Daimler Sees Second-Half Gains as Europe Bottoms Out

Daimler AG, the world’s third-largest maker of luxury vehicles, forecast significant gains in second-half earnings as the western European auto market bottoms out and new models spur demand.

Backed by vehicles like the new Mercedes-Benz CLA compact four-door coupe and a new generation of the top-of-the-line S-Class, Daimler expects to grab market share in the second half, Chief Executive Officer Dieter Zetsche said today. In addition to improved sales prospects, cost-cutting efforts are proceeding better than the company had anticipated, he said.

“Profits have already improved and the majority of the planned savings are expected in the second half of the year,” said Daniel Schwarz, a Frankfurt-based analyst with Commerzbank. “This gives increased confidence that the earnings will improve sequentially in the coming quarters.”

Daimler has countered a drop in European car sales to a two-decade low by expanding its lineup with new entry-level vehicles like the A-Class hatchback. The manufacturer also plans to add more high-end offerings such as the stretched Pullman version of the S-Class. In all, it plans to roll out 13 new models that have no predecessor over the next eight years in a bid to overtake No. 1 Bayerische Motoren Werke AG in luxury-car sales by the end of the decade.

Shares Drop

Mercedes failed to close the gap to rivals in the first half. Car sales increased 6.4 percent to 694,433 cars and sport-utility vehicles. Deliveries of Bayerische Motoren Werke AG’s namesake brand advanced 7.7 percent to 804,248 vehicles. Sales for Volkswagen AG’s Audi rose 6.4 percent to 780,500.

Spending by the Daimler passenger-car unit to roll out new models contributed to a drop in profitability in the second quarter. The operating profit margin fell to 6.4 percent from 8.7 percent a year ago.

Daimler shares fell as much as 2.1 percent to 51.57 euros and were down 0.9 percent at 10:35 a.m. in Frankfurt trading. The stock has surged 26 percent this year, valuing the company at 55.7 billion euros ($73.7 billion).

Daimler forecast industrywide demand in western Europe to show “gradual improvement” in the second half as sales seem to have “bottomed out,” the company said today in a statement.

The second-half boost won’t totally offset a weak first six months. Daimler reiterated that full-year earnings before interest, taxes and one-time items will decline from 2012’s 8.1 billion euros on weaker profit at Mercedes. Ebit from ongoing business was 3.07 billion euros in the first half, a decline of 31 percent.

‘No Complacency’

Daimler’s second-quarter Ebit more than doubled to 5.24 billion euros, lifted by 3.21 billion euros in proceeds from the sale of shares in the parent of planemaker Airbus SAS, the company said, reiterating figures released July 12. Excluding one-time items, Ebit fell 8 percent to 2.14 billion euros.

Sales in the period advanced 2.8 percent to 29.7 billion euros. Net income attributable to shareholders of the company, which is also the world’s largest maker of heavy-duty trucks, surged to 2.83 billion euros from 1.48 billion euros a year ago.

Zetsche last year postponed a goal of earning 10 percent margins from cars to 2014 at the earliest -- four years later than originally planned. To help reach that target, the division, which is run by the Daimler CEO, plans to lower spending by 2 billion euros by the end of next year, under a savings program dubbed “Fit for Leadership.”

The better second-quarter results “represents progress in our earnings development, but no cause for complacency,” Zetsche said today. “We will continue to work hard on achieving our goals.”

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