Traton's takeover of Navistar—trucks pictured here—is expected to complete by mid-2021.
(Photo by Scott Olson/Getty Images)Truck maker Traton, which is listed on the Frankfurt Stock Exchange, had its best ever quarter in the first three months of 2021, as demand suppressed by the Covid-19 pandemic began to bounce back.
The group, an arm of Volkswagen that is majority-owned by the German automobile giant, is also looking to take full control of MAN, a trucking group and diesel engine manufacturer, of which it already owns more than 93%.
Traton stock climbed 6% higher on Monday, as investors cheered a record quarter, with shares in MAN jumping near 30% following Traton’s plan to squeeze out minority shareholders with an offer at a big premium to last week’s price.
The back story. Traton is a trucking spinoff of Volkswagen that went public in 2019. The German company’s brands include Scania, MAN, and VW Caminhões, and it is one of the largest commercial-vehicle manufacturers in the world, with production and sales in Europe, Asia, Africa as well as Latin America.
Traton has been bulking up and streamlining its business since the beginning of last year. The group’s only U.S. exposure comes from a 17% stake in Navistar, and in March, Traton reached a deal to acquire the remaining 83% of the company more than a year after its first bid in January 2020. The Navistar deal is expected to complete by mid-2021. In February 2020, Traton announced its plans to merge with MAN, of which it owns more than 93%, by squeezing out existing shareholders with a view to establishing a more efficient group structure.
Also:Navistar Shareholders Clear the Traton Takeover, Putting the Pedal to the Metal for Volkswagen Stock
What’s new. Traton’s brands logged a total of 81,700 vehicle orders in the first three months of 2021, 51% more than in the same period last year and a quarterly record. Growth was driven by trucks, with orders 62% higher than 2020 levels, while bus orders were 46% lower, which the group put down to the effect of the Covid-19 pandemic.
Revenue increased to €6.5 billion ($7.9 billion), up 15% from the first quarter of 2020, while adjusted operating profit tripled over the same period to €516 million. On the back of the strong results, Traton also raised its outlook for the full year, expecting its operating margin to be between 5% and 7%, after previously guiding 5% to 6%.
“A year ago, we saw how quickly the pandemic hit the commercial-vehicle business. Now, we are seeing our customers’ orders pick up again just as quickly,” said Matthias Gründler, Traton’s chief executive.
Traton’s record results, which include strong performance at MAN, came shortly after the group’s play to take full ownership of that subsidiary. On Saturday, Traton submitted a request to MAN’s executive board to enforce a merger squeeze-out of minority shareholders. The group said it was prepared to pay €70.68 per share—a 27% premium to the stock price on Friday.
The offer pushed MAN shares up more than 29% to €71.60 on Monday, as the market had a first chance to react to the offer. Traton said it expects the conclusion of the merger agreement to take place on May 14, before it goes to MAN shareholders at the end of June.
Looking ahead. While bus orders remain low—a knock-on effect from the pandemic-battered tourism industry, no doubt—Traton’s core truck business is accelerating at pace. From a financial perspective, the group’s key performance indicators have surpassed first-quarter 2019 levels, suggesting the impact of the pandemic is firmly in Traton’s rearview mirror.
Between the hike to the full-year guidance and the efficiencies expected from the MAN merger, once it’s completed, investors have a lot to smile about. Analysts are bullish on Traton stock, with a mean target price for the shares 6.9% higher than the current price, according to FactSet.
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May 11, 2021 at 12:35AM
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VW’s Traton Had Its Best Quarter Ever. It’s Also Behind This Stock Soaring 30%. - Barron's
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