German truckmaker MAN SE swung to a first-quarter net loss, hit by a plunge in demand in Brazil, and said it expected market conditions there to remain tough until at least mid-year. The Volkswagen-owned company said on Tuesday truck deliveries in Brazil slumped 51 percent in the quarter as the local economy weakening, while orders tumbled 49 percent. Brazil, along with other Latin American countries, accounted for about a fifth of MAN’s revenues last year. The deteriorating performance poses a challenge to Volkswagen (VW) as it strives to merge MAN with Swedish arm Scania to create a global truck maker to take on industry leader Daimler. Earlier on Tuesday, Daimler said quarterly earnings at its trucks business rose by more than a half as growth in North America more than offset weakness in Brazil. MAN has no presence in North America. “There are no signs of a recovery yet in Brazil and the situation there remains strained with direct consequences for our business activities in South America,” MAN Chief Executive Georg Pachta-Reyhofen said. MAN shares were down 0.3 percent by 1100 GMT, within a STOXX Europe 600 Automobiles & Parts index off 0.8 percent. The stock is up 7 percent this year, lagging the sector which has gained more than a third. Munich-based MAN posted a net loss of 10 million euros ($10.9 million) in the quarter ended March 31, down from a 28 million euro profit in the same period last year. Operating profit fell 50 percent to 34 million euros. Pachta-Reyhofen said he expected the Brazilian market to shrink by at least a third this year but that it could start recovering as early as the third quarter. He could not rule out that MAN would end up with a loss in Brazil for the full year. MAN has been market leader in Brazil for trucks of more than 5 metric tons for 11 years and is a major supplier of commercial vehicles and bus chassis there. While Europe generally showed signs of recovery, Eastern Europe was badly affected by the Ukraine conflict, MAN said. The company, which also makes diesel engines and turbines, said last month it would expand cost cuts at its truck division to all business areas. It said on Tuesday it still expected 2015 sales on a level with the previous year and stable operating profit.