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Thursday June 14, 1:30 AMBrembo sees margins squeezed by raw material pricesBERGAMO, Italy, June 13 (Reuters) - Brembo SpA's profit margin could be flat or slightly lower in 2007 if raw materials prices remain high, the chief financial officer of the Italian maker of brakes for Formula One race cars said on Wednesday.Asked about the company's margin outlook, Corrado Orsi said he expected it to be "stable or (show) a slight decrease" on the basis of earnings before interest, tax, depreciation and amortisation (EBITDA), despite expected revenue growth. Orsi also told Reuters in an interview it would be impossible to reach Brembo's previous guidance for investors to expect an EBITDA margin of 17 percent for 2009 if prices remained at the same levels. "If by 2009 we find ourselves at price levels for raw materials that are the same as the current ones or worse, at that point it will be impossible to reach it," he said, adding that the guidance was not a fixed target set by the company. His remarks helped send Brembo stock down 4.0 percent to close at 11.306 euros, underperforming Milan's Mibtel virtually flat index . Analysts said Orsi's comments had likely given investors an excuse to take profits after the stock's strong run this year. "We all knew that 17 percent (for 2009) was too high," said one. Since January, Brembo has risen more than 20 percent. MARGIN SQUEEZE In 2006, Brembo had an EBITDA margin of 14.8 percent. In the first quarter of 2007, it was 14.6 percent. "If we take the 2006 and 2007 numbers and take out the inflationary effect from raw materials for the last two (or) two and half years, we'd already be at 16 percent," Orsi said. Based in Bergamo in northern Italy, Brembo uses iron, aluminium and other materials to make high-performance braking systems for cars, trucks and motorcycles. Its clients include Ferrari , Porsche and Toyota . It is not the only company to suffer from high raw materials prices. Auto parts makers such as France's Faurecia are also feeling the squeeze on margins. Given the growing demand for sports and luxury cars, Brembo's revenue could grow at a rate at the top end of a 6 to 9 percent guidance range for 2007, Oris said, adding that it could even reach double digits. "There are no negative signs in the market in terms of volumes," he said. In 2006, revenue grew 13.3 percent to 806.1 million euros. Orsi said the motorcycle market remained stable, while trucks demand was growing thanks to demand from eastern Europe. Brembo, which is 58 percent owned by the Bombassei family, was mulling acquisitions to strengthen its portfolio of products and services in two markets: racing and after-sales, he said. Financing deals would not be a problem, he added. "The Brembo name and its financial structure leaves all options open: from extending our leverage to forming partnerships to tapping capital markets. "Everything is possible." |
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