MAN SE Cuts 2013 Forecast as Europe Decline Leads to LossChristoph Rauwald
MAN SE, Europe’s third-largest maker of commercial vehicles, lowered its earnings forecast for 2013 as a drop in its home region’s truck market and extra costs on a power-plant project led to a first-quarter loss.
The loss before interest, taxes and one-time items was 82 million euros ($106.8 million) versus profit of 254 million euros a year earlier, Munich-based MAN said today. That compares with an average 30.8 million-euro loss estimated by five analysts. MAN expects a “significant” drop in 2013 operating profit and a return on sales “well below” the 2012 figure.
Amid a recession in the 17 countries sharing the euro, demand for commercial vehicles in Europe fell for a 15th consecutive month in March. First-quarter sales of trucks weighing more than 3.5 tons dropped 17 percent to 64,198 vehicles, industry association ACEA said today in a statement.
“We still don’t see any signs of a significant economic recovery in 2013,” Chief Executive Officer Georg Pachta-Reyhofen told journalists today on a conference call. At the same time, MAN will “of course” report a “positive result” for the full year.
MAN fell as much as 0.6 percent to 84.28 euros and was trading down 0.4 percent at 11:45 a.m. in Frankfurt, valuing the manufacturer at 12.4 billion euros.
First-quarter revenue fell 7.6 percent to 3.55 billion euros. New orders dropped 14 percent to 3.75 billion euros. The company raised its forecast for revenue this year, saying sales will about match the number from 2012 instead of a “slight decline” forecast earlier. Its earlier prediction for operating profit was for a “disproportionately large drop” compared with sales.
“The results were relatively weak compared to other truckmakers, especially the order intake,” Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG said via phone. He rates MAN stock as hold.
Volvo AB, the world’s second-largest truckmaker, posted its first order growth in six quarters yesterday as customers in recession-plagued Europe prepared to replace vehicles in advance of stricter emissions rules. The Gothenburg, Sweden-based manufacturer’s Ebit in the first three months of 2013 plunged 92 percent and it posted a net loss because of the costs of unused production capacity.
Daimler AG said on April 24 that first-quarter Ebit at its truck unit, the world’s biggest maker of the vehicles, plunged 69 percent because of the western European sales decline and investment spending in India and China. Swedish competitor Scania AB’s operating profit fell 17 percent.
Anders Nielsen, MAN’s truck-division chief, said the company has no plans for shorter working hours in the second half of the year and that inventories are at a “normal level.”
MAN reiterated today that profit will be reduced by about 140 million euros in additional provisions due to “risks” at its power engineering division related to a turnkey project to build diesel-fueled electricity plants. Group provisions in the first quarter totaled 138 million euros. Pachta-Reyhofen said MAN agreed to not disclose the name of the customer involved in the contract, which is undergoing an audit.
The failure of the contract may have “extremely negative” repercussions, Commerzbank’s Gommel said.
MAN, controlled by Wolfsburg, Germany-based Volkswagen AG, has scaled back production in response to the shrinking truck market in Europe. Measures to protect earnings have included reducing work shifts, cutting costs and streamlining procurement.
Volkswagen, Europe’s biggest carmaker, is pushing for closer cooperation between MAN and Scania, which the auto manufacturer also controls. VW has made a low-ball initial offer to other holders of MAN stock in a push for full control.
VW, which already owns 75.03 percent of MAN’s voting rights, will offer 80.89 euros per share. Investors who don’t accept the cash offer will receive a guaranteed annual dividend of 3.07 euros per share.
Hans Dieter Poetsch, Volkswagen’s chief financial officer, said at the carmaker’s annual shareholder meeting yesterday that the VW and MAN supervisory boards have approved VW’s plan for a profit transfer and domination agreement at the truckmaker.
Pachta-Reyhofen said today preparations are almost completed and MAN investors will vote on the domination agreement at the annual shareholders meeting on June 6.
Volkswagen rearranged its truck operations’ management last year after a six-year effort to get MAN and Soedertaelje-based Scania 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 should help earnings in coming quarters, Pachta-Reyhofen said.