Australian Parts Maker Pacifica Bounces Back in First Half

Australian parts maker Pacifica Group Ltd. reports its first-half net profit soared 107% to A$15.1 million ($11.5 million), doubling year-ago’s results.

The company says sales rose 10% to A$437.7 million ($333 million), due in large part to sales to General Motors Corp. for its new GMT900 fullsize light-truck platform in North America.

Pacifica, which makes brakes and clutches under the PBR International brand for GM, Ford Motor Co., Toyota Motor Corp. and Mitsubishi Motors Corp., says the result for the first six months ended June 30 is broadly in line with the company’s expectations.

Pacifica credits, “the positive impact on profitability” to increased North American sales and strong growth in its AP Italia European operation.

“Against the background of a still-difficult automotive industry environment, we have achieved a satisfactory turnaround in our first-half earnings,” Pacifica Managing Director John MacKenzie says.

“We expect the emerging cost benefits from our enlarged manufacturing base in Asia to underpin our long-term competitiveness.”

Pacifica’s North American operations recorded an increase in sales revenue of approximately 20%, largely due to the GMT900 light-truck platform, the company says. This was offset to some extent by a steeper-than-anticipated decline in demand for GM’s aging midsize SUVs.

Nevertheless, margins at both Pacifica’s Knoxville, TN, and Columbia, MO, plants improved on the back of increased sales. MacKenzie says he expects business for the GMT900 platform to remain at a similar level in the second half.

“In contrast, demand associated with GM’s mid-range SUVs has been disappointing and is likely to remain so, ahead of the launch of the (Saturn Outlook and GMC Arcadia cross/utility vehicles in December and the Buick Enclave next year),” he says.

“The longer-term direction of overall North American light-truck volumes in a high fuel-cost environment is uncertain,” he adds.

Meanwhile, Pacifica says its Australian business experienced tough trading conditions in the year’s first half. A 35% drop in automotive revenue reflected both the relocation of its park-brake business to Thailand in 2005 and worse-than-expected softness in large passenger-car sales in the domestic market.

“PBR Australia’s first half was very challenging,” MacKenzie says. “Underlying demand remains a concern, but the second half will benefit from the commencement of supply of new products for Toyota’s export Camry, as well as supply to the recently launched (GM Holden) VE Commodore.

“The Australian business continues to contend with the repercussions of structural change in the domestic automotive industry supplier base,” he says.

Pacifica says AP Italia produced a very strong result, increasing first-half sales 35% and earnings more than 100%, reflecting new contracts progressively coming on stream that will fuel further growth over the balance of 2006.

“We continue to pursue opportunities to extend both AP Italia’s drum-brake expertise and its customer relationships into the Asian region,” MacKenzie says.

“We are also continuing to pursue the other aspect to our regional strategy, namely direct participation in the growth opportunities presented by the (Chinese) automotive market,” MacKenzie says, noting the company is just completing construction of a foundry in Dalian.

While not large in volume terms, Pacifica will begin supplying calipers, rotors and parking brakes to Shanghai GM Automotive Co. Ltd. in early 2007.

Looking ahead to 2007, MacKenzie says the degree of earnings growth Pacifica can achieve is proving difficult to predict.

While growth is expected in Europe and Asia, “there are uncertainties attached to the current trend in Australian-produced vehicles and the outlook for the North American light-truck market,” he says.