Daimler Profit Misses Analysts' Estimates on Mercedes Development Spending
Daimler’s Profit Misses Estimates on Mercedes Costs
Andrew Harrer/Bloomberg
Mercedes-Benz’s fourth-quarter profit margin declined to 8.3 percent from 9.5 percent in the third, as Daimler boosted the unit’s development spending by 15 percent to 3.1 billion euros in 2010.
Mercedes-Benz’s fourth-quarter profit margin declined to 8.3 percent from 9.5 percent in the third, as Daimler boosted the unit’s development spending by 15 percent to 3.1 billion euros in 2010. Photographer: Andrew Harrer/Bloomberg
Daimler Chief Executive Officer Dieter Zetsche
Guenter Schiffmann/Bloomberg
Daimler Chief Executive Officer Dieter Zetsche gestures during a news conference in Stuttgart.
Daimler Chief Executive Officer Dieter Zetsche gestures during a news conference in Stuttgart. Photographer: Guenter Schiffmann/Bloomberg
Daimler AG, the world’s second- largest maker of luxury vehicles, posted earnings before interest and taxes that missed estimates after boosting development spending for Mercedes-Benz cars. The shares dropped.
The fourth-quarter operating profit of 1.56 billion euros ($2.11 billion) missed the average estimate of 16 analysts surveyed by Bloomberg for profit of 2.03 billion euros. Sales rose 24 percent to 26.4 billion euros, the Stuttgart, Germany- based carmaker said in a statement today.
Mercedes’ fourth-quarter profit margin declined to 8.3 percent from 9.5 percent in the third, as Daimler boosted the unit’s 2010 development spending 15 percent to 3.1 billion euros. Daimler will invest more than 20 billion euros on models and factory upgrades in the next two years, up from 18 billion euros in the previous two-year plan, to close the gap with Bayerische Motoren Werke AG and fend off Volkswagen AG’s Audi.
“The big disappointment is with Mercedes,” said Stefan Bauknecht, a fund manager with DWS Investments in Frankfurt. “It dampens the short-term enthusiasm, but the big picture is still intact.”
The manufacturer, also the world’s largest truckmaker, fell as much as 2.45 euros, or 4.4 percent, to 53.53 euros, the steepest decline since Jan. 20. The stock traded at 54.11 euros as of 2:06 p.m. in Frankfurt, valuing the carmaker at 57.6 billion euros. Before today, the shares had gained about 50 percent since the end of 2009.
Missing Estimates
Daimler reported fourth-quarter net income of 1.14 billion euros, compared with a loss of 352 million euros a year earlier. The figure missed the average estimate of 1.28 billion euros.
Operating profit this year will “significantly” exceed the 2010 level of 7.27 billion euros on record deliveries for Mercedes-Benz vehicles. The manufacturer recommended a dividend of 1.85 euros per share, reinstating the payout after canceling it in 2009 amid uncertainty about auto markets following the global recession.
“There’s nothing seriously wrong, but the market was simply expecting more,” said Juergen Pieper, a Bankhaus Metzler analyst in Frankfurt with a “buy” rating on the shares. “The big question is whether the rally for auto stocks is over.”
Growing wealth in China and recovering spending in the U.S. has boosted demand for luxury cars. Mercedes, BMW and Audi are targeting record sales this year and are struggling to produce enough vehicles to meet demand. Tight vehicle supply is causing delivery delays in Germany, as manufacturers shift cars to the U.S. and China, PricewaterhouseCoopers LLP said in a study released Feb. 4.
Factory Limits
Daimler Chief Executive Officer Dieter Zetsche said last month growth this year will be constrained by factory limits rather than demand as customers snatch up the updated C-Class sedan. Delivery times for build-to-order cars in Germany have climbed to 12.9 weeks on average compared with a typical waiting period of eight weeks, PricewaterhouseCoopers said in the study.
“Although the rise in automobile demand will slacken somewhat, there are many indications that our industry will sell more passenger cars than ever before,” Zetsche said at a press conference in Stuttgart.
Global auto demand is likely to rise in the range of 5 percent to 7 percent this year, driven by China, the U.S. and Germany, the company said.
Revamped Vehicles
Daimler, which traces its roots to the first automobiles invented by Carl Benz and Gottlieb Daimler in 1886, has revamped the CLS luxury coupe and SLK roadster and upgraded the C-Class, its best-selling model, with a new interior. The company will also start rolling out four compact models, when it debuts an overhauled B-Class later this year.
Daimler’s trucks unit, which makes Mercedes, Freightliner and Fuso vehicles, aims to average a return on sales of 8 percent over the next three years after shutting plants in Asia and North America during the recession. The company predicts sales over the period to rise more than 40 percent to at least 500,000 vehicles, boosted by a new Indian model line.
The truck operations posted a fourth-quarter Ebit of 393 million euros after a loss of 224 million euros a year ago. Sales should rise “substantially” this year as industrywide demand grows as much as 25 percent in North American and up to 20 percent in Europe, Daimler said.
EADS Stake
Daimler plans to continue to exercise Germany’s voting authority in European Aeronautic Defence & Space Co., even if it sells its stake Chief Financial Officer Bodo Uebber said. The company said it was interested in a “stable” long-term shareholder structure for the Airbus SAS parent that would balance French and German interests.
Uebber declined to comment on how Daimler, a founder of EADS, might retain a role at the aerospace company if it sells its 15 percent stake. German politicians have been debating purchasing the stake in the event the manufacturer sells.
Daimler yesterday appointed Christine Hohmann-Dennhardt, a former constitutional judge, to a new management board post overseeing compliance and legal affairs. She’s the first woman board member in the company’s 125-year history. Daimler’s supervisory board also extended the contract of CFO Uebber through the end of 2014.
To contact the reporter on this story: Chris Reiter in Berlin at creiter2@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.
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