Commercial Vehicles sees clear upward trend
Letter to our Shareholders
2010-07-29
Dear Shareholders
The MAN Group performed well in the second quarter; the timid signs of recovery at the beginning of the year were confirmed and strengthened. Better macroeconomic developments and reduced uncertainty in the financial sector and in manufacturing industry had a positive effect on the transportation and energy markets. MAN’s key performance indicators have improved significantly compared with the difficult year 2009. At the same time, many areas still have a long way to go to return to the high levels of capacity utilization in previous record years.
In the second quarter of 2010, MAN received orders worth €3.7 billion — up 6% on Q1 and 64% more than in the prior-year quarter. Orders in the first six months totaled €7.3 billion, a yearon- year increase of 59%. This growth was driven by both business areas, with Commercial Vehicles up 70% year-on-year in the first half of 2010 and Power Engineering recording 39% more orders. Above all, the steady upward trend at MAN Nutzfahrzeuge is boosting our expectations of a sustained improvement. Order intake at MAN Latin America in the second quarter exceeded the historic high achieved in Q1.
MAN Diesel & Turbo recorded year-on-year growth in order intake of 41% in the second quarter and 28% in the first six months. At €7.7 billion, the MAN Group’s order backlog in H1 was 4% higher than at the end of 2009.
Revenue rose by 16% in the second quarter to a total of €3.6 billion. In the first half of 2010, it was up by 19% yearon- year to €6.7 billion. This is primarily attributable to the second quarter in the Commercial Vehicles business area, while revenue in the Power Engineering business area declined slightly. Business was down by 23% in the Engines & Marine Systems strategic business unit and by 5% in the Turbo Machinery strategic business unit. This decrease was partially offset by the 57% increase in revenue in the Power Plants strategic business unit.
The upturn in business in the Commercial Vehicles business area led to a sharp rise in the MAN Group’s operating profit, from €244 million in the first half of 2009 to €404 million in H1/2010. The Power Engineering business area continues to account for the majority of this figure, at €245 million. MAN Diesel & Turbo and Renk again achieved high double-digit returns on sales. At 6%, the figure for the MAN Group as a whole has already returned to a respectable level.
The sometimes extremely diverse performance of the Commercial Vehicles and Power Engineering business areas shows that MAN is well balanced from a cyclical perspective: In 2009, the weakness in the Commercial Vehicles business area was offset by the high order backlog in the Power Engineering business area, and now the growing momentum in the commercial vehicles markets will act as a counterbalance.
This balance also applies to the regional breakdown of our business. While Europe is set for relatively low growth rates in the long term, key emerging economies are returning to their past growth momentum. The transportation and energy markets in particular are currently recording high growth and continue to offer significant potential. Our Company already has a very strong presence especially in the high-growth BRIC countries. This enables MAN to achieve higher profitable growth, additional synergies, and better risk diversification.
The uncertainty on the global markets has not yet disappeared completely. Nevertheless, we believe that stronger domestic and international demand will be the basis for positive growth beyond 2010. Due to the continued growth in Brazil, MAN Latin America will remain a stable earnings driver. The order situation in the Power Engineering business area will remain low but stable. The business area’s high order backlog should again allow it to aim for a double-digit return. We expect the MAN Group’s return on sales to match the level for the first six months.
Dr.-Ing. Georg Pachta-Reyhofen
CEO of MAN SE