Mercedes reports strong cash flow on lower working capital

MERCEDES-BENZ Group reported better-than-expected industrial cash flow for last year, helped by lower working capital levels and a favourable cash conversion rate.

Industrial cash flow amounted to 11.3 billion euros (S$16.4 billion), slightly above the prior-year level, the luxury car maker said late Thursday (Feb 1), detailing preliminary figures. That was above the 9.5 billion euros average of analysts’ estimates compiled by Bloomberg.

Automakers have benefited from high order banks that accumulated during years of severe supply-chain disruption, which are now slowly returning to normal. This has helped offset global economic headwinds following the surge in interest rates, while premium-car buyers are less exposed to inflation and more costly funding pressures.

To finance the shift to electric vehicles and bolster profits, Mercedes is directing resources away from entry-level vehicles to top-end models such as the S-Class sedan or AMG performance cars.

During the first half of last year, a well-filled order book allowed the manufacturer to command higher prices as shortages of semiconductors still limited output. But in October, Mercedes said that margins had started to fall on higher costs and lower average car prices.

Mercedes did not detail other results besides cash flow, saying measures such as group earnings before interest and taxes are not subject to ad-hoc disclosure rules. The Stuttgart-based company is due to report full-year earnings on Feb 22. BLOOMBERG