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MAN Q1 Operating Profit Down, Despite Higher Sales; Backs Forecast

4/20/2012 6:11 AM ET

Maschinenfabrik Augsburg-Nürnberg or MAN SE (MAGOF.PK) on Friday said its first-quarter revenues grew slightly, but operating profit declined 20 percent due to the strong competition in several markets. Chief Executive Officer Georg Pachta-Reyhofen expects the German mechanical engineering company to counter the competition with measures to boost profitability and efficiency.

Noting that there are still major development opportunities, Pachta-Reyhofen said the company still sees an increasing demand for transportation and energy, especially in the emerging economies.

"Because unless they resolve key transportation and energy issues, these economies cannot grow any further. This is precisely what we are counting on with our BRIC strategy and have secured ourselves market access to the key markets of the future in good time," he added.

Confirming the long-term objectives at the Annual General Meeting, Pachta-Reyhofen said, "We want to continue growing profitably and to be the world's most successful commercial vehicle manufacturer."

MAN said its success continued in fiscal year 2011 on international position with systematic focus on transportation and energy. This was despite existing uncertainties on the financial markets triggered by the European debt crisis.

In its fiscal 2011, revenues increased 12 percent to 16.47 billion euros and order intake grew 14 percent and at 17.1 billion euros drew nearer to the record level of 2007 again. Operating profit was 1.48 billion euros, a growth of 42% from last year. Meanwhile, net income plunged 475 million euros to 247 million euros hurt mainly by a loss from disposal of its Ferrostaal unit.

Looking ahead, the company said it expects a slight decline in revenues as well as operating profit in the year due to the predominance of the commercial vehicle arm, which would record a sales decline of up to 5 percent. This would be partly offset by anticipated 5 percent sales growth in the Power Engineering business area.

The forecast reflects a slowing down of global economic growth in 2012, even though MAN continues to expect solid growth on the transportation and energy markets worldwide in the long term.

For its first quarter, operating profit was around 250 million euros compared to 325 million euros and revenues were 3.8 billion euros, up from 3.7 billion euros last year. Revenue in the Power Engineering business area climbed around 5 percent from the previous year.

The company noted that the demand for MAN's commercial vehicles and its machinery remained at a high level in the first few months of 2012. In the quarter, the company sold 35 thousand commercial vehicles, same as last year.

The order intake was 4.4 billion euros in the quarter, which remained around the prior year level.

MAN, which is partnering with its largest shareholder and German automaker Volkswagen AG (VLW.L, VLKAY.PK) and Swedish trucks and buses maker Scania AB (SVKBF.PK), said the joint projects within the Volkswagen Group will also have a beneficial impact.

"The opportunities to cooperate with Volkswagen and Scania that are now available will give us fresh impetus. Cooperating in purchasing, development, and production will enable us to leverage the necessary synergies to tackle the competition head on," it noted.

MAN shares are currently trading at 101.60 euros, down 0.70 euros or 0.68 percent on Frankfurt's Xetra.

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by RTT Staff Writer

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