Mercedes E-Class Demand Lifts Daimler Earnings Above Forecasts
Strong third-quarter sales of the Mercedes E-Class helped Daimler post €470 million in earnings before interest and taxes, beating analyst estimates after a period of losses.
Mercedes-Benz parent Daimler AG reported third-quarter earnings and cash flow above analyst forecasts, as robust demand for the E-Class saloon contributed to a sharp turnaround after three consecutive quarters of losses. The Stuttgart-based group posted earnings before interest and taxes (Ebit) of €470 million on sales of €19.3 billion, exceeding UniCredit analyst Georg Stuerzer’s Ebit prediction of €246 million.
Mercedes-Benz Cars, which includes the E-Class, saw its operating profit more than triple to €355 million from €112 million a year earlier. Daimler attributed the improvement to increased sales of high-end models, with the E-Class and S-Class both performing strongly despite the wider economic downturn.
E-Class and S-Class Lead Recovery
The E-Class’s sales momentum ended a run of losses for Daimler and supported the group’s financial recovery. According to the company, the E-Class played a central role in lifting Mercedes-Benz Cars’ profitability, while the S-Class also contributed to the improved results. The trucks division, although still affected by weak European demand, managed to stabilise its performance during the quarter.
Daimler also reported free cash flow from its automotive businesses of €2 billion for the quarter. The company’s share price rose by 7% to €37.62 in Frankfurt trading following the announcement, the steepest increase in more than four months, giving the manufacturer a market value of €39.9 billion.
Production and Employment Adjustments
Earlier in the year, Daimler had cut output sharply as the global economic crisis hit demand, with production cuts peaking in April when up to 68,000 employees in Germany were placed on reduced hours. By the end of the third quarter, the number of staff on shortened work weeks had been reduced to 27,400, according to company figures.
Analyst Reaction and Outlook
UniCredit analyst Georg Stuerzer commented that while the economic crisis was not over, Daimler had regained control of its situation. The focus on higher-margin models such as the E-Class and S-Class has been key to offsetting weakness in other segments, particularly trucks. The group’s performance in the quarter suggests that premium product demand can still drive recovery even in challenging market conditions.
Daimler’s results will be closely watched by competitors and suppliers, as the E-Class’s success demonstrates the potential for premium saloons to support profitability during periods of wider market uncertainty. For more on Mercedes-Benz’s recent product developments, see Mercedes C-Class facelift brings new engines and tech for 2011.
