MAN SE Forecasts Stable Earnings as Cost Cuts Offset Brazil Drop

MAN SE, Europe’s third-largest truck manufacturer, forecast “stable” earnings in 2015 as cost cutting offsets a recession in Brazil and slowing growth in China that’s hurting deliveries.

Sales of commercial vehicles and power-engineering orders will be “slightly” below figures for 2014, the Munich-based division of German carmaker Volkswagen AG said Wednesday in its annual report. Orders fell 5 percent last year to 15.3 billion euros ($16.4 billion).

MAN, which also makes buses as well as diesel engines for ships and power plants, scaled back its 2014 earnings forecast in October as stagnating economies in its home region and Brazil reduced orders, prompting the manufacturer to cut production. Parent company Volkswagen said last month that it can’t guarantee profit growth this year because of economic troubles in Russia and Brazil.

“MAN sounded a cautious note in its outlook because truck demand remains uncertain and there are still problems in South America,” Frank Biller, a Stuttgart, Germany-based analyst at LBBW, said by phone. Even so, with earnings growth last year, “MAN’s position is fairly robust in a tough market.”

Economists in Brazil this week forecast a steepening contraction in gross domestic product in 2015. Chinese Premier Li Keqiang set a 2015 GDP growth target of 7 percent a week ago, the slowest rate in more than 15 years, and expansion may already be lagging behind that goal.

Ebit Jumps

Earnings before interest and taxes at MAN jumped 24 percent last year to 384 million euros ($411 million), exceeding the 379.5 million-euro average of six analyst estimates compiled by Bloomberg. Sales dropped 10 percent to 14.3 billion euros, and operating profit widened to 2.7 percent of revenue from 1.9 percent.

MAN rose as much as 0.5 percent to 96.24 euros and was trading up 0.1 percent at 9:08 a.m. in Frankfurt. The stock has gained 4 percent this year, valuing the company at 14.1 billion euros.

The manufacturer “has stepped up programs to increase efficiency and cut costs in all divisions in response” to unfavorable markets, Chief Executive Officer Georg Pachta-Reyhofen said in the report. “Our competitiveness is already being boosted by the procurement synergies” from being part of Volkswagen.

Volkswagen, the world’s second-biggest carmaker and the largest in Europe, bought MAN and Swedish competitor Scania with the aim of taking on commercial-vehicle market leaders Daimler AG and Volvo AB. Wolfsburg-based VW has yet to reap significant savings from the strategy, and has brought in Andreas Renschler, a former head of Daimler’s truck unit, to push cooperation across the group.

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