July 30, 2014 / 7:06 AM / in 4 years

UPDATE 2-MAN cuts 2014 sales outlook on Latin American weakness

* Sees 2014 sales “noticeably” below year-ago results

* Q2 sales drop 12 pct, Latin America down 17 pct

* Reaffirms 2014 profit, margin outlook

* Little share price reaction (Adds background, peer comparison and shares)

By Andreas Cremer

BERLIN, July 30 (Reuters) - Germany’s MAN SE cut its full-year sales outlook as weakening truck demand and falling orders in major South American markets weigh on business.

Second-quarter group sales plunged 12 percent to 3.6 billion euros ($4.8 billion), with revenue at its Latin American truck division down 17 percent due to slowing growth in Brazil and the weaker real currency, MAN said on Wednesday.

The Volkswagen-owned company, market leader in the region’s biggest economy for trucks weighing 5 metric tons or more, is bracing for a “substantial” drop in Latin American profit after quarterly orders plunged 17 percent.

MAN, which also makes diesel engines and turbines, said it now expects group sales to fall noticeably below the 15.7 billion euros posted last year. Three months ago, MAN had guided for sales to dip only slightly below 2013 results.

“We are facing growing challenges in Brazil, a key market for MAN,” Chief Executive Georg Pachta-Reyhofen said. “We are keeping a close eye on economic developments in Brazil which are a cause for concern.”

Brazil, once one of the most dynamic emerging economies, is edging closer to a recession. Industrial output probably fell for a fourth straight month in June, a Reuters poll of analysts showed, as manufacturers grapple with problems including higher interest rates and mounting inventories.


But MAN reaffirmed its 2014 guidance for significant gains in group operating profit as well as margin, citing its improving power plant business and cost cuts.

Operating profit increased to 154 million euros, compared with a 26-million-euro loss a year ago as strong demand for diesel engines and turbines offset weaker truck sales.

Shares showed little reaction. MAN was trading 0.1 percent lower at 89.31 euros as of 0936 GMT while parent VW was down 0.5 percent at 176.30 euros.

MAN has become more upbeat on prospects for core European markets where haulier companies and construction firms last year rushed to buy older but cheaper trucks ahead of costly emission-rule changes.

“We are once again more optimistic about the economic situation in Europe,” CEO Pachta-Reyhofen said.

MAN’s European rivals posted mixed earnings performances.

Sweden’s Scania, also part of VW, said earlier this month it will add staff to underpin a planned increase in output this autumn after second-quarter truck orders hit a record.

But Volvo reported lower-than-expected operating profit of 4.3 billion crowns, saying overcapacity in European plants, falling demand for trucks in Brazil and construction gear in China had hit earnings.

$1 = 0.7460 euros Reporting by Andreas Cremer. Additional reporting by Joern Poltz.; Editing by Arno Schuetze and John Stonestreet

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