Bloomberg News

Embraer Rises on Lufthansa Jet Order, Brazilian Tax Break

September 29, 2011

(Updates with closing prices in second paragraph.)

Sept. 29 (Bloomberg) -- Embraer SA, the world’s fourth- largest planemaker, rose to a one-week high after Deutsche Lufthansa AG ordered five jets valued at a total of more than $200 million, and Brazil’s government gave tax breaks to defense suppliers, including aircraft builders.

Embraer advanced 1.6 percent to 11.78 reais at 4:15 p.m. New York time, the highest since Sept. 21. The benchmark Bovespa index gained 0.2 percent.

Deutsche Lufthansa AG, Europe’s second-biggest airline, said it will buy five of Embraer’s 195 regional jets. The order was part of a $1.5 billion capital expenditure program that included seven aircraft from Airbus SAS, the German carrier said today in a statement.

“Embraer has had the advantage of a weak currency and a backlog in orders, which has been a surprise to the upside,” Marcello Paixao, money manager at Sao Paulo-based quant fund Principia Capital Management, said in a telephone interview. “That combination has been a big plus because a lot of their costs -- labor and energy -- are in reais, while the planes are sold for foreign currency.”

The real was little changed at 1.8403 per dollar, from 1.8408 yesterday. The currency has lost 13 percent this month, the worst performer among 25 emerging-market currencies tracked by Bloomberg.

Brazil is giving a tax break to suppliers of defense systems and products, including aircraft, satellites, vehicles and software. Brazilian President Dilma Rousseff signed a decree today to enact the tax break.

--With assistance from Eduardo Thomson in Santiago. Editors: Richard Richtmyer, Brendan Walsh

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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