Daimler Cautiously Optimistic As Earnings Rise

04/27/2012| 07:24am US/Eastern

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-- Earnings rise on EADS stake, rising vehicle sales and favorable tax rate

-- No change to full-year outlook

-- China disappoints

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  By Christoph Rauwald 
  Of  
 

Daimler AG (>> Daimler AG) Friday gave a cautiously optimistic outlook for the full year as the German auto maker reported higher first-quarter earnings due to rising vehicle sales, lower interest charges and a favorable tax rate.

"Despite higher investment in future growth and a challenging market environment, we succeeded in surpassing the very good prior-year results," Chief Executive Dieter Zetsche said.

Net profit rose 26% on the year to EUR1.34 billion, while earnings before interest and taxes were up 4.8% at EUR2.13 billion, beating expectations. Revenue rose 9.2% year-on-year to EUR27.01 billion on a 9% rise in sales to 502,086 cars, vans and trucks.

Daimler reiterated it expects full-year revenue to improve compared with 2011, driven by higher vehicle sales. Full-year Ebit is anticipated to be around last year's level as costs for broadening its product line and expanding production capacity will weigh on earnings this year.

Global luxury-car makers have felt little impact so far from the woes embroiling mass-market manufacturers, who face a raging price war in Europe as demand for new vehicles shrinks amid economic concerns and austerity measures.

Volkswagen AG's (VOW.XE) Audi brand has moved up to second behind BMW AG (>> Bayerische Motoren Werke AG) and pushed Mercedes-Benz into third place in the premium car market, fueled by booming sales in China and North America. Both BMW and Audi also have higher profit margins than Mercedes-Benz, which has sparked criticism from investors.

Zetsche has described 2012 as a transition year as part of his ambitious plan to make its core Mercedes-Benz unit the world's bestselling luxury-car maker again by 2020 but Daimler admitted the crucial Chinese auto market hadn't developed as well as it predicted at the start of the year. Chief Financial Officer Bodo Uebber reiterated higher price discounts given on certain Mercedes-Benz models in China at the beginning of the year amid model changeovers have been reduced again.

The Mercedes-Benz Cars division, which comprises the Mercedes-Benz, Smart and Maybach brands, contributed EUR1.25 billion to first-quarter Ebit after EUR1.29 billion last year. Earnings at Daimler's truck and van units came in lower as well and the loss at the bus division widened.

But Daimler's share in European Aeronautic Defence & Space Co. EADS NV (>> EADS) and other reconciliation effects led to a EUR86 million contribution to Ebit from a EUR131 million loss last year.

At 1019 GMT, Daimler shares were down 2% at EUR41.80, while the DAX30 bluechip index edged down 0.1%. Traders cited profit taking as reason for the falling stock.

-By Christoph Rauwald, Dow Jones Newswires; +49 69 29 725 512; christoph.rauwald@dowjones.com

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