Profitability weighed down by ongoing difficult market environment
Interim Report as of September 30, 2012 – Q3 2012
The MAN Group was confronted with an ongoing difficult economic environment in the third quarter of 2012. The sovereign debt crisis in the euro zone led to market uncertainty and is clearly holding back economic growth. We are also seeing a downturn in a number of markets outside of Europe. These developments translate into shrinking order books throughout the sector, including at MAN. This is compounded in the commercial vehicles business by other factors such as the introduction of the Euro V emission standard in Brazil at the beginning of 2012. However, we are now receiving more positive reports from South America at the moment.
Against this backdrop, the MAN Group’s order intake fell to €3.5 billion in the third quarter, down 14% on the prior-year level. This is attributable to the Commercial Vehicles business area. Order intake at MAN Truck & Bus declined by 16% in the months of July to September. The number of orders received by MAN Latin America increased as against the previous quarter, opening up more optimistic prospects for the fourth quarter. The Brazilian government’s stimulus measures were already delivering positive incentives towards the end of the third quarter. In the Power Engineering business area, continued market weakness in the shipping industry, among other things, saw orders at MAN Diesel & Turbo decline by 9% in the first three quarters of 2012. Thanks to strong results in the Turbomachinery strategic business unit — albeit influenced by a major order — order intake rebounded by a total of 8% in the third quarter.
Revenue in the MAN Group in the third quarter of 2012 declined slightly compared with the prior-year quarter, falling 4% to roughly €3.9 billion. At €11.6 billion, revenue in the first nine months of 2012 was slightly below the prior-year level (–3%). Revenue figures in the Power Engineering business area rose by 13% year-on-year in the third quarter, while the Commercial Vehicles business area recorded a decrease of 8%.
The strained economic situation also made itself felt in our results. The MAN Group generated an operating profit of €656 million in the first three quarters, compared with €1,083 million in the previous year. This significant decrease is primarily attributable to the Commercial Vehicles business area, which saw operating profit decline to €307 million. The return on sales for the MAN Group was 5.7%, compared with 9.0% in the prior-year period. The Power Engineering business area again proved to be a source of stability, contributing €104 million to earnings in the third quarter — €8 million more than the Commercial Vehicles business area. Renk turned in an extremely encouraging business performance, with order intake (€123 million), revenue (€126 million), and operating profit (€23 million) all increasing in the third quarter, in some cases significantly.
Overall, our results are unsatisfactory, which is why we will drive forward our efforts to cut costs. However, this does not rule out further investment in research and development, or in the sales and after-sales network — areas that are important for the future. Times like these show just how important the less cyclical service business is for our Company. Equally, we have no intention of surrendering our technology leadership either. In the past quarter, we provided impressive demonstrations of our technological expertise to customers and members of the public at the SMM International Shipbuilding Fair in Hamburg and the IAA Commercial Vehicles Show in Hanover.
We are confirming our outlook for the MAN Group for the current fiscal year and continue to expect a slight decline in revenue. Given the contraction in the European commercial vehicles market and the ongoing muted demand in Latin America, we are expecting revenue in the Commercial Vehicles business area to decline by somewhat more than 5%. We are continuing to anticipate revenue growth of roughly 5% for the Power Engineering business area. The MAN Group’s return on sales will be approximately 6%.
Dr.-Ing. Georg Pachta-Reyhofen
Chief Executive Officer of MAN SE