MAN AG Profit Rises 33% on Growth in Poland, Russia

MAN AG, Europe's third-largest truckmaker, said fourth-quarter profit rose 33 percent as vehicle deliveries surged in the booming economies of Poland and Russia.

Net income increased to 331 million euros ($485 million) from 248 million euros a year earlier, Munich-based MAN said today in a statement. Earnings beat the 318 million-euro estimate of seven analysts surveyed by Bloomberg. Revenue rose 35 percent to 5.23 billion euros.

Chief Executive Officer Hakan Samuelsson forecast today that 2008 sales will rise more than 5 percent, and operating profit will increase, on eastern European growth. Industrywide sales in the region jumped 47 percent last year, compared with 2.7 percent in western Europe. MAN shares fell the most in more than 4 1/2 years after Samuelsson said the company raised its stake in rival Scania AB by less than 2 percentage points.

``The figures were very good, but I was expecting more news regarding Scania,'' said Gregor Claussen, Frankfurt-based analyst at SEB AB with a ``strong buy'' recommendation on MAN.

MAN shares fell 7.24 euros, or 8.2 percent, to 80.40 euros in the biggest drop since May 8, 2003.

2007 Profit Rises

Fourth-quarter earnings per share from continuing operations were 2.26 euros compared with 1.54 euros a year earlier, MAN said. Full-year net income increased 32 percent to 1.23 billion euros, or 7.99 euros per share. Sales rose 19 percent to 15.5 billion euros. MAN's Polish vehicle deliveries more than doubled in the last four years, while Russian sales tripled in 2007.

``These figures blow you away,'' said Hans-Peter Wodniok, an analyst with Fairesearch GmbH in Frankfurt. ``Eastern Europe should continue to do well. Thanks to the enormous demand there, there's no need to give discounts.''

Samuelsson opened a 100 million-euro factory in October near Krakow, Poland, the first truck plant in the region set up by a western European manufacturer. Volvo AB, the world's second- largest commercial-vehicle maker, aims to follow suit with an assembly plant opening in Russia in 2009. Scania, Sweden's second-largest truckmaker, outlined plans in October to build a plant in Russia within 2 1/2 years.

MAN expects eventually to build 15,000 vehicles a year in Krakow. That compares with the 10,000-truck annual capacity Scania is planning in Russia and the 15,000 vehicles Volvo expects to build there.

Economic Forecasts

Poland's government is forecasting 2008 economic growth following a 6.5 percent expansion last year. That was more than double the 2.6 percent growth posted by the 13 countries that shared the euro in 2007, according to European Central Bank figures. Russia's government forecasts a 10th consecutive year of growth in 2008 after the economy expanded 8.1 percent in 2007.

``We don't see any impact of the financial crisis on our business so far'' following the sub-prime market collapse in the U.S. that hurt European bank earnings, Samuelsson said at a Munich press conference today. ``The market is very robust. We don't see any signs of a peak.''

MAN's 2007 return on sales expanded to 11.2 percent from 8.5 percent in 2006. The figure surpassed Samuelsson's November forecast of 10.7 percent. The 2008 return on sales will ``be in line with the high level on 2007,'' Samuelsson said.

Dividend Plans

The 2007 dividend will amount to about 35 percent of earnings per share, the CEO said, adding in an interview that the payment may total 3 euros a share, compared with 2 euros in dividends and special payouts a year earlier. Figures will be specified in March, he said.

Fourth-quarter orders, an indicator of future sales, gained 11 percent to 5.07 billion euros, while full-year sales contracts rose 17 percent to 19.4 billion euros. Samuelsson forecast orders this year would remain at the same level.

The commercial-vehicle unit, which accounts for three- fourths of MAN's sales, posted a 75 percent jump in fourth- quarter operating profit to 393 million euros. The division built 100,609 trucks and buses last year, a 15 percent increase. MAN is forecasting 10 percent growth in deliveries this year to 110,000 vehicles.

``MAN has again posted a solid set of results surpassing our expectations in all of the divisions,'' said Jose Asumendi, an analyst with WestLB in London with a ``buy'' recommendation on the shares. ``The strong order intake in the fourth quarter sets the path to see another strong year in 2008.''

Samuelsson, whose 10.3 billion-euro bid for Scania collapsed in January 2007, said today that MAN now holds 17 percent of the voting rights in the Soedertaelje, Sweden-based truckmaker, his former employer.

Stock-Class Swap

The German company has built up its stake in the past two months by obtaining Scania Class-A stock, which holds 10 times the voting power of Class-B shares, through swaps of its Class-B holdings. MAN hasn't identified any other party in the transactions.

MAN is ``highly unlikely'' to engage in further swaps because most remaining Class-A stock is held by Scania's largest shareholders and isn't on the market, Chief Financial Officer Karlheinz Hornung said today in an interview.

The German truckmaker, whose capital ownership in Scania remains at 13.25 percent, held 15.57 percent of the votes in December. MAN ranks third in Scania voting rights, behind Volkswagen AG, the biggest shareholder in both truckmakers, and Investor AB, a holding company controlled by Sweden's Wallenberg family.

`Friendly' Combination Sought

Samuelsson's Scania bid failed after Volkswagen and Investor AB rejected the offer as too low. Volkswagen, Europe's biggest carmaker, wants a ``friendly'' three-way combination of Scania, MAN and its own truck division.

``It's important to be big in the trucks business,'' SEB's Claussen said. ``MAN and Scania are too small to survive in the long term'' against Daimler AG's truck division and Volvo, the global market leaders.

MAN named a representative in November to a panel selecting Scania's board. The Swedish company has said the move conflicts with local corporate governance recommendations that nominating committee members not include competitors. The Wallenbergs have two of the four seats on the nominating committee, with MAN and Volkswagen controlling the other two.

The German truckmaker currently holds no Scania board seats, while Wolfsburg, Germany-based Volkswagen controls three of the nine seats reserved for shareholders, Stockholm-based Investor AB holds two and individuals independent of the three largest owners have the remainder. Scania CEO Leif Oestling, who has opposed the takeover, also holds a board seat.

MAN isn't seeking to appoint one of its employees to the Scania board, Samuelsson said today, declining to say whether he'll push for an indirect representative.

Source: bloomberg.com