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MAN SE Targets Profit Gains Amid Early 2014 Truck Orders

MAN SE pledged to contribute significantly more to parent Volkswagen AG’s earnings as the truckmaker recovers from power-plant contract costs and the company won 2,100 vehicle orders in the first weeks of 2014.

Profitability at the truck-manufacturing division will improve as efficiency measures make up for a decline in revenue caused by currency shifts, Munich-based MAN, Europe’s third-largest maker of commercial vehicles, said today in a statement. The company has a mid-term target of generating more than 800 million euros ($1.11 billion) in operating profit, 68 percent more than the 475 million euros posted last year.

Volkswagen, Europe’s biggest carmaker, is pushing for cooperation between MAN and Scania AB, the Swedish truck producer that VW also controls, to expand its role in the commercial-vehicle industry. MAN said today that it won sales contracts for about 500 city buses in five European countries as well as about 1,600 transport or industrial trucks worldwide.

“I am cautiously optimistic about 2014,” Chief Executive Officer Georg Pachta-Reyhofen said in the statement. “As we saw in the second half of 2013, if the economic environment is right, we are still in the best possible position to expand our excellent market position further.”

MAN fell as much as 0.5 percent and was trading down 0.4 percent at 91.55 euros at 12:17 p.m. in Frankfurt. That pared the stock’s gain this year to 2.6 percent.

Net Loss

The full-year net loss was 524 million euros compared with profit in 2012 of 180 million euros, while operating profit dropped 51 percent, MAN said. Earnings were dragged down by project charges at the power-plant construction business and by tax-accounting changes triggered when Volkswagen integrated MAN fully into its books.

Revenue fell 0.7 percent to 15.7 billion euros, with operating profit at 3 percent of sales. The return on sales this year will be “slightly below” 6.5 percent, Pachta-Reyhofen said today at a press conference in Munich.

The company paid 286 million euros in overruns on a diesel-fueled power-plant project for Electricite de France SA on the island of Reunion, though “we also learned something about the technology,” Rene Umlauft, head of MAN’s power-engineering unit, said at the press conference.

European Role

The truck division remains too dependent on the European market, and it’s working to increase deliveries outside the region eventually to 50 percent of the total, Anders Nielsen, the head of the unit, said at the press conference, without specifying the current proportion.

The business is in talks with unions on ways to reduce spending, while there’s no plan for large-scale job cuts, Nielsen said.

Volkswagen, which holds a little more than 75 percent of the voting rights in MAN, bid 80.89 euros a share in mid-2013 for the remaining stock, 3.9 percent lower than the market price at the time.

The carmaker wants MAN and Soedertaelje-based Scania to work more closely together to reduce costs while gaining the scale to compete with truck-industry leaders Daimler AG and Volvo AB. Wolfsburg, Germany-based Volkswagen said in February that it’s hiring Andreas Renschler, a former Daimler executive, to run the commercial vehicle operations starting in 2015.

MAN and Scania have “good, big” opportunities to cooperate, with projects including axles and gearboxes likely to be set up, Nielsen said. Renschler’s hiring is “great news for us,” as he has “enormous experience in the truck industry” that includes coordinating a range of brands, Nielsen said.

Volkswagen is scheduled to release full-year earnings figures for all its divisions tomorrow.

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