Crash repairer AMA Group has concluded negotiations with Suncorp over pricing arrangements for vehicles booked into Capital Smart sites, after seeking improved terms due to inflation and supply constraint impacts exacerbated by covid disruptions. 

AMA says pricing and term details for the Capital Smart repair agreement are commercially sensitive, but new arrangements have returned to annual reviews and will take cost pressures into account.

“The annual re-pricing mechanism provides for price to be adjusted with reference to industry specific inflationary measures with additional mechanisms to capture material changes in severity, up to agreed tolerances,” AMA says in a statement today.

“An additional mechanism allows for price renegotiations for significant external events where inflationary measurers exceed agreed tolerances.”

But the crash repairer also reduced its guidance for this financial year to between $86-96 million normalised earnings before interest, tax, depreciation and amortisation (EBITDA), partly reflecting “a more modest outcome for the Capital Smart pricing compared to original forecast”.

Other factors driving the revision include a more conservative outlook for AMA Collision and a slower than previously forecast ramp-up in ACM Parts. Guidance in February was for EBITDA of $120-140 million.

Suncorp sold Capital Smart to AMA Group in 2019, while retaining a 10% stake.

AMA Group CEO Carl Bizon told a briefing earlier this year that previous management had entered into a three-year pricing standstill agreement due to end on June 30. Inflation impacts hit hard and interim terms were introduced that took effect from last October until a new deal.

The new arrangements include transitional support while improvements are made to improve the efficiency and profitability of Capital Smart, which has specialised in low-to-medium severity repairs.

A majority of Capital Smart sites will be converted so they can complete a broader range of severity repairs, reducing vehicle movement between sites, while increased use of non-original equipment manufacturer (OEM) parts also aims to reduce costs.