Bekaert Raises Margin Forecast, Posts First-Half Profit Beating Estimates

Bekaert NV, the world’s largest maker of steel cord used in tires, reported profit that beat analysts’ estimates and raised its three-year profitability forecast on the growth of its operations in China.

Net income for the six months through June rose to 181 million euros ($236.6 million), or 9.08 euros a share, from 44.2 million euros, or 2.24 euros, a year earlier, the Zwevegem, Belgium-based company said in a statement today. Profit beat the 116.3 million-euro average of six estimates compiled by Bloomberg. Sales climbed 28 percent to 1.53 billion euros.

Bekaert said operating profit as a proportion of revenue will be at least 10 percent for the next three years, raising its guidance from a range of 7 percent to 9 percent. The steel- cord maker generates more than 80 percent of profit in Asia, where operating margin surpassed 36 percent for a second straight period, after raising its steel-cord capacity in China to more than half of its global production capacity.

“The risk is to the upside,” Filip De Pauw, an analyst at ING Groep NV who recommends buying Bekaert, wrote in a preview note this week. “Management had warned earlier this year that the 2009 Chinese margins were unsustainable over time, which has led to some cautiousness in consensus estimates.”

Bekaert also said it plans to pay an interim dividend of 2 euros a share in October and proposed a three-for-one stock split on Nov. 10 to improve liquidity in the shares.

The steel-cord maker has advanced 39 percent so far this year in Brussels trading, making Bekaert the best-performing stock in Belgium’s Bel20 Index in the period.

To contact the reporter on this story: John Martens in Brussels at jmartens1@bloomberg.net

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