2004* 5o.Encontro Anual De Investidores Da Embraer ApresentaçãO Financeira (DisponíVel Apenas Em InglêS)

5th Annual Investors and Analysts MeetingNovember 18 & 19, 2004

São José dos Campos - Brazil

Antonio Luiz Pizarro MansoCFO

Financial

THE INFORMATION CONTAINED HEREIN IS THE PROPERTY OF EMBRAER AND SHALL NOT BE COPIED OR USED WITHOUT EMBRAER’S WRITTEN CONSENT.

Forward Looking Statement

This presentation includes forward-looking statements or statements about events or circumstances which have not occurred. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business and our future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: general economic, political and business conditions, both in Brazil and in our market. The words “believes,” “may,” “will,” “estimates,” “continues,” “anticipates,” “intends,”“expects” and similar words are intended to identify forward-looking statements. We undertake no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur. Our actual results could differ substantially from those anticipated in our forward-looking statements.

ShareholderBase


Embraer Voting Capital

20% European Group

7%Foreign

Institutional Investors

11%Brazilian

Institutional Investors

60% Controlling Shareholders

Ordinary Shares: 242,544,448 33.78%

2% Individuals


PREVI (Pension Fund) 20%

SISTEL (Pension Fund) 20%

Cia. Bozano 20%

20% European Group Dassault 5.67%Thales 5.67%EADS 5.67%Snecma 2.99%


Preferred Shares

Preferred Shares : 475,411,026 66.22%

68% Foreign Investors


10%BNDES

3% BrazilianInstitutional Investors

2%Individuals


Dividends

228

404

327

195

42149.8%

36.1%

27.2%

36.1%43.3%

0

100

200

300

400

500

2000 2001 2002 2003 9M040%

10%

20%

30%

40%

50%

60%

Dividends Pay Out Ratio

R$ million

Main Differences between

Brazilian GAAP &

US GAAP


Revenue Recognition – BR Gaap & US Gaap

Commercial Airline & Corporate SegmentsRevenues are generally recognized as deliveries are made

DefenseDefense segment operates in a business environment that differs from Commercial Airline and Corporate market segments. The main characteristics are:

Long-term contracts with customers to develop defense products Based on each customer needQuantities and selling price are generally fixed At the beginning of the programExposed to risks in the execution of the contract

Given these characteristics, revenues are recognized under the long-term contract rules which uses the percentage-of-completion method.


Cost Recognition – BR Gaap & US GaapCommercial Airline & Corporate Segments

BR GAAPR&D capitalized as a deferred assetAmortization based on total serial production

US GAAPNo program accountingCost as incurred


Defense Revenue and CostsDefense contract accounting

Long-term contract accounting requires management to estimate the total contract cost. These costs consist of designing, engineering, manufacturing and entryinto service.

Total estimated contract costs include:Raw materialSupplier componentsDirect Labor, including engineeringManufacturing overhead

Estimated total Price topercent of complete x price = be recognized to date

Revenue to be - Revenue recognized = Current periodRecognized to date in prior periods revenue


Defense Revenue and CostsDefense contract accounting

Contract monitoring and related adjustments:

Review is made on a quartely basis

As part of these reviews, additional revenues arising from changeorder requests and additional cost from over spending are identifiedand reflected in a revised contract margin.

The effect of any revision is accounted for by way of a cumulativecatch-up adjustment to margin

Physical progress

Percent of complete = Costs incurred to dateMost recent estimate of total cost


BR GAAPü Non monetary items no longer indexed by the UFIR (adjusted

to current purchasing power)ü There is no functional currency concept

US GAAPü Functional Currency is the US$ (SFAS 52)ü Non Monetary items (Assets and Liabilities) are accounted in

historical US$ values

Translation Effects (R$ x US$)


BR GAAPü Assets revaluation at market value is allowedü Since 1996 interest capitalization is not accounted

US GAAPü Interest capitalization over Long-term assets construction (SFAS 34)ü Capitalization of assets acquired through capital leases (SFAS 13)

PP&E


BR GAAPüCapitalization of expenses will be amortized over future fiscal yearsüDeferral of pre-operation costs

US GAAPüR&D expense accounted as incurred in the income statementüPre-operation costs are not deferred

Deferred Assets


BR GAAPüCapital and operating lease are accounted as rent

US GAAPüCapital (financing) and operating lease concept explainedby SFAS 13

Capital & Operating Lease


BR GAAPüNo CVM or IBRACON specific ruleüAccounted by the accrual method

US GAAPüSFAS 133 in use since 2001üGains and losses recognized during the

periodü Fair value of derivatives is mandatory

Derivatives


BR GAAPü Differences between accounting and fiscal records

US GAAPü All BR GAAP and US GAAP accounting diferences are considered

to calculate the deferred income tax

Deferred Income Taxes

With Benefitof IOSE

With IOSE Benefit

No IOSE Benefit

(33.7%)(38.9%)(33.4%)(34.5%)(27.4%)27.9%

(22.5%)(29.8%)(26.6%)(30.6%)(24.2%)27.9%BR GAAP

(45.6%)

2002

25.8%

2003

(25.7%)(40.3%)(26.8%)(23.8%)US GAAP

9M04200120001999 (*)

IOSE = Interest on Shareholders’ Equity(*) 1999 no IOSE distribution


Some of the sales transactions are structured financings through which an SPE purchases the aircraft, pays the full purchase price on delivery or at the conclusion of the sales financing structure, and leases the related aircraft to the ultimate customer.

BR GAAPü New rule to be applied in 2005

US GAAPü Accounted as collateralized accounts receivable and non-

recourse and recourse debtü Starting in 2004 FIN 46 and FIN 46R becomes effective and

basic consolidation conditions were maintainedü Before 2004 other rules were used for SPE consolidation

SPEs Consolidation

Source: 20 F note 8


BR GAAPü No specific rule availableü Disclosure under notes to consolidated financial statements is

mandatory

US GAAPü Since 01/01/2003 guarantees given to third parties are

measured at fair value and recognized on income (FIN 45)

In both Gaaps, IBNR (incurred but not reported) accounts for problable losses through the ECC Insurance

Financial Guarantees


Reconciliation between BR & USGAAP

1.3271.503

-280

3121

-13 -16 - 1

-4

113 0

-

200

400

600

800

1.000

1.200

1.400

1.600

BR GAAP TranslationEffects

PP&E Inventories FinancialLease

DeferredAssets (R&D)

Derivativesfair Value

Fin 45 OperacionalLease

Adjusments

DeferredIncome Taxes

Others USGAAP

Shareholders Equity(09/30/04)US$ MillionPeriod end exchange rate


Reconciliation between BR & USGAAP

Net Income(9M04)

US$ Million

327297

-55

-4

-5 -4 -13 -9 47

22 225

-

50

100

150

200

250

300

350

BR GAAP TranslationEffects

PP&E Inventories FinancialLease

DeferredAssets(R&D)

Derivativesfair Value

Fin 45 OperacionalLease

Adjusments

DeferredIncomeTaxes

Others Exchangesrate effect

USGAAP

104

Average exchange rate




Provided in the form of guarantees of lease payments, to mitigate default-related losses.

These guarantees are mainly issued for the benefit of the customers financing agent.

Exercised when customers do not meet their payment obligations during the term of the financing.

Collateralized by the aircraft.

Upon an event of default, the Company usually is the agent for the guaranteed party for the refurbishment and remarketing of the underlying aircraft. The Company may be entitled to a fee for such remarketing services.Typically a claim under the guarantee shall be made only upon surrender of the underlying aircraft for remarketing


Financial Guarantees & RVGs

Residual Value Guarantees (RVGs)

Provide a third party with a specific guaranteed asset value at the end of the financing agreement

In the event of a decrease in market value of the aircraft, the Company shall bear the difference between the specific guaranteed amount and the actual fair market value

In order to benefit from the guarantee, the guaranteed party has to make the aircraft to meet tight specific return conditions


In the event both guarantees were issued for the same aircraft, the residual value guarantees can only be exercised if the financialguarantees have expired without having been triggered, and therefore, are mutually exclusive.



Provisioning of financial guarantees and RVGs

In order to cover the exposure related to financial guarantees, a provision is recorded at the time of the delivery.

Use of sophisticated models to measure the provision:

External appraisals of expected aircraft valueCredit ratings of the airlines companiesCurrent and future market outlookAircraft expected availability level in the market


Off Balance Sheet Exposure

(67)(14)Provisions & Liabilities Recorded

(392)(362)Mutually Exclusive Exposure

1,2971,422Off Balance Sheet Exposure

1,6501,748Estimated proceeds from performance guarantees and underlying assets

627624RVGs

1,2291,175Financial Guarantees

20032002US$ million

The maximum potential payments represent the “worst-case scenario,” and do not necessarily reflect the expected results by the Company.

Estimated proceeds from performance guarantees and underlying assets represent the anticipated values of assets the Company could liquidate or receive from other parties to offset its payments under guarantees.

Source: 20 F note 34



Repurchase Options (Put Options)

Provide the customer with the right to sell the aircraft back to the Company in the future according to defined pricing rules.

These put options may become exercisable at various times

Can be exercised at the customer’s sole discretion.

The put price per aircraft is less than the original sales price of the aircraft and less than management’s estimation for the future market value of the aircraft during the exercise period as assessed at the date of sale.

Put obligations:

As of December 2003 US$ 500 million

As of today ~ US$ 100 million



Trade-in options

Provide a customer with the right to trade-in existing aircraft upon the purchase of a new aircraft.

The trade in price per aircraft is less than the original sales price of the aircraft and less than management’s estimation for the future market value of the relevant aircraft.

6 Commercial jets are subject to trade-in

Trade up options

When the Company launches a new corporate jet model,the customer has the right to trade-up to the new model and has the right to sell the aircraft back to the Company in the future.

The trade-up price is determined as a percentage of the original purchase price of the corporate jets.

11 Corporate jets are subject to trade up

3rd. Quarter 2004 Financial Results

Brazilian GAAP / US GAAP


US$ MillionUS GAAP

Net Sales & Gross Margin

R$ MillionBR GAAP

439

649 626

924 93738.1%

36.8%

32.3% 32.6%33.2%

3Q03 4Q03 1Q04 2Q04 3Q04

Revenue Gross Margin

1,2961,929 1,816

3,0342,734

35.3%36.2%

31.8%

35.0%

32.2%

3Q03 4Q03 1Q04 2Q04 3Q04


Gross Margin Evolution

7032

6096

160 161131

101

36

26.9% 28.3%32.0%

39.6% 39.4% 37.7%32.8%

32.0%

1997 1998 1999 2000 2001 2002 2003 9M04

EMBRAER 170 Jets Deliveries Gross Margin

7032

6096

160 161131

101

36

26.9% 28.3% 28.6%

41.6%44.6%

35.8%33.2%

31.1%

1997 1998 1999 2000 2001 2002 2003 9M04

EMBRAER 170 Jet Deliveries Gross Margin

US GAAPBR GAAP


US GAAP & BR GAAP

Sales per Segment9M04

Revenue Breakdown

US GAAP & BR GAAP

Sales per Market9M04

Foreign Market

93%

Brazil7%

Commercial Airline

78%

Corporate 4%

Customer Services &

Others7%

Defense 11%


US$ MillionUS GAAP

EBIT & Margin

R$ MillionBR GAAP

221

339255

558462

17.1% 17.6%

14.1%

18.4%16.9%

3Q03 4Q03 1Q04 2Q04 3Q04

4973

153123 12711.3%

11.0%

24.4%

13.3% 13.6%

3Q03 4Q03 1Q04 2Q04 3Q04


US$ MillionUS GAAP

Net Income & Margin

R$ MillionBR GAAP

89

280195

382 3976.9%

14.5%

10.7%

12.6%

14.5%

3Q03 4Q03 1Q04 2Q04 3Q04

19

68

10380

114

4.4%

10.4%

16.5%

8.7%

12.1%

3Q03 4Q03 1Q04 2Q04 3Q04

Working Capital

Brazilian GAAP/US GAAP /


Accounts Receivables

US$ MillionUS GAAP

R$ MillionBR GAAP

981

472

703

465 356

3Q03 4Q03 1Q04 2Q04 3Q04

2,821

9701,292 1,457

2,052

3Q03 4Q03 1Q04 2Q04 3Q04


Accounts Receivables

US$ Million - US GAAP

886

190 271 315514

95

166194 157

189

3Q03 4Q03 1Q04 2Q04 3Q04

Commercial Airline Market Others

Others = Defense + Customer Services


Inventories

US$ MillionUS GAAP

R$ MillionBR GAAP

1,111 1,158 1,258 1,2311,390

3Q03 4Q03 1Q04 2Q04 3Q04

3,328 3,346 3,647 3,8234,155

3Q03 4Q03 1Q04 2Q04 3Q04


Net Cash (Debt)

US$ MillionUS GAAP

R$ MillionBR GAAP

(178)

222 178

304220

3Q03 4Q03 1Q04 2Q04 3Q04

(521)

642 516

944

629

3Q03 4Q03 1Q04 2Q04 3Q04

Hedging Strategy


Hedging Strategy

• Firm backlog of US$11.0 billion

• 93% revenues in US$

• 83% of R&D and PP&E investments in R$

• 37% of total cash disbursements in R$

Main Objective of the Hedging Strategy

Optimize the Natural Hedge of the Cash Flow


Bank Debt - US$ 1,169.2 million

September 30, 2004

Loans Breakdown

Debt MaturityCurrency Breakdown

Considering Swap effects; from US$ and Yen to R$Cost of Local Currency = 12.4Cost of Foreing Currency = US$ variation + 3.9% p/a

• Loan Average Maturity: 2 years and 11 months

Local Currency

7%

Foreign Currency

93%

Short Term37%

Long Term63%


Balance Sheet

21% 13% 18% 12% 16% 12% 14% 14%

79% 87% 82% 88% 84% 88% 86% 86%

Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

12/31/2003 03/31/2004 06/30/2004 09/31/2004

Other Currencies US$

US GAAP


Balance Sheet

21% 12% 18% 12% 16% 11% 14% 13%

79% 88% 82% 88% 84% 89% 86% 87%

Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

12/31/2003 03/31/2004 06/30/2004 09/31/2004

Other Currencies US$

US GAAPIncludes Derivatives

Sales Finance


Aerospace Sector Support*

ECA’s - Export Credit Agencies

•US-EXIM & EU-ECA’s: commercial aircraft more than 70 seats•EDC commercial aircraft of 50-70-90 seats•BNDES: commercial aircraft 30-50 seats

US$ Billion

Source: US-Exim - Competitiveness Report 2001/2002EDC Annual Report 2000/2001/2002/2003

4.55.0

2.9

3.5

6.3

2.6

5.8

2.7

4.2

2.7 2.7

5.9

2.4

3.0

2.2

2.6

1.8

1.01.4

0.6 0.7

1.95(a)

0

1

2

3

4

5

6

7

1998 1999 2000 2001 2002 2003

US-EXIM EU-ECA's EDC BNDES

(a) Direct and indirect disbursement


Market 76.1%

BNDES 23.9%

Total Regional Jets delivered: 106 (through Sep/04)Total amount exported: US$ 2.05 BillionTotal amount financed by BNDES: US$ 490 Million

ERJ 145 Family* and EMBRAER 170 Financing Methods – Year 2004

* Includes Corporate and Authority Transportation


Market 55.6%

BNDES 44.4%

Total Regional Jets delivered: 847 (through Sep/04)Total amount exported: US$ 14.46 BillionTotal amount financed by BNDES: US$ 6.42 Billion

ERJ 145 Family* and EMBRAER 170 Financing Methods

* Includes Corporate and Authority Transportation


Total RJ Aircraft Delivered: 847 (Sep 04)

ERJ Financing Methods

Bridge3%

Straight Financing

34%

Finance Lease5%

Tax Lease46%

Operating Lease5%

Cash5%


Tax Lease

ERJ Financing Methods

Polish TaxLease

3%

UK Tax Lease

9%

Japanese TaxLease

1%Single Investor

Lease18%

French TaxLease

1%

USLL68%

EETC


(1994~2004)

EETC – Annual volume of new issues

Amount US$ Million

762 9851,486

2,688

3,594

6,0306,621

8,084

2,204 2,305

785

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Oct/04

Source: Citigroup – EETC Trading Observer – October 14, 2004


Aircraft Financing – EETC 2003

2003-ERJ1 Pass Through Trust Certificate Offering

ü U$ 415 million total volume

ü Standard&Poor’s BBB and Moody’s Ba3 ratings

ü Priced at T + 347 bps with coupon of 7.875%

ü Unwrapped Single Tranche transaction – first unwrapped transaction since October 2001

ü More than 3 times oversubscribed and spread over (75) different accounts

ü Citigroup and Morgan Stanley as Joint Bookrunners

ü Awarded “Deal of the Year” by AirfinanceJournal for 2003


Aircraft Financing – EETC 2004

2004-ERJ1 Pass Through Trust Certificate Offering

ü U$ 174 million total volume

üUnwrapped Single Tranche transaction

ü Significant portion of aircraft pre-funded

üPriced at T + 484 bps with coupon of 9.5%

ü Standard&Poor’s BBB- and Moody’s Ba2 ratings

ü Citigroup and Morgan Stanley as Joint Bookrunners with Citigroup acting as sole structuring agent

Investments


US$ million

136

44.1127.7

143.8

114.2

60.1

158.6

99.6

69.6

18.8

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 E

PP&E

R&D

PP&E and R&D – Cash Flow

Does not include cash contribution from risk sharing partners


US$ million

Cash Contribution – Risk Sharing Partners

--

246 141 107

72

24

28

-

50

100

150

200

250

300

Total 2001 2002 2003 2004E 2005E 2006E 2007/2010E


Investments Forecast

R&D Total

- Commercial Aviation

- Corporate Aviation

- Others

Defence

20062005

119

89

11

19

88

66

37

12

17

38

Productivity and PP&E 77 59

TOTAL 284 163

US$ million

Defence investments are funded by their contracts and are not included in the R&D expenses but in Cost of Sales and Services.

Does not include new programs


Backlog

10.4 10.6 10.9 10.5 11.0

17.3 17.5 17.7 17.8 18.5

3Q03 4Q03 1Q04 2Q04 3Q04

Firm Orders Options

US$ Billion

Investor RelationsDepartment

Phone: (55 12) 3927 [email protected]

www.embraer.com.br

Documents

2004* 5o.Encontro Anual De Investidores Da Embraer ApresentaçãO Financeira (DisponíVel Apenas Em InglêS)