Daimler raises earnings forecast on surging Mercedes profit

MUNICH — Daimler raised its outlook for 2017 on surging profit from the Mercedes-Benz cars unit and improving commercial-vehicle operations.
The automaker predicted “significant” growth in group profit, compared with its previous forecast of only “slight” gains this year.
“We have a variety of opportunities for further profitable growth,” CEO Dieter Zetsche said Wednesday in a statement. “We do have the right products to take advantage of these opportunities and the financial strength to make the necessary investments.”
Daimler confirmed preliminary results released earlier this month, reporting first-quarter operating profit that surged 87 percent to 4 billion euros ($4.4 billion) as Mercedes widened its lead over rival BMW.
Profit at Mercedes-Benz Cars, which also makes Smart cars, rose 60 percent to 2.23 billion euros. The return on sales for the Mercedes cars unit rose to 9.8 percent from 7 percent, compared with a drop in BMW’s automaking margin to 9 percent from 9.4 percent.
Earnings also improved for Daimler’s truck business, the world’s biggest. The profit margin at the maker of Freightliner and Fuso vehicles widened to 8.4 percent from 6.4 percent. Still, that trailed a 9.9 percent first-quarter margin at Volvo AB’s trucks business
Daimler’s first-quarter profits were lifted by the revaluation of a stake in mapping company HERE, as well as by the sale of some real estate and the reversal of an impairment charge on its stake in Chinese carmaker BAIC. A stricter interpretation of EU financial reporting guidelines has forced Daimler to start giving forecasts based on unadjusted numbers, increasing the scope for one-off gains and losses to distort consensus.
R&d boost
The improved outlook shows Daimler’s confidence in being able to milk growth at Mercedes while at the same financing investment to develop next-generation vehicles.
Research and development spending jumped 24 percent to 2.1 billion euros in the first quarter as the company seeks to be at the forefront of electric and self-driving cars, accelerating the introduction of at least 10 new electric models by three years to 2022.
That spending hasn’t hurt the company’s ability to pad its coffers, with free cash flow from its industrial operations jumping to 1.9 billion euros in the quarter from about 300 million euros a year earlier.
“Daimler served up a confirmation of the strong early numbers,” said Christian Ludwig, an analyst with Bankhaus Lampe. “Especially the strong hike in free-cash-flow underscores how well their businesses are doing, and they raised their guidance too, which after the strong gains for Mercedes wasn’t completely unexpected.”
Source: Automotive News