Daimler Raises 2010 Ebit Target to 6 Billion Euros
Daimler AG chief executive officer Dieter Zetsche. Photographer: Nelson Ching/Bloomberg
July 27 (Bloomberg) -- Dieter Zetsche, chief executive officer of Daimler AG, discusses the outlook for the automaker and its competition with Toyota Motor Corp.’s Lexus unit and Bayerische Motoren Werke AG in the U.S. market. Daimler raised its 2010 operating profit forecast to 6 billion euros ($7.8 billion) after the company beat quarterly estimates on higher sales in China and the U.S. Zetsche speaks to Carol Massar on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
Daimler AG, the world’s second- largest maker of luxury cars, raised its 2010 operating profit forecast to 6 billion euros ($7.8 billion) after beating quarterly estimates on higher sales in China and the U.S.
The manufacturer of Mercedes-Benz cars, which said July 16 it would increase its target today, previously aimed for full- year earnings before interest and taxes of more than 4 billion euros. Stuttgart, Germany-based Daimler reported an operating loss in 2009 of 1.51 billion euros.
Daimler and rivals Bayerische Motoren Werke AG and Audi AG are benefitting from a jump in demand in China and the U.S., the world’s two biggest car markets. Daimler, also the world’s top maker of heavy trucks, has continually raised targets in 2010 on the rebounding global economy.
“Investors are selling on good news,” said Thomas Nagel, a trader at Equinet AG in Frankfurt. “Automobile shares had a good run in the last few weeks and investors were expecting good numbers from Daimler. Now that they have those numbers, they’re selling on them to take profit.”
Daimler fell 1.82 euros, or 4.2 percent, to 41.34 euros at the close of trading at 5:30 p.m. in Frankfurt. That’s the stock steepest decline in a month. Before today’s announcement, Daimler had jumped 19 percent since April 19, the day the company began raising forecasts.
Profit Advances
Second-quarter net income was 1.25 billion euros, compared with a loss of 1.02 billion euros a year earlier, Daimler said today. The carmaker was expected to report profit of 1.03 billion euros, according to the average estimate of eight analysts surveyed by Bloomberg.
Daimler said July 16 that second-quarter Ebit reached 2.1 billion euros, while sales jumped 28 percent to 25.1 billion euros. Daimler first lifted forecasts in April, raising targets for the Mercedes-Benz division twice within two months, as the global economic recovery feeds consumer demand.
“Fiscal 2010 is becoming so strong it’ll create a base effect for the coming years,” said Philippe Houchois, an analyst at UBS AG in London with a “neutral” rating on the shares. “The car companies need to generate constant earnings momentum to further drive their share prices.”
Mercedes’ deliveries in the U.S., the world’s second- biggest market, climbed 25 percent to 106,972 vehicles in the first six months. Toyota Motor Co.’s Lexus brand added 19 percent to 107,430, while BMW sales rose to 100,632 cars.
‘Best Profit’
“We’re not fighting for the highest volume, but for the best reputation, customer satisfaction and the best profit,” Chief Executive Officer Dieter Zetsche said in a Bloomberg TV interview today. “We’re making good progress on that. Whether we’ll end up slightly ahead or behind Lexus isn’t really relevant.”
Mercedes’ sales growth in China, which more than doubled in the first half to 59,600 vehicles, will be as strong in the second half as in the first, the CEO said on a conference call with analysts.
Third-quarter sales worldwide will depend on how quickly Daimler can fill orders, the CEO said, adding the carmaker used all available capacity in the first half.
Zetsche aims to push the operating margin at Mercedes to 10 percent in 2012 and said that figure shouldn’t fall below 8 percent in the near term. The carmaker is benefiting from higher prices for the S- and E-class cars, the CEO said.
“Daimler came out of the crisis faster than just about any other competitor, and their margins are already on an absolute top-level, comparable with the boom years before the crisis,” said Tim Schuldt, an analyst with Equinet AG in Frankfurt with a “buy” recommendation on the shares.
Raised Forecasts
BMW two weeks ago raised its 2010 forecast, predicting sales will rise about 10 percent to more than 1.4 million cars and sport-utility vehicles, while the operating margin at the automotive unit will exceed 5 percent.
BMW increased first-half group deliveries 13 percent while Mercedes-Benz posted a 12 percent gain. Six-month deliveries at Volkswagen AG’s Audi, which aims to dethrone BMW by 2015, advanced 19 percent.
Mercedes-Benz, BMW and Audi are adding workers and cutting summer factory breaks to boost production as demand for luxury cars returns quicker than they had planned.
Daimler has hired 1,800 temporary workers and added Saturday shifts at German assembly plants making the SLS gull- wing sports car, GLK sport-utility vehicle and E-Class convertible. Audi is running extra shifts, while BMW has added 5,000 temporary workers.
Higher Truck Demand
Daimler and competitors Volvo AB and Scania AB are also benefitting from increasing orders for commercial vehicles. Volvo, the world’s second-largest truckmaker, reported second- quarter net income that exceeded analysts’ estimates.
Daimler’s heavy truck unit posted a second-quarter operating profit of 300 million euros compared with a loss of 604 million euros a year earlier. The unit will be profitable this year in Japan, Europe and the U.S., where Daimler is pushing through price increases, Andreas Renschler, head of the truck division, said.
To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net
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