Iveco to proceed with spinoff of defence unit as results miss expectations

MILAN (Reuters) -Truck and bus maker Iveco Group said on Thursday it will press ahead with a plan to spin off or sell its defence business, as results fell short of expectations in the first quarter, with a 42% contraction of its operating profit.

The Italian manufacturer said that in the January-March period adjusted operating profit of its industrial activities came in at 117 million euros ($131 million), due to lower truck demand in Europe.

That compares with a 201 million euro result a year earlier and a 140 million euro analyst consensus provided by the company.

Its shares were down 6.2% in early trading, the worst among Italy's blue chips.

Iveco, controlled by Exor, the investment company of Italy's Agnelli family, said in February it was considering spinning off its defence unit, known as IDV, to simplify its structure and create greater flexibility for both businesses, adding it would provide an update in the following months.

The group said on Thursday its board approved the spinoff plan, which is expected to take place this year. But the company added it was also exploring a sale of the defence business, after Iveco had received preliminary expressions of interest from potential buyers.

"The board has therefore mandated the management to continue the preparation for the spinoff, while exploring such preliminary interests," it added.

Leonardo, together with Germany's Rheinmetall, has filed a non-binding offer for IDV, the CEO of the Italian aerospace and defence said last week without providing further details. According to a media report earlier this week Spanish defence company Indra also sent a non-binding offer.

The announcement in February of the IDV spinoff plan had sent Iveco shares up almost 20%, with investors and analysts suggesting a separation from its sensitive defence business could ease eventual M&A deals involving Iveco itself, the smallest of Europe's leading truckmakers.

The company on Thursday also confirmed its preliminary forecasts for its full-year results, including one for adjusted EBIT from industrial activities of between 850 and 900 million euros, with CEO Olof Persson pointing to a "strong order book" for the company.

($1 = 0.8937 euros)

(Reporting by Giulio Piovaccari; Editing by Giulia Segreti, Muralikumar Anantharaman and Louise Heavens)