Company Announces 4Q'03; Full Year Results

While 2003 was not particularly a booming year for any major aircraft manufacturer; Embraer seemed to have weathered the economic storm better than its competitors. Embraer, the leading Brazilian commercial aircraft manufacturer, registered in 2003 net sales of US$2,143.5 million and net income of US$136.0 million, equivalent to diluted earnings per ADS of US$0.7807. The order backlog as of December 31, 2003 totaled US$28.1 billion, US$ 10.6 billion in firm orders and US$17.5 billion in options.

Embraer officials agree with industry analysts that the worldwide aviation industry continued to experience great difficulties in 2003. Commercial aviation experienced the greatest crisis, with the large commercial airlines accumulating losses worldwide and the continuation of a high-risk rating for the industry, which led to a lack of funds available for structuring sales financing. However, "low-fare, low-cost" companies and regional airlines stood out in this adverse climate with their consistent and profitable growth. That's where Embraer benefited via its range of aircraft products.

Nevertheless, Embraer, as well as other aircraft manufacturers, endured the consequences of these difficult industry conditions in 2003, experiencing cancellations and postponements of aircraft deliveries, as well as difficulties in structuring financial transactions in favor of our customers. The delay in obtaining final certification ("type certification") for the Embraer 170 helped aggravate the situation, resulting in a further reduction in deliveries during 2003 and an increase in inventory levels of finished and under process products. In light of these circumstances, Embraer revised its schedule for jet aircraft deliveries in 2003 and, as a result, delivered 101 of the 148 aircraft initially planned.

Despite these setbacks, the company able to obtain significant results despite the decrease in projected deliveries and the adverse environment surrounding our operations. Embraer booked several new and noteworthy orders for the 170/190 family, not only due to their economic significance and their impact on our operations for the next few years, but also because of their operational value to commercial aviation.

Embraer officials say the manufacturer has rebuilt its firm order backlog to a level of US$10.6 billion at year-end 2003, a US$1.6 billion increase as compared to year-end 2002. This volume of firm orders, added to US$17.5 billion in options, equals a total of US$28.1 billion. Embraer concentrated all of our efforts in obtaining final type certifications from the Brazilian, US, and European aviation authorities, which were granted in February 2004.

Not putting all of their aeronautical eggs in one basket, Embraer also launched with an intense sales promotion effort and branding for its Legacy family. In line with the company's policy of continuous technological enhancement of our products throughout their life cycle, Embraer announced new and improvements to the Legacy's executive version, including an increase in range to 3,250 nautical miles (6,020 km).

In the defense market, Embraer entered into an agreement with the Indian Government for the supply of five special executive version Legacy aircraft. This transaction gives the company an important addition to its government customer base.

Embraer ended the year with a US$222.1 million net cash position (cash and cash equivalents less total debt) and with accounts receivable 51.6 percent below the 2002 level. This result was achieved despite the adverse international financial scenario due to the support of the Brazilian Government, mainly through BNDES -- Banco Nacional de Desenvolvimento Economico e Social. Through its policy in favor of increasing Brazilian exports, BNDES was able to finance a considerable volume of Embraer's exports in 2003.

As for the future, Embraer believes the trend toward migration of passengers from larger to smaller modern technology aircraft is now being confirmed by the world's airlines. The manufacturer believes this trend, together with the type certification obtained by and the entry into service of the Embraer 170, should "lead to a vibrant and productive year."

FMI: www.embraer.com.br