MELBOURNE -- Australian auto brakes maker Pacifica Group Ltd. on Thursday posted a 6 percent fall in first-half profit before one-offs, depressed by the strong Australian dollar, and warned its 2005 earnings would be flat.
The company reiterated it expected flat net profits of A$48 million ($34 million) before one-offs in 2004.
It said there would be no growth in 2005 due to a loss of A$50 million in sales to General Motors, which is changing one of its sport utility vehicle platforms in the United States.
"The loss of the GM business caught a few people unawares," said Invesco assistant investment manager Mark Topy.
Brokers had been expecting around 10 percent profit growth in 2005. The maker of brake and clutch parts for car companies in the United States, Europe, Australia, Malaysia and Thailand reported a net profit before one-offs of A$22.5 million for the six months to end-June, down from A$24 million a year earlier and below analysts' forecasts of A$23.7 million.
After restructuring costs, net profit was A$20.5 million, down 28 percent from a year earlier when profit was boosted by the sale of its Webforge construction business.
With 80 percent of its sales offshore, Pacifica said the Aussie dollar's strength against the U.S. dollar cut A$2 million from net profit when converted to Australian dollars.
The group's expansion into Europe through its purchase last year of AP Italia and strong new car sales in Australia helped offset the currency pain.
Pacifica's Asian sales fell, mainly due to a drop in brakes part sales for older Proton models in Malaysia. Pacifica Managing Director John MacKenzie said the company might consolidate its brakes business with its friction materials arm in Malaysia, while it was considering growing in Thailand.
"We see Thailand as strategically important, though it's a highly competitive market. We're seeing what our options are, maybe to expand Thailand," MacKenzie told Reuters.
The outlook for 2006 onwards looked better thanks to A$117 million a year in new contracts Pacifica has secured, beginning in 2005 and 2006.
More than half of those new contracts are with Australia's four carmakers -- units of Toyota Motor Co., GM, Ford Motor Co., and Mitsubishi Motors Corp. -- which disappointed some analysts.
However, MacKenzie said the company prized Australian sales, because profits on local sales build up the company's bank of tax credits for paying dividends to Australian shareholders.
"Technically it takes us into a new range of products, which we can leverage into new markets. I see it as a significant positive," he told Reuters.