Daimler’s Mercedes Sustains Margins, Sees Boost From E-Class

  • Adjusted profit margin was 10% at Mercedes-Benz Cars division
  • CFO says 400 million-euro provision was linked to cartel fines

Daimler AG maintained profitability at the Mercedes-Benz Cars unit in the second quarter, even as it spent money to introduce a new version of the E-Class sedan, a model it said will boost returns the rest of the year.

Adjusted for special items, the return on sales was 10 percent at the division, which includes the Smart city car brand, compared with 10.6 percent a year earlier, the Stuttgart, Germany-based company said Thursday in a statement. Including one-time charges related to recalling cars with faulty Takata Corp. air bags, the profit margin dropped to 6.4 percent from 10.5 percent last year.

“It’s good to see the adjusted return on sales in the cars division back in the double-digits with the E-Class launching,” said Sascha Gommel, a Frankfurt-based analyst at Commerzbank AG. “It’s a strong result across the board.”

Mercedes caught up with BMW to become the world’s biggest luxury-car maker in the first half of the year after expanding its lineup of sport utility vehicles and giving its core models a style overhaul to appeal to younger consumers. The E-Class business sedan that went on sale in March completed the decade-long design upgrade. BMW had already filled out its range of rugged crossovers, leaving the company with fewer niches to exploit for growth.

Second Half

“The second half of the year is expected to be significantly stronger than the first,” Daimler Chief Executive Officer Dieter Zetsche said on a conference call with reporters. “We currently have the youngest product portfolio among our competitors.”

The shares rose 1.4 percent to 59.47 euros at 11:08 a.m. in Frankfurt. Daimler has dropped 23 percent this year as it outlined significant spending plans on new technology and faced lower sales for its top-of-the-line S-Class sedan, which is due for a facelift soon.

Second-quarter group adjusted earnings before interest and taxes rose 5.6 percent to 3.97 billion euros ($4.37 billion), driven by gains in the vans and bus units, Daimler said. Revenue rose 2.9 percent to 38.6 billion euros. Adjusted Ebit at the Mercedes-Benz Cars unit fell 1.1 percent to 2.21 billion euros. The company stuck with a forecast of slightly higher adjusted Ebit for both Mercedes-Benz and the group this year.

A 400 million-euro provision for legal expenses was related to cartel fines, Chief Financial Officer Bodo Uebber said on a conference call with reporters. Daimler, also the world’s biggest truckmaker, was among companies to agree to pay a record European Union fine this week for fixing vehicle prices for more than 14 years. Daimler’s share of the fine was 1.01 billion euros. Germany’s antitrust regulator also raided Daimler’s offices last month in a probe of steel purchasing by the auto industry.

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