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Milling machine maker looks to China for profits

Published:2011-04-28

MADRID - Nicolas Correa SA, Spain's biggest maker of milling machines by sales volume, expects to post profits in the next few years on rising sales of machine tools in China, Chairman Jose Ignacio Nicolas-Correa said.  

 

"We expect to turn profitable in the second half of this year and continue reporting net income for the next few years," Nicolas-Correa said in a telephone interview on Monday. "The environment remains challenging but the worst is over."

 

The company, based in Burgos, northern Spain, forecasts its first full-year profit in three years, as demand for milling equipment, used to shape metals and other solids into components, benefits from stronger sales of machine tools in countries including China.

 

Global consumption of machine tools is expected to climb 27 percent in 2011 from a year earlier and reach 78 billion euros ($111 billion) in 2014 compared with 42 billion euros in 2010, the 62-year-old executive said.

 

The company will at least double last year's sales of 31.1 million euros, the chairman said.

 

He declined to provide a specific forecast for net income or earnings before interest, taxes, depreciation and amortization.

 

The company also expects to at least maintain its current gross margin, which the chairman said is "well above 20 percent", as it eliminates lower-margin products and customized production.

 

The company's clients include components suppliers for energy companies including Gamesa Corporacion Tecnologica SA and Repsol YPF SA.

 

Nicolas-Correa, whose father founded the company in 1947, said he's targeting full capacity this year as demand in China, India and Germany grows.

 

Revenue at the company's China unit will climb to more than 10 million euros from about 3 million euros last year, the executive said. The company is planning a 1.5-million-euro capital increase for the unit, based in Kunming, Yunnan province.

 

The company's order book climbed 97 percent in 2010 to 32.2 million euros from 16.3 million euros a year earlier, it said on Feb 28.

 

The order book so far this year is three times last year's level, the chairman said, without providing more details.

 

"All the orders are coming from foreign countries at the moment," Nicolas-Correa said. "The domestic market isn't recovering yet."