May 2, 2019 / 6:28 AM / a year ago

UPDATE 2-Andritz shares slide as weak car sector hits margins

* Weak car demand hits metals business

* Price pressure to hit pulp and paper unit

* Sees 2019 EBITA margin flat

* Shares fall 12 percent (Adds pulp & paper business, shares, analyst)

By Kirsti Knolle

VIENNA, May 2 (Reuters) - Austrian engineer Andritz cut its full-year profit margin forecast on Thursday, blaming weak auto industry demand at its metals business and price pressures at its pulp and paper operations.

Andritz, which produces plants for pulp, paper and metal manufacturers, said it now expected a largely unchanged core profit margin, after previously forecasting an increase from last year. Its shares dropped 12 percent in early trade.

The company made a margin on earnings before interest, tax and amortisation (EBITA), adjusted for one-off effects, of 6.9 percent last year.

“While weakness in auto capex is not a surprise, Andritz had provided the guidance only two months ago,” JP Morgan said in a note, describing first-quarter earnings as “disappointing”.

Andritz said it had not managed to achieve improvements in its metals business because auto industry projects including in China continued to come in slowly and profitability at its pulp and paper business would be slightly lower than last year.

Order intake in the metals unit fell 25.6 percent in the first quarter.

Andritz has said it plans to cut jobs at its German subsidiary Schuler AG, which specialises in systems and tooling for the auto industry, due to slow demand.

“As we expect the global automotive market to remain weak in the medium term, in the next few weeks we will extensively evaluate the need to implement possible restructuring measures in the metals forming sector,” Chief Executive Wolfgang Leitner said in a statement.

Possible capacity adjustments may result in financial provisions, which could have a negative effect on earnings, the company said.

Andritz’s pulp and paper business saw a 76.4 percent increase in order intake in the first quarter thanks to modernisation and new pulp mill construction projects.

However, the international pulp market is weakening and falling demand from Chinese paper producers in particular has led to an increase in pulp inventories worldwide, it said.

As a result, prices for short-fibre pulp derived from eucalyptus fell around 6 percent in the period.

Andritz reported EBITA of 82.8 million euros ($92.8 million) for the three months ended March, up 15.5 percent year on year but missing analysts’ average forecast of 95.9 million euros.

$1 = 0.8924 euros Reporting by Kirsti Knolle; Editing by Jane Merriman and Mark Potter

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