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Daimler closes gap with BMW, Audi as profit jumps

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Record sales of luxury Mercedes-Benz cars helped Daimler to beat first-quarter earnings forecasts and close its profitability gap with German rivals BMW and Audi.

[BERLIN] Record sales of luxury Mercedes-Benz cars helped Daimler to beat first-quarter earnings forecasts and close its profitability gap with German rivals BMW and Audi.

Daimler's flagship Mercedes-Benz division has lagged BMW and Audi on deliveries and profitability in recent years, but demand for the revamped C-Class saloon and a growing lineup of more profitable sport-utility vehicles (SUVs) are proving a boon. "Daimler is revving up and closing in on rivals," said NordLB analyst Frank Schwope, keeping his "buy" rating on the stock. "The next two business years should be fairly profitable," he added.

Group adjusted earnings before interest and tax (Ebit) jumped 41 per cent to 2.93 billion euros (S$4.23 billion), beating the 2.65 billion forecast in a Reuters poll.

The return on sales from ongoing business at Mercedes-Benz Cars came in at 9.2 per cent, up from 7 per cent a year ago and nearing the 9.6 per cent posted in 2014 by both BMW and Audi, which publish quarterly results next week.

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Record deliveries last month in Europe, China and the United States drove quarterly car sales up 18 per cent year on year to 459,708 models, Stuttgart-based Daimler said.

Daimler reiterated it expects significant growth in deliveries, revenue and EBIT from ongoing business this year.

Mercedes-Benz is pushing a raft of SUVs this year, including the all-new GLE coupe and the GLC model, successor to the GLK compact SUV. The brand, which last month started sales of the CLA coupe and the AMG GTS sports car, will also roll out a reworked A-Class. "Our growth strategy, our product offensives and our efficiency programmes are paying off," Chief Executive Dieter Zetsche said.

The shares rose as much as 3.5 per cent and were trading up 1.9 per cent to 91.21 euros at 0915 GMT.

Daimler Trucks, the group's No.2 division by sales contributing a quarter to overall revenue, saw earnings rise by more than half as growth in North America offset plunging demand in Brazil.

Volkswagen's truck unit MAN SE, which lacks business in North America, said on Tuesday the slump in Brazil caused first-quarter profit to drop by half, further complicating VW's efforts to forge an alliance of its MAN and Scania truck brands.

Unlike VW, which is grappling with the fallout of a two-week leadership dispute, Daimler has a settled top team. The supervisory board chairman and its top labour representative this month backed CEO Zetsche to stay in office through 2019.

REUTERS

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