Bloomberg News

Daimler Targets Significant Profit Gain on Revamped C-Class (1)

February 06, 2014

Mercedes-Benz Badge

The Mercedes-Benz badge sits on display as the new Mercedes-Benz V-Class truck, manufactured by Daimler AG, is unveiled in Munich. Photographer: Krisztian Bocsi/Bloomberg

Daimler AG (DAI) forecast 2014 profit will rise “significantly” as the new GLA compact sport-utility vehicle and redesigned C-Class sedan add to a push by the third-largest luxury-auto maker to overtake rivals in sales by 2020.

Earnings before interest and taxes from ongoing operations will exceed the 7.9 billion euros ($10.7 billion) posted last year as the owner of the Mercedes-Benz brand brings out new cars and trucks and expands in emerging markets such as China and Brazil, Stuttgart, Germany-based Daimler said. Fourth-quarter profit on that basis surged 45 percent as customers scooped up the Mercedes CLA coupe and revamped flagship S-Class sedan.

Chief Executive Officer Dieter Zetsche has vowed to regain the top spot in luxury-car sales by the end of the decade after losing it to Bayerische Motoren Werke AG (BMW) in 2005 and ceding second place to Audi AG (NSU) in 2011. Mercedes plans to introduce 30 models through 2020, with a gasoline-powered sports car among the dozen vehicles that have no predecessor, Zetsche said today in a Bloomberg Television interview.

“Mercedes is on the right track with the new models,” said Frank Schwope, a Hanover, Germany-based analyst at NordLB. “You can see the change of the brand by the vehicles on the road. They’re attracting younger buyers.”

Stock Rises

Daimler rose as much as 4.3 percent to 63.51 euros, the biggest intraday increase since Oct. 24, and was trading up 3.9 percent at 1:03 p.m. in Frankfurt. The shares have climbed 47 percent in the last year, valuing the German manufacturer at 67.8 billion euros.

Fourth-quarter Ebit at continuing businesses jumped to 2.53 billion euros from 1.74 billion euros a year earlier, Daimler said. Revenue gained 7.6 percent to 32.1 billion euros. The company plans to raise the dividend for 2013 by 2.3 percent to 2.25 euros a share.

Spending-reduction measures at the Mercedes-Benz Cars and the Daimler Trucks divisions contributed a combined 1.3 billion euros to earnings. The Mercedes marque’s vehicle sales rose 15 percent in January, propelled by demand for the S-Class and compacts such as the CLA, Daimler said yesterday.

“Our products are in demand around the world,” Zetsche said at a press conference in Stuttgart. “Our efficiency programs are paying off, and our investments are bearing fruit,” and “I am confident that we will continue to pick up the pace.”

Savings Contribution

Deliveries at Mercedes-Benz Cars, which also includes the Smart city-car brand, rose 7.9 percent last year. The division’s Fit for Leadership spending-reduction program, which has a goal of cutting costs by 2 billion euros in the two years through 2014, saved 800 million euros last year, beating targets, Daimler said. The fourth-quarter Ebit margin widened to 7.5 percent of sales from 5.3 percent a year earlier.

Cost cuts from a 1.6 billion-euro earnings-improvement project at the Daimler Trucks division, which makes Mercedes, Freightliner and Fuso commercial vehicles, totaled 500 million in 2013. The unit’s Ebit margin in the fourth quarter jumped to 6.6 percent from 3.8 percent.

“Our plan is working step by step,” to improve profitability, Zetsche said. “The initial results of our strategy are making us hungry for more.”

Growth Rate

Deliveries at the Mercedes nameplate increased faster than sales at Volkswagen AG (VOW)’s Audi in the final months of 2013 and for the first time since 2010 the growth rate was faster last year than at Munich-based BMW.

Mercedes-Benz will roll out a new version of the mid-sized C-Class sedan in March as well as the GLA, an all-new small SUV. The manufacturer is also starting to offer an electric version of the B-Class compact in the U.S., and will debut a coupe variant of the S-Class.

To catch up with Audi and BMW in China, Mercedes plans to accelerate its retail-network expansion and add 100 dealers this year, compared to 75 new outlets in 2013. Daimler bought a 12 percent stake last year in BAIC, its local production partner in the country, as part of a plan for an initial public offering of the unit. Mercedes is also planning to resume manufacturing cars in Brazil by 2016.

To contact the reporter on this story: Dorothee Tschampa in Stuttgart, Germany, at dtschampa@bloomberg.net

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


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