February 7, 2013 / 10:15 AM / 7 years ago

Struggling in China, Daimler sees flat 2013 profit

STUTTGART, Germany (Reuters) - German automaker Daimler (DAIGn.DE) said it expected flat earnings this year as a persistently weak market and an ageing model line-up sap demand for its luxury cars and trucks until the second half.

Premium brands like Daimler’s Mercedes or Volkswagen’s (VOWG_p.DE) Audi have held up better than mass-market competitors in Europe’s car market meltdown, such as loss-making Peugeot (PEUP.PA).

But some investors have begun to lose patience with a Daimler management team that has failed repeatedly to deliver the same profitability as peers BMW (BMWG.DE) and Audi.

Daimler executives admit profits would have been better were it not for the underperformance of Mercedes in China, a vital growth market where its two local rivals have been running circles around it.

Daimler forecast 2013 earnings before interest and tax (EBIT) from its ongoing business at around last year’s 8.1 billion euros (7 billion pounds), down 10 percent from 2011 and in line with a consensus estimate from analysts.

“For market and model-cycle reasons, the first quarter is likely to be the weakest of the year,” said its finance chief Bodo Uebber.

Uebber said Daimler based the forecast in part on expectations that the euro will trade between $1.30-$1.35. The European currency was bid at $1.357 on Thursday.

An upcoming revamp of its flagship Mercedes S-Class saloon, due mid-year, and roughly 600 million euros in Mercedes cost savings would boost second-half profit, the company said.

Shares in Daimler rose 2.3 percent by 9.48 a.m. British Time to 43.99 euros, outperforming both its peers in the European auto sector .SXAP and other German blue-chip shares .GDAXI.

“The forecast is not bad given expectations and at least there was no disappointment like so often in the past,” said Metzler Bank analyst Juergen Pieper.

He said a planned dividend payment of 2.20 euros per share was “a bit of a positive surprise, since it looked as if it may be lowered to around 2 euros”.

The earnings were also slightly better than expected, said Pieper, although that was more to do with Daimler businesses outside the core Mercedes and Trucks divisions.


The group had also forecast stable earnings this time last year, but ended up warning in October that it would miss its profit target of 9 billion euros by about 1 billion.

It was also forced to postpone 2013 EBIT profit margin targets of 8 percent at Daimler Trucks and 10 percent at Mercedes. That second goal had been set back in 2010.

Analysts have repeatedly questioned whether Mercedes can achieve its goal of overtaking its two German rivals to become the world’s largest luxury carmaker by 2020 so long as its sales growth in China continues to lag theirs.

Chief Executive Dieter Zetsche said on Thursday that shareholders would see next year the target was realistic.

After conceding in July that poor growth in China was more than just a temporary blip, Daimler has moved aggressively to improve its fortunes there and aims to increase annual sales by half to 300,000 vehicles in 2015.

In December, it brought in a new China sales chief, appointed a new management board member responsible for its Chinese operations and combined two competing sales channels for locally built and imported cars.

On Friday, Daimler went a step further and bought 12 percent of its Chinese joint venture partner BAIC Motor in a deal that values the Beijing-based company at around 5.3 billion euros ahead of its planned stock offering.

Sales in China rebounded last month, growing over 15 percent following a steep drop in December. But Mercedes is outsold there two to one by Audi, while the BMW brand’s sales volumes in the country were 50 percent higher last year.

Reporting by Christiaan Hetzner; Editing by Maria Sheahan and Tom Pfeiffer

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