MAN SE Profit Tumbles as European Truck Demand Declines
MAN SE (MAN), Europe’s third-largest maker of commercial vehicles, reported a 67 percent plunge in second-quarter profit, burdened by extra costs for a power-plant project and declining demand for trucks in the region.
Operating profit fell to 72 million euros ($95 million) from 219 million euros a year earlier, the Munich-based company said today in a statement. Revenue rose 3.6 percent to 3.99 billion euros, while orders increased 0.6 percent.
“For the time being, the environment remains difficult,” Chief Executive Officer Georg Pachta-Reyhofen said in the statement. “Much will depend on how quickly the global economy recovers from the uncertainties triggered by the euro crisis.”
MAN, a unit of Wolfsburg, Germany-based carmaker Volkswagen AG (VOW), has scaled back production as companies hold off on vehicle purchases amid recessions in Europe. Measures to protect earnings have included reducing work shifts, cutting costs and streamlining procurement.
New registrations of trucks above 3.5 tons declined 11.5 percent in Europe in the first six months of the year to 132,900 vehicles, industry association ACEA said on July 26. Signs that the economy of the 17 nations sharing the euro may be recovering include an increase in the Ifo institute’s business climate index in Germany and an unexpected expansion in manufacturing in the euro area.
MAN forecast full-year revenue on last year’s level and a “very pronounced” decline in operating profit for this year. It said it didn’t expect a “significant” recovery in the European economy in 2013. The company reported a net loss of 43 million euros in the second quarter, narrower than the 91 million-euro deficit a year ago.
“MAN didn’t say it expects business to pick up in the second half of the year,” in contrast to competitors including Daimler AG and Volvo AB (VOLVB), said Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG. The subdued outlook could be related to some MAN investors seeking a higher price from VW, he said.
MAN fell as much as 27 cents, or 0.3 percent, to 85.43 euros and was down 17 cents at 10:03 a.m. in Frankfurt trading. The shares have gained 5.9 percent this year, valuing the company at 12.6 billion euros.
Boosting efficiency at MAN is vital for VW’s strategy of pushing cooperation between the German truckmaker and the car producer’s Scania commercial-vehicle division in Sweden.
VW has made a low-ball initial offer to other holders of MAN stock as part of its bid for full control. The carmaker already owns 75.03 percent of MAN’s voting rights. It’s bidding 80.89 euros a share after a profit-transfer and domination agreement took effect earlier this month. Investors who don’t accept the cash offer will receive a guaranteed annual dividend of 3.07 euros a share.
Volkswagen rearranged its truck operations’ management last year after a six-year effort to get MAN and Soedertaelje-based Scania (SCVB) to work together. Leif Oestling was promoted from his post as chief executive officer of Scania to join VW’s management board to help forge the alliance.
Cooperation between MAN and Scania has begun with joint purchases of raw materials, and the cost reductions are expected to help earnings in coming quarters.
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