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Daimler Raises Earnings Forecast on China Auto Sales Rebound

Christoph Rauwald
·2 mins read

(Bloomberg) -- Daimler AG improved its full-year profit forecast after earnings bounced back last quarter, helped by robust sales in China and cost cuts starting to bear fruit at the maker of Mercedes-Benz luxury cars.

Daimler now expects earnings before interest and taxes at the prior-year level, from lower than last year previously, the Stuttgart, Germany-based manufacturer said Friday in a statement. It anticipates markedly higher industrial free cash flow but also warned that group revenue will decline significantly because of the pandemic. Daimler released preliminary results last week that well exceeded analysts estimates.

The company’s more upbeat earnings outlook adds to evidence of a global auto industry recovery after manufacturers including BMW AG and Tesla Inc. posted better-than-expected third-quarter figures. Renault on Friday reported sales that topped estimates. Daimler navigated the steepest industry slump since World War II triggered by the Covid-19 pandemic better than feared mainly because of a swift rebound in its largest market China. The country is set to be the first globally to bounce back to 2019 volume levels, albeit only by 2022, according to researchers including S&P Global Ratings.

Chief Executive Officer Ola Kallenius also made progress restoring confidence among investors that his deepened restructuring push is gaining traction after a bumpy start. The CEO wants the luxury-car and truck maker to put less emphasis on volume and more on improving returns in the midst of a costly shift to electric vehicles.

Daimler targets an adjusted Ebit margin of between 4.5% and 5.5% for the full year at the unit that comprises the car and van operations. The margin goal for the trucks division, one of the world’s largest producers of commercial vehicles, is between 1% and 2%.

Read more: Mercedes Maps Out Push to Boost Profits Amid Electric Shift

Daimler noted that its outlook is based on economies averting further lockdowns. Countries including Germany and France, where Daimler runs factories, experience record infections and governments scramble for an adequate response.

Daimler’s main labor union IG Metall and employer association Suedwestmetall urged people to adhere to social distancing and hygiene rules. A further spread of the coronavirus would not just threaten public health, “but the economic survival of companies -- and many jobs,” IG Metall’s regional chief and Daimler supervisory board member Roman Zitzelsberger said Thursday in a statement.

Daimler shares have declined 3% this year, valuing the company at about 51 billion euros ($60 billion). While the stock has fared better than that of German rivals Volkswagen AG and BMW, Tesla Inc. zoomed past everyone this year to become the world’s most valuable automaker.

(Updates with details on outlook in second paragraph.)

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©2020 Bloomberg L.P.

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