Tags: Daimler | car | auto | profit

Daimler Scraps Profit Targets as Weak Demand Hits Earnings

Wednesday, 24 Oct 2012 03:12 PM

Daimler AG, the world’s third-biggest maker of luxury vehicles, scrapped profit targets for next year and lowered its 2012 forecast as declining demand in Europe and greater competition in China sap earnings.

The parent of Mercedes-Benz forecast full-year earnings before interest and taxes will fall 11 percent to 8 billion euros ($10.4 billion), compared with a previous target of matching last year’s 9 billion euros. The Stuttgart, Germany-based automaker also said it no longer will reach 2013 operating margin goals because of toughening market conditions.

Daimler Chief Executive Officer Dieter Zetsche, who has been losing ground to Volkswagen AG’s Audi and Bayerische Motoren Werke AG in the luxury-car sales race, plans to reduce costs by 2 billion euros by the end of 2014, according to a slideshow on the company’s Web site. VW today kept its goal of matching last year’s operating profit, while BMW, which reports earnings Nov. 6, forecasts a 2012 gain in pretax profit.

“In the light of the relative strength of VW and BMW, I’m simply shocked by the weakness of Daimler,” said Arndt Ellinghorst, a London-based analyst with Credit Suisse. “The management of Daimler is disappointing once more.”

Daimler has gained 12 percent this year, giving the German carmaker a market value of 40.4 billion euros. VW has surged 30 percent in 2012, while Munich-based BMW has climbed 17 percent.

Early Earnings

Daimler, which was scheduled to release results Thursday, is at least the third company this month to inadvertently release news earlier than planned after a U.S. spokeswoman for the carmaker accidentally e-mailed the earnings. Google Inc. blamed financial printing company R.R. Donnelley & Sons Co. last week for the premature release of results. Dow Chemical Co. said in a draft press release on Oct. 23 that it planned to cut about 5 percent of its workforce and shut 20 plants.

In a bid to reclaim the top spot in sales and profit in the luxury-car segment, Mercedes plans to cut costs under a program dubbed “Fit for Leadership.” Daimler will reduce material, production and fixed costs and cut back on research and development and capital spending, according to the earnings presentation on its Web site.

The company lowered its full-year earnings outlook for its divisions, with all units now forecast to remain below last year’s level. The car business is expected to contribute 4.4 billion euros in profit compared with 5.19 billion euros a year earlier. The Ebit in the trucks unit will fall to about 1.7 billion euros from 1.88 billion euros in 2011.

Goals Scrapped

“We are not yet at the level that we aim to reach in the medium to long term,” Zetsche said in a statement. “We have therefore initiated appropriate measures for all divisions and are thus prepared for a difficult market environment.”

Daimler Wednesday scrapped its 2013 profitability goals, which aimed to achieve a 10 percent operating margin in the Mercedes-Benz cars division and an 8 percent return on sales at the trucks unit. “The group assumes that the targets will not be met until a later date but continues to pursue them vigorously,” it said.

“They are cashing in every target for next year,” Ellinghorst said. “That’s clearly a major disappointment.”

Mercedes has also been trailing in China, where deliveries edged up 6.7 percent this year, compared with gains of more than 30 percent for BMW and Audi. To improve its fortunes, Zetsche combined two separate sales units -- one for imported vehicles and one for locally made cars -- into a single entity.

More Models

Daimler expects increased car sales in the fourth quarter on rising demand for its new A- and B-Class models. Earnings will be subdued by spending on the Chinese dealer network, the company said. The proportion of operating profit to revenue in the Mercedes-Benz division sank to 6.4 percent in the third quarter compared to 8 percent a year earlier.

Daimler aims to regain the No. 1 position in the luxury-car segment by the end of the decade after falling to third last year. To catch up with Audi and BMW, Mercedes plans to introduce 10 models by 2015, including new variants of the S-Class. The company targets sales of 1.6 million Mercedes-Banz brand cars by 2015, 25 percent more than last year.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
Companies
Daimler AG, the world's third-biggest maker of luxury vehicles, scrapped profit targets for next year and lowered its 2012 forecast as declining demand in Europe and greater competition in China sap earnings.
Daimler,car,auto,profit
712
2012-12-24
Wednesday, 24 Oct 2012 03:12 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved