GERMANY: Daimler Q3 net up as unit sales fall
Daimler has reported a third quarter net profit of EUR213m compared with a net loss of EUR1,533m a year ago as unit sales dropped 3% to 522,500 cars and revenue fell 7% to EUR23.8bn.
The Q3 result was adversely affected by costs associated with the sale of Chrysler to Cerberus.
"The worsening banking crisis, its effects on the real economy, and the resulting global consumer uncertainty had a negative impact on the business development of Daimler AG in the third quarter of this year," the maker of Mercedes-Benz cars and trucks said on Thursday.
Earnings before interest and tax (EBIT) fell to EUR648m versus EUR1,891m a year previously.
"The decline in EBIT is primarily the result of lower earnings at the Mercedes-Benz Cars division. In addition, special items reduced earnings by EUR765m," the automaker said.
Earnings at Daimler Trucks, Mercedes-Benz Vans and Daimler Buses offset the cars shortfall. Profit from Daimler Financial Services was also up year on year.
Daimler chariman Dieter Zetsche said: "We recognise that the situation is very challenging indeed. We press ahead consequently with our cost efficiency programs in all our businesses. We'll also continue to execute our aggressive R&D and product plans. The substance of our company is very solid - and that makes me confident that Daimler can and will emerge strong."
Daimler sold 522,500 passenger cars and commercial vehicles worldwide in Q3 2008 versus 537,000 in the same period last year so revenue fell from EUR25.7bn to EUR23.8bn.
Mercedes-Benz Cars sales fell 6% to 315,800 vehicles in the third quarter. The Mercedes-Benz brand slipped 8% to 282,100 while Smart, helped by new models, rose 20% to 32,300 units. Revenue was down to EUR11.6bn from EUR14.1bn a year previously and EBIT of EUR112m was "significantly lower" than the Q3 07 result (EUR1,331m), "despite further efficiency improvements".
Daimler blamed the decrease in earnings primarily on "the abrupt decline in sales in the NAFTA region as well as in the major European markets".
It also took a EUR449m hit from the reassessment of residual values of leased vehicles and other negative factors included an unfavourable model mix, exchange rate effects and higher raw material prices.
Daimler Trucks increased unit sales 4% to 122,700 vehicles while revenue increased from EUR7.0bn to EUR7.3bn.
The division achieved EBIT of EUR510m in the third quarter, which was higher than the prior-year result despite difficult market conditions in the United States and Japan.
The division's earnings benefited from strong sales of trucks in Brazil and Europe, especially in Germany.
Daimler Financial Services division expanded its worldwide contract volume by 11% to EUR63.9bn in the third quarter. Compared with the prior year, 15 additional companies were consolidated for the first time, most of them in eastern Europe and Asia. Without this effect and adjusted for exchange-rate effects, the increase was 9%. Compared with the prior-year period, new business increased by 19% to EUR7.7bn.
Third-quarter EBIT of EUR173m was higher than the EUR87m posted in 2007.
"In light of the worsened financial market crisis and the resulting impact on future economic developments, forecasts are connected with a high degree of uncertainty in the current environment. In addition, it is not yet possible to reliably assess how quickly the action plans announced by various governments will contribute to the stabilisation of markets for financial services and goods," Daimler said.
Mercedes-Benz Cars expects full-year unit sales to be similar to the prior year level, despite negative market development and adjustments to its production programme as most of its models are either new or refreshed.
"Against the backdrop of massive turmoil on financial markets and the resulting effects on economic developments in the industrialised countries, including falls in unit sales in major markets (in some cases of double-digit percentages) and requiring reassessments of vehicles' residual values, the previous earnings forecasts for 2008 can no longer be achieved," the automaker said.
"Daimler now assumes that the division will achieve EBIT in the magnitude of EUR2.5bn and a return on sales of approximately 5% in 2008; charges of EUR449m from the reassessment of leased vehicles' residual values are included."
Daimler Trucks anticipates higher unit sales in 2008 due to growth in markets such as Brazil, Indonesia and the Middle East.
"Growth in unit sales is also indicated for Eastern Europe, but is expected to return to a moderate level by the end of 2008. This means that after six above-average years, the European market for commercial vehicles is normalising once again. For the US and Japanese markets, unit sales are expected to be once again below the volumes of the prior year."
The group expects a slight decrease in total revenue in full year 2008 and is now forecasting EBIT of more than EUR6bn in 2008, excluding special items, down from the over-EUR7bn previously forecast.
"However, in view of the current turmoil of financial and automotive markets, Daimler's forecasts are connected with a high degree of uncertainty," the automaker said.
"Despite the ongoing financial market crisis, the group has a solid financial position, which should also remain stable throughout the rest of the year."