November 6, 2018 / 7:25 AM / 11 days ago

UPDATE 2-Andritz lowers profitability target as seeks to cut costs, shares dive

* Q3 EBITA at 85.9 mln eur vs 95.5 mln in Rtrs poll

* Q3 order intake at 1.47 bln eur vs 1.52 bln in Rtrs poll

* Still expects 2018 sales to be stable

* 2018 EBITA margin seen below 2017 level (Adds details, shares, background)

By Kirsti Knolle

VIENNA, Nov 6 (Reuters) - Engineering group Andritz lowered its full year profitability forecast on Tuesday as it plans to reduce capacities at its metals and hydro operations to cut costs after third-quarter earnings fell nearly 30 percent in both units.

The group also reported third-quarter operating profit below expectations, sending its shares down 7 percent to a five-month-low.

“Solid order intake but disappointing operating result,” Baader analyst Peter Rothenaicher said in a note to clients. However, he reiterated a Buy recommendation. “We consider Andritz a value play in the sector with attractive multiples.”

Andritz, which manufactures and supplies plants and systems to hydropower stations, pulp and paper said provisions of more than 20 million euros ($23 million) for the restructuring of the metals and hydro operations would be booked in the fourth quarter and weigh on earnings.

Adjusted for this effect, the margin on its earnings before interest, tax and amortisation (EBITA) will “reach almost the level of the previous year”, which was at 7.1 percent, it said.

The group had previously forecast its EBITA margin to reach “roughly the level of the previous year”.

“With adjustments we mean measures to reduce the cost base sustainably in both divisions. This certainly includes reduction (of) capacities,” a spokesman said. He did not say whether the restructuring would include plant closures.

Third-quarter EBITA fell 13 percent to 85.9 million euros, hit by higher costs at its metals unit and lower earnings at its hydro operations. Analysts polled by Reuters on average had expected 95.5 million euros.

The group, which has been on a shopping spree lately, said it would focus on cutting costs and integrating recently bought companies in coming months.

Order intake increased 9.5 percent to 1.47 billion euros in the period, slightly missing analyst expectations of 1.52 billion euros.

Andritz shares fell as much as 7 percent to 41.84 euros, its lowest since early June.

The company said its pulp & paper and separation businesses, which contribute nearly half of group sales, were developing well and would continue to do so.

It expects continued moderate demand for the electromechanical equipment it provides for hydropower plants and a “satisfactory project and investment activity” in its metals unit.

The order backlog amounted to 6.9 billion euros at end-September, providing a solid basis for next year, chief executive Wolfgang Leitner said in a statement.

$1 = 0.8767 euros Reporting by Kirsti Knolle; Editing by Subhranshu Sahu and Emelia Sithole-Matarise

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