Daimler sees little tailwind
DAIMLER might need to revise its full-year profit goal after the car and truck maker warned that European automotive markets were weaker than expected at the start of the year.
DAIMLER might need to revise its full-year profit goal after the car and truck maker warned that European automotive markets were weaker than expected at the start of the year.
At the German group’s annual meeting in Berlin, Daimler CE Dieter Zetsche said: “Not much tailwind is anticipated from the markets in the coming months. For Europe in particular, there are no signs of a trend reversal.”
He said Daimler would, therefore, “reassess whether its previous market-related assumptions for 2013 are still valid”.
The company said it would provide further information on market and earnings expectations for the full year when it reports firstquarter results on April 24.
Daimler’s Mercedes-Benz car division has been hit by weak sales in China and has lagged behind its premium sector rivals due to an ageing model line-up that Daimler is in the process of renewing.
Daimler’s truck division is also facing weaker demand as cautious customers remain reluctant to invest in big-ticket purchases.
Citi Research warned in a recent note that “investors may have got ahead of themselves in their bullishness regarding a fullyear 2013 recovery”.
Still, Daimler shares traded 2.9% higher at €42.04 by early afternoon yesterday, as investors were relieved the vehicle group’s outlook was not even more negative. The stock has declined 2.1% this year, valuing the company at ¤43.2bn.
Chief financial officer Bodo Uebber had warned at the end of last month that operating profit in the first quarter would “very clearly be below the level of the fourth quarter”, saying it “should mark the low point for the year”.
The Stuttgart-based company was forced to lower its 2012 earnings target in October and pushed back key divisional profit margin targets from 2013 due to a “significant worsening of the market environment”.
Daimler’s 2012 earnings before interest and taxation from continuing business declined from €9bn in 2011 to €8.1bn.
In February it issued a cautious outlook for this year saying that income from continuing businesses would be about the same as last year and earnings from its core Mercedes-Benz car division would decline slightly.
Mr Zetsche yesterday reiterated Mercedes-Benz’s goal to retake the lead from BMW and Audi in the premium car sector by 2020. Mercedes lost the leading position in luxury-car sales to BMW in 2005 and sank to third behind Audi in 2011. The company last year also posted the weakest profitability of the three, with car earnings at 7.1% of sales compared with BMW’s 10.9% margin and Audi’s 11%.
“We are Daimler. We don’t only want to get better. We want to beat the competition — on a permanent basis,” he said.
But he added that the company would not sacrifice profits in the process. “We don’t want to grow at any price. Our growth has to be sustainably profitable.”
Daimler aims to save a total of €4bn across its various divisions by the end of next year.
Some investors vented frustration with Daimler’s underperformance at the annual general meeting yesterday.
Mr Zetsche’s contract was renewed in February for three years instead five as expected.
The company expects earnings in the second half of 2013 to be higher than the first, thanks partly to the launch of new models.
Shareholders were to vote later on a dividend proposal of ¤2.20 for last year, unchanged from the previous year. Investors are also being asked to approve the appointment of Andrea Jung, the former CEO of cosmetics maker Avon Products, to Daimler’s supervisory board. Financial Times, Bloomberg