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MAN SE Cuts 2014 Profit Forecast on Europe, Brazil Sales


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Bloomberg / October 28, 2014

MAN, Europe's third-largest truck manufacturer, scaled back its 2014 earnings forecast as slowing economies in its home region and Brazil hurt sales and led to a 48 percent drop in third-quarter operating profit.

Earnings before interest and taxes will be “moderately” higher this year, Munich-based MAN said today. That compares with predictions in March of “significantly” rising operating profit. Third-quarter earnings on that basis fell to 82 million euros ($104.2 million) from 159 million euros a year earlier, while the value of new orders dropped 20 percent.

MAN, a division of Volkswagen AG, lowered full-year targets last month at its truck and bus unit, and outlined production cuts that will reduce hours for 4,000 workers.

Daimler AG, the world’s biggest heavy-vehicle maker and the owner of the Freightliner brand in the U.S., forecast steepening industrywide drops in European and Brazilian truck sales.

Second-ranked Volvo is also predicting a Europe-wide decline.

Compared to its two larger competitors and to VW’s Scania truck unit, “MAN is losing ground, even if Volvo and Daimler have a somewhat different geographical split in their business,” said Marc-Rene Tonn, a Hamburg-based analyst with M.M. Warburg. “The fourth quarter won’t bring a significant uptick in the European or Brazilian economies, and MAN’s performance next year will depend on what measures it takes to adapt to the situation in both those regions.”

German business confidence dropped for a sixth month in October, and the Bundesbank predicts little, if any, economic expansion in the final six months of 2014 following a contraction in the second quarter.

In Brazil, where President Dilma Rousseff was re-elected on Oct. 26, gross domestic product shrank in the first half, and analysts surveyed by the central bank forecast just 1 percent growth in 2015.

MAN rose as much as 0.3 percent to 90.77 euros at 9:28 a.m. in Frankfurt, reversing a decline earlier in the day. The shares have fallen 1.6 percent this year.

Wolfsburg, Germany-based Volkswagen owns about three-quarters of MAN’s stock and bid in March 2013 for the rest with the intent of pushing cooperation with Swedish truckmaker Scania and the car manufacturer’s commercial-van business.

Truck and bus deliveries in the third quarter fell 14 percent to 28,865 vehicles, dragged down by a 29 percent plunge in Latin America. Revenue fell 5.3 percent to 3.52 billion euros, while order value plunged to 3.47 billion euros. MAN is forecasting a “significant” decline in revenue this year. That compares with an earlier prediction the figure would be “noticeably below” the 2013 level.

“Our figures are certainly less than satisfactory,” MAN Chief Executive Officer Georg Pachta-Reyhofen said in the statement. “This is why we are doing everything we can to get back on track as soon as possible.”

Group operating-profit growth this year will come from a “slight” increase at the power-engineering division, which was hurt last year by extra project costs, while the commercial-vehicle unit will report a “considerable decline” in earnings, MAN said.


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