Economic conditions remain difficult
Group Interim Financial Report for Q1/2013
The past fiscal year brought with it major challenges for MAN. Despite the ongoing slump in the commercial vehicles market, we generated a respectable operating profit of just under one billion euros in 2012. Our customers were clearly unsettled by the euro crisis and the introduction of the Euro V emission standard in the key Brazilian market. This led to buyer reluctance and increased competition. Even the Power Engineering business area, which made a stabilizing contribution to the Group’s earnings, saw a decline in demand for marine diesel engines and turbomachinery.
Economic conditions will remain difficult in fiscal 2013. Order intake in the Commercial Vehicles business area declined by 12% in the first three months compared with the prior-year quarter, to €3.0 billion. The 16% decrease at MAN Truck & Bus to €2.1 billion mirrors the significant decline expected in the European commercial vehicles business. By contrast, MAN Latin America has been picking up speed again over the past few months with orders amounting to €0.8 billion, roughly on a level with the prior-year quarter. Order intake in the Power Engineering business area was down €0.2 billion on the prior-year level at €0.8 billion. The 20% decline in orders at MAN Diesel & Turbo to €0.7 billion was primarily attributable to the Power Plants strategic business unit. Renk recorded a solid order intake of €116 million in the first three months (previous year: €134 million).
The MAN Group’s revenue declined by 8% in the first quarter of 2013 to €3.6 billion. MAN Truck & Bus’s revenue was down 9% on the prior-year level at €1.9 billion. Here too, the significant decline in the European commercial vehicles markets made itself felt. At €0.8 billion, MAN Latin America’s revenue in the first quarter of 2013 was roughly in line with the previous year, continuing the slightly positive sales trend seen over the past nine months. Revenue in the Power Engineering business area declined by 10% year-on-year in the first three months to €0.9 billion, mainly due to lower demand for merchant ship engines. MAN Diesel & Turbo was down 13% on the prior-year figure, while Renk lifted its revenue by 17% to €123 million.
Continued market weakness in the commercial vehicles and shipbuilding segments, as well as the recognition of additional project-specific provisions in the Power Plants strategic business unit, which had a significant impact, resulted in an operating loss of €82 million for the MAN Group, after an operating profit of €254 million in the previous year. This produces a return on sales of –2.3%.
We still do not anticipate any significant economic recovery in 2013. We expect the European commercial vehicles business to decline; sales should return to growth in Brazil. Revenue will be down on the prior-year level in the Power Engineering business area. The MAN Group’s return on sales will be well below the 2012 figure.
The Executive Board has initiated a range of measures to keep the Company on track in this challenging environment. The focus is on cutting costs and increasing efficiency in production, as well as in administration, development, and sales. Furthermore, the greater production flexibility agreed with the employee representatives allows us to adapt to lower sales volumes. We have experience with pronounced economic fluctuations in our industry. In general, however, global demand for innovative solutions in the transportation and energy industry will continue to rise and guarantees long-term profitable growth.
Dr.-Ing. Georg Pachta-Reyhofen
Chief Executive Officer of MAN SE