Daimler AG yesterday improved its full-year profit forecast after earnings bounced back in the third quarter, as it posted robust sales in China and cost cuts started to bear fruit at the maker of Mercedes-Benz vehicles.
Daimler expects earnings before interest and taxes to match last year’s level, after previously forecasting a fall.
The Stuttgart, Germany-based manufacturer anticipates markedly higher industrial free cash flow, but also warned that group revenue would decline significantly because of the COVID-19 pandemic.
Photo: EPA-EFE
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 results.
Renault SA yesterday posted sales that topped estimates.
Daimler navigated the steepest slump since World War II — triggered by the pandemic — better than feared, mainly because of a swift rebound in China, its largest market.
The nation is set to be the first to bounce back to last year’s levels, albeit only by 2022, according to researchers including S&P Global Ratings.
Daimler shares rose as much as 2.5 percent in early Frankfurt trading. That helped drive the STOXX Europe 600 Automobiles & Parts Index to a 1.5 percent gain, with French tire maker Michelin SCA and Renault among the biggest winners.
Daimler chief executive Ola Kallenius also made progress restoring confidence among investors that his deepened restructuring push is gaining traction after a bumpy start.
Kallenius wants the automaker to put less emphasis on volume and more on improving returns in the midst of a costly shift to electric vehicles.
Daimler is targeting an adjusted earnings before interest and taxes margin of between 4.5 percent and 5.5 percent for the full year at the unit that comprises the passenger vehicle and van operations.
The margin goal for the trucks division, one of the world’s largest producers of commercial vehicles, is between 1 percent and 2 percent.
Daimler said that its outlook is based on economies in its most important markets averting further lockdowns and normalizing.
Nations, including Germany and France, where Daimler runs factories, have experienced record COVID-19 infections and governments are scrambling for an adequate response.
Fourth-quarter demand so far has been “encouraging,” and is expected to be higher than the third quarter, but lower than the same period last year, Daimler chief financial officer Harald Wilhelm said during a telephone call with analysts.
Daimler released preliminary results last week that were well above analyst estimates.
The company’s main union, IG Metall, and employer association Suedwestmetall have urged people to adhere to social distancing and hygiene regulations.
A further spread of COVID-19 would threaten “the economic survival of companies — and many jobs,” IG Metall regional chief and Daimler supervisory board member Roman Zitzelsberger said on Thursday.
Daimler shares have declined 1 percent this year, valuing the company at about 52 billion euros (U$61.6 billion).
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