Iveco sees profit boost from strong order backlog

By Giulio Piovaccari

MILAN (Reuters) - Truck and bus maker Iveco Group on Friday pointed to a progressive normalisation of supply-chain issues and forecast higher operating profits this year on the back of a strong order backlog after reporting a big jump in fourth-quarter results.

Its shares rose as much as 15.4%, topping Italy's blue chip index as the company also proposed its first share buyback programme, worth 130 million euros ($139 million).

The Italian manufacturer said order intake was "solid" last year, with between 30-35 weeks of production already sold for light commercial vehicles and medium and heavy-duty trucks, and with no signs of increasing cancellations.

CEO Gerrit Marx told analysts the group was aiming to lower the backlogs to a "more healthy" level of 15-20 weeks during 2023 as supply chain issues were improving after hobbling manufacturers' ability to timely produce and deliver last year.

"We have to maintain a certain level of prudence at the moment, but we are somewhat optimistic that in front of us is another solid year similar to 2022," he said.

Iveco expects adjusted earnings before interest and tax (EBIT) of 550-590 million euros ($590-633 million) this year. In 2022, its first year as a stand-alone company, it made 527 million euros, above its own forecast, with a positive free cash flow from its industrial activities.

Marx cautioned "some" supply chain challenges remained in the near term and that still unclear macroeconomic developments could affect the industry in the second-half. These include an expected decline in commodity costs, which will prevent Iveco from further increases in its selling prices.

"We must defend, if not expand, our margins, but this might come in an environment of prices under pressure," he said.

JP Morgan analysts described the 2022 results as "strong" and the guidance on 2023 EBIT as "well ahead" of consensus.

Iveco, which was spun-off from farming and construction machine maker CNH Industrial and separately listed at the beginning of 2022, is the smallest of Europe's major truck and bus makers.

It has pledged to develop a full range of zero-emission vehicles and has partnerships with Hyundai Motor, focused on hydrogen fuel-cell vans and buses, and with U.S. start-up Nikola for battery electric and hydrogen fuel-cell heavy trucks.ù

Marx insisted new partnerships would support growth.

"We will double down on our efforts to enter partnerships," he said.

In the fourth quarter, strong pricing, higher volumes and a better product mix helped Iveco to more than offset higher raw material and energy costs. Its adjusted EBIT from industrial activities more than quadrupled to 187 million euros.

($1 = 0.9354 euros)

(Reporting by Giulio Piovaccari; editing Federico Maccioni, Jason Neely and Emelia Sithole-Matarise)