Ukraine crisis clouds outlook for Italy's Brembo after Q4 margin drop

·2-min read
Interview with Brembo Executive Vice-Chairman Matteo Tiraboschi at Brembo headquarters

(Reuters) - Italian premium brakes maker Brembo said on Thursday core earnings and margins were hit in the fourth quarter by higher production costs and the global chip shortage, while the crisis in Ukraine made it impossible to issue a forecast for the coming months.

Brembo Executive Chairman Matteo Tiraboschi told Reuters the company had a positive start in 2022, with a "robust" performance in January and February.

But he said that the Russian invasion of Ukraine was putting a "huge question mark" on the business outlook.

"Should the current geopolitical crisis last for weeks or, worse, for months, that would be a huge problem," he said.

The company, with operations in 15 countries including Russia, said in a statement the direct impact of the Russia-Ukraine crisis on the group was limited as it has no production sites in the area, but it was nonetheless closely monitoring the impact on commodity supplies and production costs.

Brembo, which makes brakes for several Formula One and MotoGP teams as well as premium carmakers such as Tesla and Ferrari, said earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at 121 million euros ($134.14 million) in the October-December period, with its profit margin falling to 16.4% from 18.7%.

Tiraboschi said raw materials prices and energy and logistic costs had spiked in particular in the final part of 2021, and that Brembo's indexed contracts were offering protection only with a three-to-six-month lag.

"We're in a pursuit situation and this weighed on our margins", he said.

Tiraboschi added that the high-end segment of the automotive market, where Brembo is focused, was also affected by a global semiconductor shortage in the fourth quarter, after it was spared in the previous part of the year.

Brembo shares fell as much as 6.5% to their lowest price since November 2020 after the release of its results. By 1535 GMT they were down 2.3%.

Fourth-quarter sales rose 13.4% to 735.8 million euros, driven by growth across all markets.

($1 = 0.9020 euros)

(Reporting by Agnese Stracquadanio and Giulio Piovaccari; Editing by Paul Simao)