Bloomberg News

Daimler Gains After Forecasting Fourth-Quarter Profit Increase

October 27, 2011

Oct. 27 (Bloomberg) -- Daimler AG, the world’s third- largest maker of luxury vehicles, advanced after the automaker predicted higher fourth-quarter profit on gains at its trucks and vans divisions.

Earnings before interest and taxes will likely “significantly exceed” the previous year’s figure of 2.02 billion euros ($2.83 billion), the Stuttgart, Germany-based company said today. The forecast eased concerns after the automaker posted its first quarterly profit drop in two years.

“All the divisions are pursuing their goals very consistently and are right on track,” Chief Executive Officer Dieter Zetsche said in a statement. “We are more flexible than ever before, so that we can react quickly to future developments.”

Daimler plans to expand Mercedes’s range with new compacts and high-end variants of the S-Class flagship as it targets overtaking Bayerische Motoren Werke AG for the luxury-car lead. The brand slipped behind Volkswagen AG’s Audi this year in sales, as it renewed the $48,990 M-Class sport-utility vehicle and B-Class compact. The overhauls led to slower sales in the third-quarter with deliveries rising 3.9 percent, dragging down growth through the first nine months to 7.6 percent.

The German automaker rose as much as 1.96 euros, or 5.2 percent, to 39.85 euros and was up 2.3 percent at 9:26 a.m. in Frankfurt.

Profit Drops

Daimler has fallen 23 percent this year as investors fear the debt crisis in Europe will burden demand for cars and trucks. PSA Peugeot Citroen, Europe’s second-largest carmaker, yesterday cut its target for 2011 auto profit and said it may cut as many as 3,500 jobs as pricing pressure intensifies.

Daimler’s third-quarter earnings before interest and taxes fell 19 percent to 1.97 billion euros, the company said. The figure missed the average estimate of 2.19 billion euros, based on a Bloomberg survey of 18 analysts.

Earnings were burdened by 133 million euros in charges to write down the value of the Daimler’s holdings in partners Renault SA and OAO KamAZ as well as 130 million euros in higher foreign exchange costs and spending 100 million euros more for steel and other supplies at Mercedes.

Ebit of Daimler’s Mercedes cars unit declined 15 percent to 1.11 billion euros on expenses for the introduction of new vehicles and higher material costs, the company said. The unit’s revenue rose 1 percent to 13.8 billion euros, leading to an 8 percent margin compared with 9.5 percent a year ago. The company predicted flat Mercedes earnings in the fourth quarter.

‘Sign of Weakness’

“Daimler has largely lost its momentum,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. Daimler’s pinning the fall on higher material costs and model introductions “is a sign of weakness. That’s routine business that everyone faces.”

Net income fell 16 percent to 1.36 billion euros. Sales rose 5 percent to 26.4 billion euros.

The company stood by its target for a “very significant” rise in 2011 Ebit after last year’s 7.27 billion euros. Sales were forecast by the company to exceed 100 billion euros. The automaker predicted record sales of more than 1.35 million Mercedes and Smart cars this year. The company, also the world’s largest manufacturer of commercial vehicles, projected “strong” growth in truck sales.

The German automaker expects the global economy to escape a recession next year, projecting higher car sales and growth in truck demand in North American and Asia, Chief Executive Officer Bodo Uebber said today on a conference call with journalists.

--Editors: Chad Thomas, Chris Jasper

To contact the editor responsible for this story: Chris Reiter at creiter2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net.


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