February 7, 2013 9:24 am

Daimler issues cautious outlook for 2013

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Mercedes-Benz continues its forward march©Bloomberg

Mercedes-Benz continues its forward march

Daimler has issued a cautious outlook for 2013, saying that income from ongoing businesses would be about the same as last year and earnings from its core Mercedes-Benz car division would decline slightly.

The German premium car and truckmaker expects that, following a weak first quarter, earnings will improve in the second half of the year thanks to the launch of new models, macroeconomic improvement and cost savings. 

However, Daimler declined to say when long-term divisional profit targets, including a 10 per cent return on sales at Mercedes-Benz, would be achieved. In October it pushed back these targets from 2013 because of the “significantly worse market conditions”.

The world’s biggest truckmaker by sales expects the North American medium and heavy truck market to decline 5-10 per cent this year “as a result of the uncertainty about the country’s fiscal problems”, continuing the trend of softening demand seen at the end of last year.

The European truck market may decline a further 5 per cent, Daimler said, but this would be offset by improvements in Brazil. As a result the company expects a “slight increase” in truck unit sales this year after a weak start.

The Stuttgart-based company experienced a “year of transition” last year as investments in new models and pricing pressure caused margins to weaken, while unit sales lagged behind rivals with younger models and products including small SUVs, which Mercedes-Benz does not yet have. The car unit plans €2bn in cost savings by the end of 2014 to help improve earnings.

Daimler’s group earnings before interest and taxation from ongoing business declined from €9bn in 2011 to €8.1bn, in spite of a more than €950m positive currency impact because of the weak euro. For 2013 Daimler expects around €200m in currency headwinds following a strengthening of the single-currency.

Full-year net profit increased 8 per cent to €6.5bn thanks to a €709m gain on sale of a 7.5 per cent stake in aerospace and defence group EADS. Daimler kept its dividend at €2.20.

“It is a fact that we did not reach our own targets for earnings and profitability,” said Dieter Zetsche, chief executive. “To ensure that our future growth is even more profitable, we have implemented detailed measures in all divisions that will further increase our efficiency.”

Mercedes could begin to regain ground later in 2013 when new versions of its high-margin E and S-Class saloons are launched. Overall the company expects to set a new unit-sales record for Mercedes in 2013 and 2014.

“The brand is gradually moving towards a younger, sportier and more dynamic image, replacing the somewhat fusty image that Mercedes once had,” said Tim Urquhart, analyst at IHS Automotive.

But he added: “The challenge from BMW and Audi will only intensify and any goal to regain global leadership in the premium sector will be extremely difficult to attain.”

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