Bekaert NV (BEKB), the world’s largest maker of steel cord for tires, fell the most in nine months in Brussels after saying the collapse of its sawing-wire business will prompt an additional writedown of the equipment.
Bekaert declined as much as 9.7 percent on Euronext Brussels, the biggest intraday slump since Feb. 2, and traded 1.93 euros lower at 19.03 euros by 12:02 p.m. local time. Almost 270,000 shares changed hands so far, more than 2.5 times the three-month average volume.
“The decision to impair the remaining sawing-wire machines is an indication that Bekaert does not see the possibility to transfer these machines toward the tire activity, given the likely trend of tire cord demand,” Bernard Hanssens, an analyst at Bank Degroof in Brussels, wrote in a note to investors. “Bekaert is still facing solid headwind.”
The collapse of demand for sawing wire, which is used to slice silicon ingots into wafers for solar cells, and provisions for overdue payments from clients in that industry, will cut earnings by an additional 100 million euros ($127 million) in the second half, Bekaert said today in a statement. The company said price cuts needed to fend off competition in Asia, a temporary plant shutdown in Venezuela due to wire-rod shortages and a wider share of low-margin products in European sales will also affect profitability.
Third-quarter sales of 864 million euros, a 2.7 percent decline from the preceding quarter, missed the 871 million-euro median estimate of three analysts surveyed by Bloomberg News. Sales in Europe, the Middle East and Africa tumbled 14 percent from the same period a year earlier despite stable volumes and declined 8 percent in the Asia Pacific region.
“With the exception of Latin America, sales in all regions came in below expectations,” said Wouter Vanderhaeghen, an analyst at KBC Securities, as he cut his recommendation for the stock to hold and reduced his price estimate by 12 percent to 22 euros. “As 2H12 and 2013 will prove extremely challenging, investors need to take a view on at least 2014.”
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