Traton Group is thankful it acquired Navistar International when it did. The U.S. brand is providing cover as Traton deals with the uncertainties of the war in Ukraine and restructuring of its MAN Truck & Bus subsidiary.
Munich-based Traton reported a 17% increase in incoming orders and a 12% increase in sales in Q1. Revenue grew 39% to 8.5 billion euros ($8.96 billion).
“It’s hard to imagine a more challenging economic environment,” Christian Levin, Traton CEO, said in a press release. “The semiconductor bottlenecks have still not been resolved, and the conflict in Ukraine has brought with it a shortage of cable harnesses.”
Traton posted operating profit of 355 million euros ($374 million). That improvement of 200 million euros related to a 356 million-euro charge for the restructuring of MAN Truck & Bus last year. Adjusted operating income in Q1 was 402 million euros, 144 million below a year ago.
Navistar acquisition paying off
“Our company’s performance in the first quarter of 2022 is a clear sign that our strategy to become more global with the Navistar acquisition and the expansion of our service business is paying off,” Levin said.
Service accounted for about 25% of Q1 sales.
“The [service] business is more resistant to changes in the economy and has strong margins, which is having a stabilizing effect on the company,” Levin said. The acquisition of Navistar for $3.7 billion last year “means we are better equipped to handle fluctuations in individual markets.”
Traton took a 47 million-euro ($49.6 million) charge against earnings because of the war in Ukraine. It is concerned about the duration of supply chain disruptions because of Russia’s invasion.
Risk from war in Ukraine
“The war in Ukraine is having a strong impact on the Traton Group, which is why we have made our forecast for fiscal year 2022 more specific,” said Annette Danielski, Traton chief financial officer.
Traton expects sharply rising sales across all brands — Scania, MAN, Volkswagen Caminhões e Ônibus and Navistar. It projects an adjusted operating return on sales of 5% to 6%, including earnings from Navistar.
How the war will affect Traton is impossible to predict, Danielski said. There is risk for a negative impact on the business, including further supply chain bottlenecks.