UPDATE 2-MAN SE profit plunges as crisis bites

Tue Oct 30, 2012 6:43pm IST

Stocks

   

* MAN keeps 2012 outlook, group profit margin of 6 pct

* Q3 operating profit 185 mln euros vs 321 mln euros

* German plants to shut between Dec 21-Jan 11 -CEO

* MAN will keep cutting costs -CEO

* Shares rise 2.9 pct (Adds analyst, CEO comments, shares and background)

By Andreas Cremer

BERLIN, Oct 30 (Reuters) - German truck maker MAN SE's third-quarter profit tumbled 42 percent as slowing economic growth in its main European markets eroded demand from haulier companies and construction firms.

Owned by Europe's biggest car maker Volkswagen, MAN is halting assembly lines this week at its Munich-based headquarter factory and at a plant in Salzgitter after orders dropped 14 percent between July and September to 3.5 billion euros ($4.52 billion).

Truck makers are facing tough times as the euro zone debt crisis squeezes demand in European and as other markets ease due to a slowdown in the global economy.

"Truck makers are deep in the mire," said Hanover-based NordLB analyst Frank Schwope. "Demand is weak and production cutbacks are indispensable."

Both Volvo, the world's second biggest manufacturer of heavy-duty vehicles, and Scania, recently reported sharp falls in profits. Volvo has said it expects no growth in European and U.S. markets next year.

MAN's third-quarter operating profit fell to 185 million euros ($238.74 million) from 321 million euros a year earlier, missing a consensus forecast of 199 million euros in a Reuters analyst poll.

Still, MAN, which also makes diesel engines and industrial turbines, reaffirmed its outlook for a 2012 profit margin of about 6 percent from 9 percent in 2011.

The company had already lowered the targeted profit margin from 8.5 percent in July. MAN now expects revenue from commercial vehicles to decline more than 5 percent this year instead of as much as 5 percent as previously forecast.

MAN shares were up 2.2 percent at 78.43 euros at 1247 GMT, extending this year's run to almost 11 percent.

MAN plans to halt production at its headquarter factory and Salzgitter plant again between Dec 21 and Jan 11, including in this stoppage an engine plant in Nuremberg, Chief Executive Georg Pachta-Reyhofen said on a conference call, confirming a Reuters story.

It will use workers' residual leave and overtime hours to avoid more drastic cutbacks during the planned stoppages, Pachta-Reyhofen added.

Once those steps have been exhausted, MAN may apply for subsidies under the German government's short-work programme, called "Kurzarbeit," the CEO said. The scheme allows companies to preserve jobs by cutting workers' hours when plant usage is low and have the government compensate staff for part of their lost wages.

"We will keep working intensively to cut costs," the CEO said, noting past efforts to trim the number of lease workers. "The (quarterly) result isn't satisfactory." ($1 = 0.7749 euros) (Reporting By Andreas Cremer; Editing by Christiaan Hetzner and Louise Heavens)