Piaggio's strategy update expected to be cautious
MILAN, May 28 (Reuters) - After a weak start to the year, Italian scooter maker Piaggio & C SpA (PIA.MI) is expected to be cautious at best when it gives an update of its three-year strategic plan on Friday.
Like most vehicle manufacturers, Piaggio, best known for its Vespa scooter, is facing a drop in sales as consumers postpone big-ticket purchases amid signs of a weakening economy.
The weather has not helped, either. In Italy, its home market, rain has washed out the spring season and dampened demand for scooters and motorcycles.
In India, an emerging market where it is expanding, motorcycle makers like Bajaj Auto Ltd. (BJAT.BO) are complaining about inflation and high interest rates hurting sales. Bajaj has forecast a flat market for its 2008-2009 fiscal year.
"I don't expect any positive news flow (from Piaggio's update)," said one analyst, who declined to be named. "(But) if they present a credible plan, it could boost the stock."
When Piaggio presented its plan last year it set a number of targets as it prepared for a big push into Asia where a boom had increased demand for scooters, motorcycles and cars.
Its targets included a compound annual growth rate in sales of nearly 7 percent, excluding a joint venture in China. This rate was expected to lead to a widening of its core profit margin to 14 percent from 12.7 percent in 2006.
ROUGH ROAD
After posting higher results for 2007, Piaggio has had a harder time this year as the market has slowed down. It has also had to contend with a strong euro and a rise in raw material prices.
In the first quarter its consolidated net sales fell 7.7 percent to 363.9 million euros ($572.2 million) and earnings before interest, tax, depreciation and amortisation (EBITDA), dropped 21 percent to 35.1 million euros.
"Negative sentiment and low visibility on (the) motorcycle market could weigh on the stock," Citigroup said in a research note after publication of the results this month.
Piaggio's chief executive, Roberto Colaninno, has only said in assessing the company's performance that the control of cash flow is what matters to him.
He has also refused to join competitors in cutting prices.
At 1508 GMT shares in Piaggio, 55 percent owned by Colaninno's holding company IMMSI SpA (IMSI.MI), were off 0.79 percent at 1.5410 euros, a third below the price at which the company was listed in July 2006. (Editing by Greg Mahlich)
