Bekaert Posts Wider-than-Estimated Loss on Lower Cord Prices

Bekaert NV, the world’s largest maker of steel cord for tires, posted a loss that was wider than analysts estimated as waning demand from tiremakers cut into prices and integration costs wiped out profit in Asia.

The net loss of 194.9 million euros ($255 million) compares with analyst projections of a 185.6 million-euro shortfall, according to the average of five estimates compiled by Bloomberg. The figure includes 202 million euros of restructuring expenses and equipment writedowns, mostly linked to the collapse of the sawing-wire business, the company, based in Zwevelgem, Belgium, said in a statement today.

Bekaert eliminated almost 3,200 positions last year to help save 100 million euros annually by 2014 and said 20 million euros of cuts so far “largely” offset lower prices for its tire cord in Asia, while clients in the U.S. were hurt by Asian imports and a delay in truck tire replacement.

“What the impact will be of what we have been doing fully depends on where the economy is going,” Chief Executive Officer Bert De Graeve told analysts on a conference call today. “Our 7 percent Ebit margin target may be stretched if our cost cuts are only to offset price pressure.”

Bekaert declined 23 cents, or 1.1 percent, to 20.54 euros by 4:55 p.m. on Euronext Brussels after touching 20.05 euros, the lowest intraday value since Dec. 14, in earlier trading. The shares have lost 6.2 percent so far this year.

Accounts Receivable

The company cut its dividend by 27 percent to 85 cents a share, compared with a 50-cent forecast by Bloomberg research and analysis. Net financial debt fell to 700 million euros by year-end from 866 million euros on June 30 as Bekaert improved collection of accounts receivable in China in the final quarter.

“The lower net debt could support valuation to the tune of about 2 euros per share,” Filip De Pauw, an analyst at ING Groep NV in Brussels, said in an investor note. “Consensus for 2013, 2014 however could be revised down by 15 percent to 20 percent, which could negatively impact valuation by 3 to 4 euros per share.”

Bekaert forecast cost savings will total 70 million euros this year, including the 20 million euros already implemented. Inflation will absorb about 15 million euros of savings, underscoring the need for global growth, De Graeve said.

“The PMI indexes are rather high, while we do not see a real consistent growth yet linked to what the purchase managers would actually think,” De Graeve said in an interview today. “People are very cautious placing the orders.”

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