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February 16, 2011

GERMANY: Daimler soars back into profit

Daimler, maker of Mercedes-Benz and Smart cars, is the latest to announce a hefty full-year 2010 turnaround, booking a net profit of EUR4.7bn in 2010, up EUR7.3bn from 2009's EUR2.6bn net loss.

Daimler, maker of Mercedes-Benz and Smart cars, is the latest to announce a hefty full-year 2010 turnaround, booking a net profit of EUR4.7bn in 2010, up EUR7.3bn from 2009’s EUR2.6bn net loss.

Group revenue rose to EUR97.8bn from EUR78.9bn, cash flow doubled to EUR5.4bn and EBIT was EUR7,274m in 2010 versus an EUR1,513m loss in 2009.

Creative Global Investments analyst Sabine Blümel was almost bang on the money having forecast 2010 earnings of EUR4.74bn, a 24.6% increase in group revenue to EUR98.33bn and group EBIT of EUR 7.52bn.

Daimler posted fourth-quarter earnings before interest and taxes (EBIT) of EUR1.56bn (US$2.1bn), compared with a forecast for EUR2.05bn in a Reuters poll.

“The news is mixed. You have good data for free cash flow and a great outlook. But the problem is that the fourth-quarter results, particularly those for the Mercedes-Benz and Financial Services divisions, slightly missed estimates,” BHF Bank analysts Aleksej Wunrau told the news agency. “The question is whether this was due to one-off effects or whether that has to be factored into future earnings too.”

Blumel Blümel had forecast Q4 EBIT of EUR2.1bn (EUR448m in Q4 2009).

Analysts told Reuters they were disappointed not to get more forecast detail.

“…(guidance) … was light versus the level of detail that the market had wanted to see. We were looking for north of EUR9bn euros in terms of full year 2011 EBIT guidance,” Credit Suisse analyst David Arnold said.

“Daimler managed an excellent comeback last year,” chairman Dieter Zetsche told the annual press conference in Stuttgart. “Our goal now is to maintain the level we have reached over the long term and to further improve it wherever possible. We have the right products, technologies and strategies to do so.”

The automaker expects 2011 EBIT “significantly” higher than 2010’s result.

Daimler attributed the turnaround to general market recovery, an “attractive” product range and efficiency gains though it boosted spending on research and development.

It sold 1.9m vehicles in 2010, up 22%.

Employees are in line for up to EUR4,150 in bonus payments and the automaker will also pay a shareholders dividend – there was none in 2009.

Daimler expects worldwide demand for motor vehicles to continue to grow this year “but no longer as dynamically as in 2010”.

It reckons indystry-wide global sales could expand by 5% to 7%, reaching a new record volume with Asian emerging markets and China prominent, but described the outlook for western Europe, the US and Japan as “mixed”.

“The US market should continue its recovery while the best that can be expected for car sales in western Europe is that they remain at the prior-year level. In Germany, however, significant growth is now to be expected following the double-digit market decline in 2010. On the other hand, the Japanese car market is unlikely to equal its artificially high level of 2010, which was boosted by state incentives for car buyers.”

However, market recovery for commercial vehicles is expected to accelerate in western Europe, the US and Japan, especially for medium- and heavy-duty trucks. Market growth of 20 to 25% is anticipated for the NAFTA region and 15 to 20% in Europe. Following the expiry of state incentive schemes in autumn 2010, moderate growth is expected in Japan. 

Demand elsewhere will be primarily driven by China where demand is expected to decline this year following the end of state incentives.

Mercedes-Benz plans many new model launches in 2011 but did not give a specific sales forecast other than saying a rise was expected. Smart sales were seen flat.

Commercial vehicle developments will include the launch of the latest Sprinter van in South America and the line’s introduction to China through a local assembly joint venture.

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