BERLIN (Reuters) - German truck maker MAN SE (MANG.DE) lowered its targeted profit margin this year as Europe’s deepening debt crisis and the slowing world economy erode demand for commercial vehicles.
First-half operating profit plunged 38.2 percent to 471 million euros ($571.02 million) from 762 million euros a year earlier, the company said in a statement on Wednesday.
MAN, which also makes diesel engines and industrial turbines, said the group’s profit margin slumped to 6.1 percent from 9.6 percent a year earlier, with the full-year margin now seen at about 6 percent instead of 8.5 percent as previously forecast.
The “increasingly difficult market environment weighs business performance down,” Munich-based MAN said, adding the company “was unable to escape the industry trend.”
The highly cyclical market for commercial vehicles has been losing steam rapidly in recent months on both sides of the Atlantic, but particularly in Europe, which is plagued by a sovereign debt crisis and a related economic slowdown.
New commercial-vehicle registrations in the European Union plunged 17.8 percent in May, the sharpest drop since 2009, as the crisis spread from indebted southern states to key markets such as Germany and the UK, according to the European Automobile Manufacturers’ Association (ACEA).
New sales data for June will be published by ACEA on Thursday, the same day on which MAN parent Volkswagen (VOWG_p.DE) releases earnings.
Swedish rivals Volvo AB (VOLVb.ST) and Scania SCVb.ST are also battling the crisis. Second-quarter operating profit at Volvo, the world’s No. 2 truck manufacturer, slipped to 7.34 billion crowns from 7.65 billion crowns a year ago. Orders plunged 19 percent, almost double the 10 percent drop expected by analysts.
Scania reported operating profit of 1.93 billion crowns, lower than expected by analysts and down from 3.31 billion a year earlier. Truck orders fell 14 percent, less than expected by analysts and better than a 19 percent plunge in first-quarter bookings.
“Scania and MAN have faced challenged end markets in the second quarter,” Singapore-based Bernstein analyst Max Warburton wrote in a research note on July 23. “Both companies are exposed heavily to Europe and Latin America.”
Shares of MAN, down 17.1 percent in the last three months, ended down 0.7 percent at 78.17 euros.
The profit margin at MAN’s main commercial vehicles division slumped more than half to 3.6 percent after six months and may rise to no more than about 4 percent this year, MAN said. The division’s previous target was 7 percent.
Despite the stark fall in profit, revenue at MAN group only eased 3 percent to 7.7 billion euros as the company pushed truck sales in Russia, the Middle East and other regions outside Europe to offset tumbling business in its home region, spokesman Stefan Straub said by phone.
Demand in Brazil, where MAN controls about a third of the trucks market, slumped in the first half as introduction of new emission rules inflicted extra costs on customers, MAN said, noting that first-half orders in Latin America tumbled 22 percent.
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Editing by Elaine Hardcastle and Steve Orlofsky