FRANKFURT -- German trucks and engineering group MAN AG pledged to slash more jobs and make deeper cost cuts on Tuesday as it strives to lift profits this year after reporting a worse-than-expected first-quarter loss.
The industrial giant, which builds trucks, plant equipment, space rocket components and the world's most powerful diesel engine, posted a pre-tax loss of 31 million euros ($36 million), wider than the lowest forecast in a Reuters poll of analysts.
The stock suffered its biggest one-day fall since mid-1999, tumbling as much as 11 percent and wiping over 240 million euros from MAN's market value, as it said it would shed up to 800 jobs on top of the 1,000 already announced for this year.
"The environment has deteriorated further in recent weeks," Chief Executive Rudolf Rupprecht told a conference call.
He said he expected the market for trucks and for printing machinery to weaken over the year as a whole, although the company would be back in the black in the second quarter.
The group is banking on its core commercial vehicles business, which returned to profit in 2002 after a two-year overhaul, to drive group earnings higher this year. But the unit posted a 36-million-euro pre-tax loss in the first quarter.
"It looks like restructuring measures were not put in place quickly enough and that is why we have profitability problems, mainly in trucks and printing," said Stephan Thomas, a fund manager at Frankfurt Trust.
"Trucks was a surprise because they made quite an effort last year in writing lots of things down, and I thought that situation was solved."
Swedish truckmaking rivals Volvo and Scania both posted first-quarter profits above expectations late last month, but warned that demand for trucks over the year as a whole would wane.
The MAN Roland printing machinery business, which saw its profits eroded by a slump in the advertising industry last year and will bear the brunt of the job cuts, slipped to a 27-million-euro pre-tax loss after breaking even a year ago, underlining the fragility of the group's goals.
"I had expected faster progress in improving profits at the trucks and printing businesses. The danger now is that the expected strong earnings rise in 2003 will not be so significant," said HVB analyst Albrecht Denninghoff.
Dresdner Kleinwort Wasserstein cut the stock to "hold" from "add", saying the weaker outlook meant the shares would probably end their recent outperformance against sector peers.
MAN's caution on the outlook for the trucks market tallies with that of Germany's auto industry association, VDA, which said on Monday it saw no signs of an upturn as orders across the sector fell five percent in the first four months of 2003.
MAN's group-wide new orders fell two percent to 3.5 billion euros in the first quarter, hit by an eight percent decline in Germany, although sales rose five percent to 3.3 billion, driven by stronger demand for its industrial plant equipment.
Rupprecht said although the war in Iraq had ended quickly, a new threat to business had arrived in the form of the SARS virus hitting China, which was weighing on the region's economy and hindering the movement of the group's staff. Asia accounted for around 15 percent of the group's order intake last year.
Although the Americas account for a similar level of business, Rupprecht said the recent strength of the euro would have virtually no effect on profits this year as most of the business was hedged.