Daimler profit jumps 10%

D aimler

AG reported a 10% rise in third-quarter profit, buoyed by robust demand for Mercedes-Benz luxury cars as the brand rolls out the revamped E-Class sedan and woos new buyers with a broader slate of sport utility vehicles.

Adjusted earnings before interest and taxes increased to €4.01 billion ($4.37 billion) from €3.66 billion a year ago as growth at Mercedes more than offset a slump at the trucks division, the Stuttgart, Germany-based company said in a statement yesterday.

Adjusted for one-time charges such as recalling cars with faulty Takata Corp airbags, operating profit at the Mercedes-Benz Cars division, which includes the urbanfocused Smart brand, surged 23% to €2.66 billion in the third quarter. Its return on sales widened to 11.4% from 10.4% a year earlier.

Deliveries of Mercedes-Benz cars jumped 12% in the first nine months of 2016, bolstered by a 30% surge in China helped by new SUVs like the sporty coupe versions of the GLC and GLE.

Earnings at Daimler’s truck division, which cut its profit forecast in May because of lower demand in the US and Middle East, tumbled 37% to €510 million, pushing the adjusted return on sales to 6.5%, below an 8% target.

Truck deliveries dropped 24% to 97,100 vehicles in the quarter, prompting Daimler to reduce output in key markets like Brazil.

While Daimler stuck to a forecast of earnings this year being “slightly” higher than 2015’s €13.8 billion, the company became more cautious on its expectations for sales.

Daimler now predicts revenue to remain flat compared with last year. It had previously forecast a slight rise.

The cut was mostly related to weaker demand for trucks in North America, chief financial officer Bodo Uebber said on a call with reporters.

Separately yesterday Volvo AB, the world’s second-largest truckmaker, said third-quarter operating profit fell 4.7% as a downturn in US heavy-truck demand outweighed a program to reduce costs.

Adjusted earnings before interest and taxes decreased to 4.85 billion kronor ($545 million) from 5.09 billion kronor a year earlier, the Gothenburg, Sweden-based manufacturer said in a statement.

Revenue dropped 6.1% to 68.8 billion kronor.