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Daimler defies pandemic with consensus-beating quarterly profit

Large  Small Date:2020-10-19  From:www.ft.com
Note: Germany’s Daimler beat market expectations to post a pre-tax profit of €3.1bn and dramatically improve its free cash flow in the three months to the end of the September, as the Mercedes-owner continues to benefit from consistent demand for premium vehicl
Germany’s Daimler beat market expectations to post a pre-tax profit of €3.1bn and dramatically improve its free cash flow in the three months to the end of the September, as the Mercedes-owner continues to benefit from consistent demand for premium vehicles despite the pandemic.

In an ad hoc release on Thursday, the Stuttgart-based company said it had experienced a “particularly strong” September and a “faster than expected market recovery” which it expected to continue for the rest of the year, providing no further Covid-19 lockdowns were imposed.

It also reported a free cash flow of more than €5.1bn, including a €1.2bn dividend from its Chinese joint venture partner BBAC, beating consensus estimates.

“The third quarter shows a very strong performance,” said Harald Wilhelm, Daimler’s chief financial officer, adding that the preliminary results were “further proof that we are on the right path” to increasing profitability.

However he warned that the fourth quarter would be subject to “regular year-end seasonality”, alluding to automakers tending to sell fewer cars towards the end of the calendar year.

Having been forced to idle many of its factories at the start of the pandemic, Daimler’s losses have since been cushioned by a spectacular rise in sales in China, its single biggest market.

Mercedes deliveries there were up by more than 23 per cent in the three months to the end of September, and down by less than half a per cent in Europe.

However Daimler, which was late to start developing electric vehicles, has been dramatically cutting costs to convince investors that it can maintain healthy profit margins while transitioning to the new technology.

Last week, chief executive Ola Källenius vowed to slash a fifth of the company’s fixed costs over the next four years, and focus more on high-end ranges including Maybach, AMG and the G brand.

Daimler has been struggling to meet strict EU-mandated emissions targets for 2020, and may have to pay to pool with manufacturers that have more than met the targets and have credits to sell, in order to avoid large fines from Brussels.

This week, Mr Källenius said sales of electric and hybrid models had been gathering momentum in the past few months, and that the group would not be left with a “dramatic” gap by the end of the year.

Following the announcement of its preliminary earnings numbers on Thursday, Daimler said it would publish an updated forecast for the financial year when it reports its quarterly results in full next week.

 
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