Daimler Lowers Profit Forecast After First-Quarter DropDorothee Tschampa
Daimler AG, the world’s third-largest maker of luxury vehicles, cut its 2013 profit forecast after first-quarter earnings tumbled more than analysts expected, burdened by weaker Mercedes-Benz sales in China.
Earnings before interest and taxes and excluding one-time items will fall this year rather than match 2012’s 8.1 billion euros ($10.6 billion) as previously predicted, the Stuttgart, Germany-based company said in a statement today. Daimler’s first-quarter Ebit plunged 56 percent.
“In the first three months of this year, many markets developed worse than expected for economic reasons, especially Western Europe,” Chief Executive Officer Dieter Zetsche said in the statement.
Mercedes has been falling further behind competitors since losing the top spot in global luxury-car sales to Bayerische Motoren Werke AG in 2005 and second place to Volkswagen AG’s Audi brand in 2011. In addition to combating slumping demand in Europe, Mercedes sales declined 11 percent in China as it restructures its business in the country.
Ebit in the first quarter fell to 917 million euros from 2.1 billion euros, said Daimler, which is also the world’s biggest truckmaker. Profit missed the 1.06 billion-euro average of 11 analyst estimates compiled by Bloomberg. Sales fell 3 percent 26.1 billion euros.
“The results are a little disappointing,” said Christian Ludwig, a Dusseldorf-based analyst with Bankhaus Lampe. After delaying long-term profit targets in 2012, “this year will probably be another transition year. Its guidance remains quite vague.”
Daimler rose as much as 1.5 percent to 41.50 euros and was up 1 percent at 9:24 a.m. in Frankfurt trading. The stock has gained 9.1 percent over the past six months, valuing the company at 44.1 billion euros.
Profit at the Mercedes cars division tumbled 63 percent to 460 million euros as revenue slipped 6 percent to 14.1 billion euros. The unit’s return on sales declined to 3.3 percent from 8.2 percent a year ago. Daimler predicted the unit’s earnings will fall for the full year.
Truck Ebit dropped 69 percent to 116 million euros as sales fell 5 percent to 7.02 billion euros. Daimler forecast 2013 truck profit to match last year’s level.
“It’s surprising that Daimler still expects flat Ebit in the trucks unit after this weak start of the year,” Ludwig said. “Daimler still shows some optimism that might not be justified.”
European new car registrations are at a two-decade low as a recession stemming from the region’s sovereign-debt crisis discourages consumers from making larger purchases. Industrywide first-quarter deliveries in the region dropped 9.7 percent to 3.1 million cars as demand in Germany, its biggest economy, plunged 13 percent. European sales by Mercedes in March rose 0.8 percent, compared with drops of 4.5 percent at BMW and 15 percent at Audi.
The company still expects earnings to improve in the second half of the year, lifted by new models including Mercedes CLA compact four-door coupe, an updated version of the upscale E-Class and a new generation of the S-Class flagship.
Worldwide first-quarter sales by Mercedes rose 3.5 percent to 324,898 cars and sport-utility vehicles, based on demand for the A- and B-Class compacts and the M-Class SUV line-up. That compares to a 6.8 percent jump to 369,500 cars and SUVs for Audi. BMW’s deliveries jumped 7 percent to 381,404 autos.
Zetsche’s pledge to regain the No. 1 spot in luxury-car sales by the end of the decade involves rolling out 13 new Mercedes models with no predecessor in the next eight years, including two variants of the S-Class on top of three versions already on offer.
“Daimler is now in the middle of the most comprehensive growth offensive in its history,” Zetsche said. “To this end, we are investing large amounts in products, technologies and markets.”
Spending on factories and equipment totaled 1.6 billion euros in the first quarter, leading to negative free cash flow of 1.2 billion euros in the period.
The catch-up strategy hinges on Daimler’s ability to fix its business in China, where expansion last year was hindered by sales organizations splitting responsibility for imported and locally produced cars. Daimler has formed one distribution entity, and the carmaker sent former Mercedes heavy-truck unit manager Hubertus Troska to China in December to oversee the company’s business there.
Daimler today also said that it extended the contract of Christine Hohmann-Dennhardt by three years to the end of February 2017. The 62-year-old former judge at Germany’s constitutional court oversees legal affairs and compliance issues at the company.