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UPDATE 3-MAN sees flat pre-tax profit in 2002

(Adds CFO on dividend, updates share price)

By Nick Tattersall

FRANKFURT, Nov 19 (Reuters) - German trucks and engineering group MAN said on Tuesday profits would be flat this year as a collapse in demand at its printing machinery unit and continued losses at its bus division took their toll.

MAN said third quarter pre-tax profit came in at 38 million euros ($38.3 million), up from a surprise pre-tax loss of 87 million a year ago, but below the 65 million euro profit forecast in a Reuters poll of 15 analysts.

"We said in March that if the U.S. economy picked up in the first half and if that came to Europe, the business would be in a position to see profit growth this year," MAN Chief Financial Officer, Ferdinand von Ballestrem, told a conference call.

"We have realised that this is not going to happen."

The firm said it now expected to more or less match, rather than beat, last year's pre-tax profit of 213 million euros. It nonetheless said it was still confident of reaching a group sales target of 15.5 billion euros this year and said profits would improve significantly in 2003.

It said it would cut more than 1,000 jobs group-wide next year in a bid to keep costs down, and said investment spending in 2003 would be in line with or slightly below this year's level. The group cut investments by 15 percent this year from 1.3 billion euros in 2001.

"When you strip out the one-off effects, you see that the restructuring efforts are beginning to bear fruit," said BHF Bank analyst Hermann Reith.

"The restructuring is laying the foundation for a jump in profits in 2003 even in a depressed economic environment."

Ballestrem said the firm had not yet discussed making a dividend payment this year, but said its confidence about profits in 2003 would be reflected in the dividend policy.

Shares in MAN were down three percent at 12.63 euros by 1705 GMT in volatile trade, compared with a 0.45 percent dip on the DJ pan-European industrials index .

Losses at the MAN Technologie aerospace business, which saw key client plane maker Fairchild Dornier file for insolvency earlier this year, weighed on the group's third quarter result.

MAN also said high costs at its bus business, still busy integrating heavily loss-making bus maker Neoplan, also had reduced profits in the period. It said it did not expect the bus business to post a full-year profit before 2005.

KEEP ON TRUCKING

The group said it was still aiming to break even this year at its commercial vehicles division, which accounts for around 40 percent of sales, compared with a pre-tax loss of 49 million euros in 2001. But it said that target had become more difficult to achieve.

The division saw incoming orders rise 10 percent in the three months to the end of September, and broke even at a pre-tax level in the period, although profits on trucks thanks to cost-cutting measures were wiped out by the losses on buses.

Truck manufacturing profits have been hit by a decline in demand this year, although MAN said in September its commercial vehicles division appeared to have reached a trough with its new order intake pointing to a stabilisation.

Three of MAN's truckmaking rivals have beaten expectations with their third-quarter profits in recent weeks, although they painted a mixed picture in their outlooks.

Swedish firm Scania said demand in Europe had been firmer than expected and said its fourth quarter profits would improve, although it said uncertainty had increased for 2003.

The world's second-biggest truckmaker Volvo also fared well but posted a fall in U.S. orders, while the world's biggest truckmaker DaimlerChrysler said it expected profits at its trucks unit to beat last year's level.

Ballestrem said MAN had become more sceptical about the benefits of mergers in the trucks sector, although he said firms would continue to seek savings through cooperation agreements.

There has been speculation that MAN might be interested in buying a strategic stake in Swedish rival Scania from Volvo.

PRINTING PRESSURE

The group slashed its profit forecast for its MAN Roland printing machinery unit, saying it now expected the division's pre-tax profit to be only marginal in 2002. It said negotiations with unions were underway about job cuts at the division.

The unit, which accounts for around 13 percent of group sales, has been hit hard along with the rest of the industry by a slump in the advertising market. It had previously expected pre-tax profit of around 45 million euros.

The world's biggest printing machinery maker, Heidelberger Druck AG , has seen demand collapse over the last two quarters, and said in October it would axe 2,200 jobs or 10 percent of its workforce at a cost of 140 million euros.

MAN group sales in the third quarter fell six percent to 3.8 billion euros, broadly in line with expectations, although new orders rose 15 percent to four billion euros. (Additional reporting by Madeline Chambers in Frankfurt and Hans Nagl in Munich)