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By Sandor Peto
BUDAPEST, April 29 (Reuters) - Hungarian busmaker NABI reported on Tuesday a surprise $1.63 million first-quarter pre-tax loss due to factory disruptions and a stronger local currency, sending its shares to a 2003 low.
Analysts said they might cut their target prices for NABI's shares and questioned whether the company's announced $1.5 million cost-cutting programme would be enough.
The shares traded at 2,730 forints at 1030 GMT, down 2.5 percent.
In the same period of 2002, it had a consolidated pre-tax profit of $2.3 million according to U.S. GAAP standards. Sales fell to $72.45 million from $91 million a year ago.
"(The losses) have been caused by production disturbances which led to lower sales, and a substantial appreciation (of the forint) against the U.S. dollar, which affected gross margin and administrative costs negatively," the company said.
"The management has decided on a $1.5 million cost-cutting programme for this year and on temporarily freezing wages in Hungary, while it is looking at the possibilities of further cost rationalisation which could improve Hungarian operations."
The U.S. is the key market of NABI, which has production sites in Hungary and the United States. The forint traded at around 230 against the dollar in the first quarter, strengthening from around 275 in the first quarter of 2002.
NABI said its sales in the U.S. fell to 159 buses in the first quarter from 217 in the same period of last year, while sales in the United Kingdom -- its only other market -- dropped to 118 units from 133.
It said U.S. sales fell as it suspended the production of 60LFW buses because tests found technical weaknesses, while output was also hindered by supply problems. A fall in American tourists visiting Britain also led to lower UK sales, it said.
QUESTION MARK AT COSTS
Peter Makray, analyst at Erste Bank Investment said the loss size came as a surprise as NABI had not warned the market.
"Unpleasant figures are these... we are likely to cut our target price," he said. "The changes in costs are very unfavourable and it is a big question what the company can do with these rises in direct and indirect costs."
Inter-Europa Bank said in its daily market update that NABI should hedge exchange rate costs more effectively as the forint strengthening and lower sales pushed the direct costs to above 90 percent of sales for the first time in the firm's history.
Direct costs also surged by 25 percent.
IEB said NABI's share price was likely to ease in the short term after these results, while in the longer term it will be influenced by the plans of 54-percent owner, investment fund EMA, which plans to exit its holdings and return funds to investors at the end of this year.
"Drawing in a professional investor is the likeliest version but EMA is unlikely to get a good price for a loss-making company," IEB said.