SAO PAULO (Reuters) -Brazilian motor maker WEG reported on Wednesday a 10.4% rise year-on-year in its second-quarter net profit, but missed market forecasts amid what it called elevated volatility in the global economy, driving its shares sharply lower. The worse-than-expected results create further uncertainty for WEG, which analysts have cited among the companies most exposed to […]
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Brazil’s WEG reports second-quarter earnings miss amid geopolitical uncertainty, shares fall
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SAO PAULO (Reuters) -Brazilian motor maker WEG reported on Wednesday a 10.4% rise year-on-year in its second-quarter net profit, but missed market forecasts amid what it called elevated volatility in the global economy, driving its shares sharply lower.
The worse-than-expected results create further uncertainty for WEG, which analysts have cited among the companies most exposed to the 50% tariff U.S. President Donald Trump said he would impose on Brazilian goods from August 1.
Sao Paulo-traded shares of the motor maker slipped as much as 6.3% after the results, making it the biggest faller on benchmark stock index Bovespa, which rose 0.6%.
WEG, whose motors are used in vehicles and wind turbines, reported net income of 1.59 billion reais ($285.8 million) for the quarter, falling short of the 1.76 billion expected by analysts in an LSEG poll.
Net revenue reached 10.2 billion reais, a 10.1% year-on-year increase, while EBITDA rose 6.5% to 2.26 billion reais. Analysts expected revenue and EBITDA of 11.16 billion and 2.49 billion reais, respectively.
WEG said the year-on-year growth was explained by a “solid performance” in the transmission and distribution infrastructure side of its long-cycle business, which makes equipment used in large projects such as transmission lines.
“We were able to maintain the consistent growth and profitability of our businesses, even in a global political and economic scenario marked by uncertainty and high volatility,” WEG said in a statement.
It noted that despite good demand for long-cycle products, geopolitical uncertainties limiting long-term visibility led to the postponement of some investment decisions for large projects.
The firm’s closely watched EBITDA margin fell by 80 basis points year-on-year to 22.1%.
Santander analysts said the weaker-than-expected results were driven mainly by the revenue miss, explained by slower sales growth in internal markets and a weaker U.S. dollar harming external revenue from the previous quarter.
WEG did not specifically address Trump’s threatened tariff, but reiterated confidence in its business model over the long term, saying it has financial flexibility as it continues to monitor market risks.
“Our global production presence, diversified product portfolio and presence in many segments are fundamental to our business strategy, and allow us to quickly react to changing scenarios and mitigate possible macroeconomic impacts,” it said.
WEG has plants in over a dozen countries, including the United States and Mexico. North America accounted for 48% of the company’s revenue from external markets in the second quarter.
($1 = 5.5643 reais)
(Reporting by Gabriel Araujo in Sao Paulo and Michael Susin in Barcelona; Editing by Jan Harvey, Chizu Nomiyama, Rod Nickel)