Piaggio sees core earnings growing 70 percent by 2017

Reuters
A man works at a Piaggio scooter and motorcycle factory in Vietnam's northern Vinh Phuc province
A man works at a Piaggio scooter and motorcycle factory in Vietnam's northern Vinh Phuc province, outside Hanoi March 17, 2010. REUTERS/Kham

By Agnieszka Flak

MILAN (Reuters) - Italian motorcycle and scooter maker Piaggio forecast 70 percent growth in core earnings up to 2017, helped by Europe's gradual economic recovery and plans to expand in Asia.

The maker of the iconic Vespa scooter and Aprilia motorbikes said it expects earnings before interest, tax, depreciation and amortisation (EBITDA) to rise to around 250 million euros (208.9 million pounds) by 2017 from 146.8 million euros last year.

Piaggio aims to invest 400 million euros through 2017, mostly on producing, improving and re-modelling its scooter, motorcycle and light commercial vehicle models.

"This is a plan to spread our risks," Finance Director Gabriele Galli said at the launch of the new business plan.

Besides Europe, where Piaggio already controls 26 percent of the scooter market, the group wants to expand in Asia, hoping to copy its success in Vietnam in Indonesia, Thailand, Malaysia and Taiwan.

Piaggio also plans a direct presence in China and to boost exports of three-wheeled vehicles produced in India to supply growing demand in Africa and Latin America.

"The 2017 targets seem achievable, even conservative should Europe pick up as expected," a Milan-based analyst said.

PROFIT TAKING

Earlier on Thursday, Piaggio reported a widely expected 57 percent fall in full-year adjusted net profit to 18.1 million euros. Net profit was adjusted to exclude non-recurring charges of 24.6 million euros related to outstanding tax fees. Including them, Piaggio would have posted a net loss of 6.5 million euros.

Shares fell more than 4 percent and closed down 3.99 percent at 2.46 euros, against a 0.42 percent gain in Italy's Automobiles & Parts index <.FTIT3300>. The business plan and 2013 results came roughly in line with analysts' expectations and traders attributed the fall to profit-taking after a strong run to levels last seen in September 2011.

Piaggio, which operates plants in Italy, Spain, India and Vietnam, sees its EBITDA margin growing to around 14 percent by 2017 from 12.1 percent last year, and net sales growing 45 percent over four years to around 1.75 billion euros, primarily driven by a recovery in demand for scooters.

"We expect Europe to drive Piaggio's growth in coming months as the recovery gains momentum, although sales in 2014 will still be far from pre-crisis levels," another analyst said. "Weak demand in Asia and currency headwinds are likely to weigh in the near term, although that could change later in the year."

Piaggio's sales have been squeezed in Europe by rising unemployment and falling spending as governments cut their budgets and raised taxes to fend off debt crises. Weaker-than-expected trends in Asia and unfavourable currency movements also hurt.

Last year, sales volumes of two-wheelers in Spain and Italy were down 70 percent on 2007 levels and also dropped by double digits in Vietnam and Thailand, the company said.

The first months of this year were already showing a recovery, Chief Executive Roberto Colaninno said, but "there is still a lot of instability.".

(Reporting by Agnieszka Flak; Editing by Ruth Pitchford)