their fleets.
Analysts at Citi praised the announcement, saying it was a positive outcome for Embraer as global military spending rises. Sao Paulo-traded shares of the planemaker were down over 4.5% on Monday, but still up more than 75% year-to-date.
"Citi reiterates its 'Buy' rating on Embraer and is intrigued to see what other news might emerge from this week's Farnborough Airshow," the analysts led by Stephen Trent said in a note to clients.
Embraer did not disclose the deal's price tag.
Austria and the Netherlands, Costa Junior said, "had already selected the C-390 as the platform meeting all their requirements but now that becomes a purchase commitment, with deliveries and the aircraft being added to our production line."
Embraer is currently working to increase output of the tactical airplane. Its production line was planned for 18 aircraft per year, but this year four planes are being delivered and next year another six, according to Costa Junior.
"We forecast (annual) production to reach 12 aircraft by 2030," the executive said. "The challenge right now is for supply chain to keep up with it. A few months ago we had a 'C-390 Day' with our main suppliers to make sure this ramp-up will happen."
Embraer's defense backlog stood at $2.1 billion at the end of the second quarter, when it delivered one C-390 aircraft.
"This sale makes our backlog very NATO-concentrated, but we also had a sale last year to South Korea. Asia, Middle East and obviously Europe are regions where the C-390 has been standing out," Costa Junior said. "We are very optimistic about future purchases by other countries."
India, Saudi Arabia and the United States are seen as strategic markets for Embraer's defense unit, with Sweden also a potential customer.
Aviation summit opens amid jet shortages, supply chain turbulence https://www.reuters.com/business/aerospace-defense/aviation-summit-opens-amid-jet-shortages-supply-chain-turbulence-2024-07-21/
Reporting by Gabriel Araujo in Sao Paulo; Editing by Mark Potter and Matthew Lewis
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