Mercedes-Benz maker swings to profit in Q3

FRANKFURT: German carmaker Daimler AG yesterday reported a return to profit in July-September quarter after booking its first quarterly loss in 10 years in the second quarter, but said more work “is ahead as it confronts a slowing global market.’’

Strong sales of Mercedes-Benz cars helped lift the company’s net profit 3% year-on-year, to €1.8 billion ($2 billion), chief executive officer Ola Kallenius said.

But the recently-installed boss reiterated that the Stuttgart-based firm must continue cutting costs to be fit for the future.

Revenues were up 8%, at £43.3 billion, with operating or underlying profit growing at the same pace, to £2.7 billion.

Over the full year, Daimler confirmed that it expects revenue “slightly above” 2018’s level, while operating profit will be “signficantly below” last year’s €11.1 billion.

It has already lowered expectations twice, hit by recalls over alleged diesel cheating and faulty Takata airbags as well as weaker-than-expected growth in the global car market.

Trade conflicts have weighed heavily on the auto sector, as has continued uncertainty over British-European business after Brexit.

But investors were encouraged by Daimler’s results, with the stock adding 4.7% to trade at €52.79 around 10.30 a.m.

That was despite the profit margin at the flagship Mercedes-Benz cars division — watched closely by markets as an indicator of the firm’s health — sliding 0.3 percentage points, to 6%.

Kallenius warned that “in order to master the transformation in the next few years, we need to increase our efforts considerably”.

“A cost-cutting drive launched under previous boss Dieter Zetsche will press on, targeting all costs in all business areas,” chief financial officer Harald Wilhelm said.

“While we want to improve Daimler’s efficiency over the short and over the medium term,” he said, there would be “no 180-degree turn” on high-priority investments like electric cars and automated driving.

Daimler’s hunt for cash intensified when it was forced to set aside €4.2 billion in provisions in the second quarter, covering a massive recall of cars allegedly fitted with software to cheat emissions tests.

The move pushed it into a net loss of €1.2 billion in April-June.