Iveco shares tumble as cash burn topped 500 million euros in first half

FILE PHOTO: Italian truckmaker Iveco holds business presentation, in Turin·Reuters
Reuters
Updated 2-min read

TURIN, Italy (Reuters) - Iveco Group shares fell more than 15% on Wednesday as the Italian truck and bus maker reported a total cash burn of over half a billion euros in the first half, making it challenging for it to meet its full-year cash target.

The manufacturer, which also makes defence vehicles, said its free cash flow from industrial activities was negative by 98 million euros ($106 million) in April-June, compared with a company-provided analyst consensus for a positive result of 38 million euros.

The cash absorption was primarily due to one-off costs linked to the launch of Iveco's new truck line-up scheduled for later this year, it said.

That follows a 436 million euro negative cash performance in the first quarter.

Iveco on Wednesday reiterated its full-year forecasts, including one for a total cash generation of between 350 and 400 million euros.

"We are confident we'll fully recover (on cash) by year-end. We expect some improvements already in the third quarter," CFO Anna Tanganelli told analysts in a post-earnings call, although noting that third quarter was traditionally another cash-burning quarter.

By 1015 GMT Iveco shares were down 14.3%, making it the worst performer among Italian blue chips.

Equita analyst Martino De Ambroggi said in a note that cash performance would remain weak in the short term, although an improvement was expected in the second part of the year.

He added the order book was not yet benefiting from the launch of new models.

In the second quarter Iveco's adjusted earnings before interest and tax (EBIT) from industrial activities fell around 4% to 264 million euros, due to lower volumes and adverse currency impact, which mostly weighed on its truck business.

The result still came slightly above the company-provided analyst consensus of 250 million euros.

The margin on industrial adjusted EBIT slightly rose to 6.9%, supported by pricing power.

"All our business units performed well, growing or maintaining their profitability," said Olof Persson, who took over as group's CEO on July 1, after former boss Gerrit Marx moved to the helm of Iveco's former parent company CNH.($1 = 0.9221 euros)

(Reporting by Giulio Piovaccari; Editing by Tomasz Janowski and Keith Weir)