Nacco Industries Inc improved forklift profits and sales during 2003 but says cost-pressure difficulties may exist ahead.

During 2004, the wholesale operation of Nacco Material Handling Group (NMHG) projected a further modest strengthening of global forklift markets.

"High product development and introduction costs are expected to continue, while manufacturing restructuring costs are anticipated to decline," the company said.

NMHG wholesale reported full-year 2003 operating income of USD22.4 million on sales of USD1.62 billion, compared to the 2002 income of USD21.5 million on sales of USD1.42 billion.

NMHG said the improvement reflected increased volumes in all markets, favourable currency movements and a shift in mix to higher-priced forklifts in the USA, South America and Europe.

NMHG, which markets Hyster and Yale forklifts, shipped 70,406 machines last year and 64,437 in 2002. The company's worldwide backlog increased to 19,830 units at December 31, compared to 18,800 at the end of 2002.

In the fourth quarter, however, unfavourable foreign currency movements caused an after-tax impact of USD6.9 million for NMHG's wholesale operation, and continuing unfavourable trends posed a challenge, the company said.

"We import a great deal of product from the [United Kingdom] and Europe" particularly from Nacco plants in Craigavon, Northern Ireland, and Nijmegen, the Netherlands, Nacco chairman Al Rankin said during a conference call. "If the strength of those currencies continues, our costs are going to increase as they (did) in the fourth quarter."

NMHG aims to fabricate equipment in the region of sale, but sourcing from Craigavon and Nijmegen for final assembly in the United States has become more costly.

Mr Rankin anticipated cost pressures could lead to supplier price increases and said Nacco would "need to look advisedly at price increases as we move forward", particularly if the British pound sterling, the euro and the Japanese yen continued to perform strongly.

NMHG's retail segment reported a 2003 operating loss of USD6.0 million on sales of USD162.6 million, compared to a 2002 loss of USD9.2 million on sales of USD172.2 million.

Nacco said the lower loss was attributable to benefits realised from prior disposal of unprofitable dealerships and higher net income in the Asia-Pacific region. Nacco aims during 2004 "to achieve and sustain at least break-even results" for its wholly-owned dealerships.