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Nicolas Correa Sees Profit in Years Ahead on China Demand

April 5 (Bloomberg) -- Nicolas Correa SA, Spain’s biggest maker of milling machines, predicts it will post profits in the next few years on rising sales of machine tools in China, Chairman Jose Ignacio Nicolas-Correa said.

“We expect to turn profitable in the second half of this year and continue reporting net income for the next few years,” Nicolas-Correa said in a phone interview yesterday. “The environment remains challenging but the worst is over.”

The manufacturer forecasts its first full-year profit in three years, as demand for milling equipment, used to shape metals and other solids into components, benefits from stronger sales of machine tools in countries including China.

Global purchases of machine tools are expected to climb 27 percent in 2011 from a year earlier and reach 78 billion euros ($111 billion) in 2014 compared with 42 billion euros in 2010, the 62-year-old executive said.

The shares rose 3.6 percent to 2.16 euros at 11:33 a.m. in Madrid trading, giving the Burgos, northern Spain-based company a market value of 27 million euros. Spain’s Ibex 35 index fell 0.7 percent.

The company will at least double last year’s sales of 31.1 million euros, the chairman said. He declined to provide a specific forecast for net income or earnings before interest, taxes, depreciation and amortization.

Gross Margin

Nicolas Correa also expects to at least maintain its current gross margin, which the chairman said is “well above 20 percent,” as it eliminates lower-margin products and customized production. The company’s clients include components suppliers for energy companies including Gamesa Corporacion Tecnologica SA and Repsol YPF SA.

The company said in a filing to regulators today that it expects a gross margin of 31 percent and that its order book has climbed 165 percent so far this year.

“All the orders are coming from foreign countries at the moment,” Nicolas-Correa said. “The domestic market isn’t recovering yet.”

Nicolas-Correa, whose father founded the company in 1947, said he’s targeting full capacity this year as demand in China, India and Germany grows.

Revenue at the company’s China unit will climb to more than 10 million euros from about 3 million euros last year, the executive said. The company is planning a 1.5 million-euro capital increase for the unit, based in Kunming, in the province of Yunnan.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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