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UPDATE 1-Daimler confirms 2012 target as Q2 profits beat
July 25, 2012 / 5:56 AM / 5 years ago

UPDATE 1-Daimler confirms 2012 target as Q2 profits beat

* Q2 Group EBIT 2.24 bln eur vs poll avg 2.16 bln

* Still sees Group EBIT from ongoing ops flat at 9 bln eur

* Q2 net profit 1.52 bln eur vs poll avg 1.36 bln eur

* Mercedes Q2 EBIT margin 8.6 pct vs 10.7 pct yr-ago (Adds background)

FRANKFURT, July 25 (Reuters) - Germany’s Daimler stuck to its forecast for roughly flat underlying profits this year, when it posted on Wednesday a smaller-than-expected decline in quarterly results.

Earnings before interest and tax (EBIT) fell 13 percent to 2.24 billion euros ($2.71 billion) in the second quarter, exceeding the 2.16 billion euro average estimate in a Reuters poll.

The EBIT margin at its Mercedes-Benz Cars division narrowed to 8.6 percent during the quarter from 10.7 percent a year earlier.

Daimler reaffirmed it still expects EBIT from its ongoing business this year will be in the magnitude of 2011, when it was 9 billion euros, but with one proviso.

“Economic uncertainty and risks exist in nearly all regions, however. We therefore remain vigilant in our monitoring of general economic developments and the volatile markets,” Chief Executive Dieter Zetsche said in a statement.

While upholding its guidance for the full year will likely soothe some investors worried Daimler would revise its targets, analysts have cautioned it may not allay fears for long given management’s less-than-sterling track record in predicting its own earnings.

“Our concern is the opposite: that Daimler clings to guidance until the third quarter - potentially prolonging negative sentiment,” Morgan Stanley wrote on Monday in a preview of industry results.

Zetsche has come under fire for allowing Daimler’s cash cow, its Mercedes-Benz premium car business, to wither in the face of ever-stronger competition from Audi and BMW .

Both rivals sell far more cars than Mercedes thanks primarily to making greater inroads into China. More telling, however, is the fact that the duo also earn much higher margins.

The Daimler CEO aims to at least begin closing the gap to BMW and Audi in terms of volumes with the help of a massive overhaul of its line of Mercedes compact cars.

Not only has the new A-Class received a completely different, sportier design but it will also spawn an SUV derivative that can finally compete with the BMW X1 and Audi Q3 offroaders. A trendy coupe is also planned based on the Concept Style Coupe that premiered at the Beijing auto show in April.

Mercedes seems confident enough of its success that it has awarded independent Finnish manufacturer Valmet Automotive a contract to build over 100,000 A-Class cars over a three year period, since it expects its own factories will be running flat out even on a three-shift basis. ($1 = 0.8275 euros) (Reporting by Christiaan Hetzner)

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