Daimler profits double as Mercedes recovery goes on

Sales of Mercedes-Benz cars jump 14 per cent in the first quarter, margins more than double

Mercedes-Benz vehicles at the 2014 North American International Auto Show in Detroit, Michigan. Photograph: Daniel Acker/Bloomberg

Mercedes-Benz vehicles at the 2014 North American International Auto Show in Detroit, Michigan. Photograph: Daniel Acker/Bloomberg

Wed, Apr 30, 2014, 16:25

Daimler’s first-quarter operating profit more than doubled as surging sales of new cars and improving margins in its Mercedes-Benz luxury autos division extended its recent recovery.

Having dropped to third place in luxury car sales rankings in 2011 behind BMW and Volkswagen’s Audi, Mercedes-Benz closed the gap in 2013 thanks to redesigned vehicles and new compact cars such as the A-Class sedan.

The group said on Wednesday sales of Mercedes-Benz cars rose 14 per cent in the first quarter, driven by demand from China and the United States, as it prepares to roll out a fresh version of its new C-Class model, currently the best selling Mercedes-Benz.

Daimler shares, which have outperformed Germany’s blue-chip DAX index this year, were down 1.7 per cent in Wednesday trading due to what traders said was an opportunity to take profits.

Daimler said group earnings before interest and tax (Ebit) from ongoing business rose to €2.07 billion in the three months ended March 31st, up from €949 million in the year-earlier period.

Including buses and trucks, total sales rose 13 per cent.

Profitability at Mercedes-Benz has improved as a range of new vehicles including the A- and B-Class compact cars as well as its flagship S-Class hit showrooms, more than doubling the division’s return on sales from ongoing operations to 7 per cent in the quarter, up from 3.3 per cent in the year-earlier quarter.

Daimler said it aimed to increase that to 10 per cent in the medium term.

The company reiterated it saw significantly higher Ebit from ongoing business this year, despite currency headwinds of about €1 billion, which were mainly related a weaker dollar, yen and also rouble against the euro.

Daimler is still targeting a dividend payout ratio of around 40 per cent of Ebit, and will use €2.4 billion in proceeds from a sale of its stake in a power systems company to Rolls-Royce Holdings to invest in its core business rather than in a special dividend, Uebber said.

The Stuttgart-based automaker’s first-quarter results stand in sharp contrast to last year, when Daimler warned it might have to cut its profit expectations only nine weeks after it had reported full-year results, blaming a slump in car sales.

Reuters

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