Higher profits for first half of 2017 – outlook confirmed

The European truck market expanded slightly in an economic environment of stable growth, while order intake at MAN Truck & Bus rose by 2 404 units or 5% year-on-year. By contrast, the Brazilian economy remained mired in recession, although the decline in economic output was less significant than in previous quarters.

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Weak domestic demand and political uncertainty had a negative impact. In this environment, registration volumes for commercial vehicles were again noticeably below the previous years figures. Nonetheless, MAN Latin America lifted its order intake by 1 619 units or 16%. In addition to slight growth in Brazil, this is primarily attributable to a sharp increase in export volumes to other South American markets. In the Power Engineering business area, the marine and turbo machinery markets remained at a low but stable level, while the energy generation market recovered slightly as against the previous year.

Overall, MAN Diesel & Turbo significantly increased its order intake. Orders in the Power Plants strategic business unit in particular rose considerably, while Engines & Marine Systems recorded sharp declines. Renk’s order intake was down significantly on the high prior-year level. The Special Gear Units and Vehicle Transmissions strategic business units were unable to match the high prior-year figures. The order backlog amounted to 6.4 billion as of June 30, 2017, up 13% compared with December 31, 2016 (5.6 billion). The Commercial Vehicles business area recorded an increase of 19% and the Power Engineering business area an increase of 8%. In the 2017 half-yearly Financial Report MAN SE 5 the MAN Group generated sales. Unit sales in the Commercial Vehicles business area rose by 7% to 52 723 vehicles (previous year: 49 331). MAN Latin America sold 11 750 vehicles, 16% more than in the previous year (10 131). Currency effects from the appreciation of the Brazilian real as against the prior-year period also had a positive impact on sales revenue. MAN Truck & Bus’s sales revenue rose by 8%. It sold 41 702 vehicles (previous year: 39 701). Sales revenue in the Power Engineering business area declined noticeably in the first six months.

MAN Diesel & Turbo’s sales revenue declined following the low order intake in the Engines & Marine Systems and Turbomachinery strategic business units in previous years, while Power Plants posted higher sales revenue. The MAN Group’s operating profit rose to €273 million in the first half of 2017 (previous year: €236 million). The increase is primarily attributable to a considerable improvement in operating profit at MAN Latin America. However, the comparable prior-year figure was negatively impacted by expenses of €50 million for restructuring measures at MAN Latin America.

Adjusted for this special item, the MAN Group’s operating profit declined slightly year-on-year. MAN Latin America recorded a further loss of €48 million (previous year: €112 million), but reduced this through higher unit sales as well as the absence of restructuring expenses. MAN Truck & Bus’s operating profit was on a level with the previous year. Operating profit in the Power Engineering business area deteriorated, mainly due to volume- and margin-related factors at MAN Diesel & Turbo. The operating loss attributable to others widened compared with the prior-year figure, which was impacted by the reversal of provisions, among other factors.

The MAN Group’s gross cash flow deteriorated year-on-year despite significant improvement in profit before tax to €665 million (previous year: €801 million). This was due in particular to high tax refunds in the prior-year period. Income tax of €71 million was paid in the first half of the current fiscal year, compared with a net inflow of €137 million in the prior-year period. Operating cash flow in the first half of the year was also negatively impacted by the higher level of funds tied up in working capital, which amounted to €677 million (previous year: €395 million).

Report on expected developments

For 2017, the global economic growth will be slightly above the prior-year level. We see risks in protectionist tendencies, volatility on the financial markets, and structural deficits in individual countries. In addition, geopolitical tensions and conflicts will continue to weigh on growth prospects.

In the majority of the industrialised nations, we expect the economic upturn to continue with growth rates stable overall. Most of the emerging economies are likely to record stronger growth than in the previous year, with the highest rates expected in the emerging economies of Asia. Assuming that the moderate growth is not negatively impacted by these risks, MAN SE’s Executive Board currently forecast the following:

“We anticipate slight year-on-year growth in the MAN Group’s sales revenue in 2017. Unit sales and sales revenue in the Commercial Vehicles business area are expected to increase noticeably, with contributions from both MAN Truck & Bus and MAN Latin America. In contrast, we expect order intake on a level with the previous year in the Power Engineering business area. Sales revenue will be down significantly on the 2016 figure following the low order intake in previous years.” [DdK1]

The MAN Group’s risk position has not changed significantly as against the assessment contained in that report. For information regarding “litigation/legal proceedings”, please see the “Notes to the Condensed Half-Yearly Consolidated Financial Statements”. With respect to current developments in connection with the economic situation and their effects on MAN’s order situation in particular, as well as on its sales revenue and earnings, please see the sections entitled “The MAN Group’s results of operations” and “Report on expected developments”, along with the information provided on the individual segments in “The Divisions in Detail”.

The European truck market was up slightly on the prior-year level in the first six months of the current fiscal year. For full-year 2017, MAN Truck & Bus expects the truck market to be on a level with the previous year, buoyed by the economic upturn in Europe. The European bus market was up slightly on the prior-year level in the first half of 2017. It is assumed that the European market will remain unchanged for full-year 2017. Order intake at MAN Truck & Bus rose sharply year-on-year to €5 733 million in the first half of 2017 (previous year: €5 250 million). Measured in terms of units, order intake was up 5% on the previous year, at 46 957 vehicles (previous year: 44 553). The trucks business recorded an order intake of €4 767 million (previous year: €4 471 million). The unit figure rose by 5% compared with the first half of 2016 to 43 349 trucks (previous year: 41 319).

This was mainly driven by positive year-on-year growth in Russia, France, Spain, and Austria. By contrast, order intake declined in the United Kingdom in particular. The figures for the trucks business also include the new MAN TGE van series for the first time. At €966 million, order intake in the bus business in the first half of 2017 was up 24% on the prior-year figure (€779 million).

The unit figure rose significantly year-on-year to 3 608 buses (previous year: 3 234). This was due to positive developments in Saudi Arabia, Israel, and the Netherlands, among other factors. MAN Truck & Bus generated sales revenue of €4 784 million, a year-on-year increase of 8% from €4 443 million. At 41 702 vehicles (previous year: 39 701), unit sales grew in line with sales revenue. Sales revenue in the trucks business rose to €4 048 million (previous year: €3 788 million). At 39 080 trucks, unit sales were up 6% on the prior-year figure (37 009) with particularly healthy growth in Russia, Spain, and Austria. By contrast, unit sales declined in the United Kingdom and Poland. Overall, MAN Truck & Bus’s share of the European market for trucks over 6t was 15.6% in the first half of 2017 (previous year: 15.2%). Sales revenue in the bus business increased to €737 million (previous year: €655 million).

It sold 2 622 buses (previous year: 2 692), a year-on-year decline of 3%. Among other things, this was attributable to lower unit sales in Mexico, which were partially offset by high sales volumes in Spain and Georgia.

In the European bus market, MAN Truck & Bus had a market share of 13.1% (previous year: 12.4%).

At €269 million, operating profit in the first half of 2017 was on a level with the previous year (€268 million). This corresponds to an operating return on sales of 5.6% (previous year: 6.0%). Higher sales revenue and the PACE 2017 programme for the future, which covers all areas in the company, had a significant positive impact on profitability. Offsetting factors included the year-on-year increase in expenses for new products and expenses relating to the digital transformation.

Latin America market

The economic environment in which MAN Latin America operates began to stabilise slightly in the first half of 2017. Although the Brazilian economy remained mired in recession, the decline in economic output was less significant than in previous quarters. Weak domestic demand and political uncertainty had a negative impact, while exports provided positive momentum.

MAN Latin America sold 11 750 commercial vehicles in the first half of 2017 (previous year: 10 131). This 16% increase is primarily attributable to the export business. Sales revenue improved to €552 million (previous year: €398 million). In addition to the increase in unit sales, the considerable appreciation of the Brazilian real compared with the prior-year period also had a positive effect on sales revenue. New registrations for trucks weighing 5t and over in Brazil declined by 17% to 20 794 units. MAN Latin America sold 6 467 trucks in the Brazilian truck market (previous year: 6 395). With a total of 5 421 new truck registrations (previous year: 6 954), MAN Latin America achieved a market share of 26.1% (previous year: 27.8%) and defended its prominent position in the Brazilian truck market in a very competitive market environment.

New registrations in the Brazilian bus market decreased by 14% to 4 896 vehicles. MAN Latin America sold 1 129 bus chassis (previous year: 822) and increased its market share to 18.3% (previous year: 16.2%) in a declining market with 896 new bus registrations (previous year: 922). The company maintained its number two position in the Brazilian bus market. In the 2017 half-yearly Financial Report MAN SE 14 Brazil’s commercial vehicle exports increased significantly, lifted by the recently more stable environment throughout Latin American markets. Registration volumes rose clearly in the first half of the year, particularly in Argentina. MAN Latin America sold 4 154 vehicles outside Brazil (previous year: 2 914), securing its position as one of Brazil’s leading exporters with 17.2% (previous year: 16.8%) of the country’s vehicle exports. The operating loss amounted to €48 million compared with an operating loss of €62 million before special items in the prior-year period. The continued loss is primarily attributable to weak demand and the resulting price pressure. Nonetheless, MAN Latin America’s operating loss improved as against the first half of 2016 following higher unit sales. MAN Latin America continued to implement an extensive programme to strengthen the company in a competitive market environment with the aim of systematically improving its earnings quality.


Dave van Graan, head of sales at MAN Truck & Bus South Africa: “We’re very proud and thankful for the support of our customers, year-on-year our volumes, trucks and busses are up 18%, we’ve improved our market share by 1.5% in a declining market. We really are having a good run at the moment, we’ve got a very healthy order backlog and it should equate to a growth of some 300 units or 20% for MAN year-on-year, compared to 2016—very thankful for that.”

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