UPDATE 2-Shares of Brazil's WEG fall on lower margins despite profit rise
(Recasts with share reaction, details, analyst comment)
By Gabriel Araujo
SAO PAULO, Feb 16 (Reuters) - Shares of Brazilian motor maker WEG SA fell on Wednesday as it reported lower operating margins in the fourth quarter amid global supply chain disruptions, despite beating net profit expectations for the period.
WEG reported a 17.8% rise in net income to 874.1 million reais ($169.43 million) from a year earlier, buoyed by higher demand for industrial products and a strong performance on power generation. That was above the market consensus of 836.8 million reais.
However, cost pressures linked to higher copper and steel prices and a less lucrative order mix affected WEG's operating margins, with EBITDA margins down 1.3 percentage points on a quarterly basis and down 2.9 percentage points on a year-on-year basis to 17.2%.
WEG shares were down 5.5% to 31.07 reais in early afternoon trading, making it the top loser on Brazil's Bovespa stock index , which was up 0.5%.
WEG said its net revenue grew 33.7% to 6.54 billion reais, driven by the continuing global economic recovery. Analysts in a Refinitiv Eikon poll were expecting net revenue to come in at 6.3 billion reais.
Growth in WEG's Commercial and Appliance Motors unit plateaued after the high demand seen in previous quarters, the company said, while its energy generation, transmission and distribution (GTD) unit "stood out" on a year-on-year basis with 60.4% growth in Brazil and 33.1% in external markets.
BTG Pactual analysts said the results were generally in line with their forecasts, but the margin deceleration was a bit stronger than expected, leading to the negative investor reaction.
Analysts at Genial Investimentos said the supply chain hurdles would continue.
"We understand that the global supply chain challenges and consequent pressure on costs, added to the new product mix, will continue to pressure margins, which should remain below 2020 and 2021 levels," they said in a note.
($1 = 5.1590 reais) (Reporting by Gabriel Araujo; Editing by Andrew Heavens, Bernadette Baum and Paul Simao)
