Daimler Profit Rises on Mercedes-Benz S-Class Sales in China

peter236

April 29, 2011, 2:21 AM EDT

http://www.businessweek.com/news ... sales-in-china.html

By Chris Reiter

April 29 (Bloomberg) -- Daimler AG, the world’s second- largest maker of luxury vehicles, reported a 71 percent gain in first-quarter operating profit as growing wealth in China boosted deliveries of the Mercedes-Benz S-Class sedan.

Earnings before interest and taxes rose to 2.03 billion euros ($3.01 billion) from 1.19 billion euros a year earlier, Stuttgart, Germany-based Daimler said today in a statement. Profit matched the 2 billion-euro average estimate of 12 analysts surveyed by Bloomberg.

Daimler stuck to its forecast for “significantly” higher Ebit in 2011 than last year’s 7.2 billion euros as prospects for the updated C-Class and revamped SLK roadster outweigh potential repercussions of last month’s Japan earthquake. Volkswagen AG reported this week that Ebit more than tripled to 2.91 billion euros on demand in China for the Audi luxury brand.

“Compared to Volkswagen’s numbers a couple days ago, it’s much less dynamic,” Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler who recommends buying the shares, said of the results.

China’s growing economy is fueling demand for vehicles from Mercedes, Bayerische Motoren Werke AG and Volkswagen AG’s Audi. The top three luxury-car makers are all targeting record sales this year. Daimler aims to boost deliveries to 1.5 million cars by 2015, backed by a doubling of sales in China to 300,000 vehicles. VW’s Lamborghini supercar brand may sell more vehicles in China than the U.S. this year for the first time.

‘Right Track’

First-quarter net income after minority interests rose 59 percent to 1.06 billion euros as revenue gained 17 percent to 24.7 billion euros.

“We are on the right track,” Chief Executive Officer Dieter Zetsche said in the statement. “This puts us well ahead of our planning and confirms our positive outlook.”

The 125-year-old German automaker plans to sell more than 1.3 million Mercedes-Benz and Smart cars in 2011, compared with 1.28 million last year. Deliveries rose 13 percent in the first quarter to 281,000 autos, boosted by a 25 percent jump in S- Class deliveries and a 78 percent surge in demand from China.

Mercedes-Benz will introduce a new version of the B-Class compact later this year. The model is the first of a line of four new small cars. Daimler is building a factory in Hungary to back the expansion, which is part of a strategy of lowering average fuel emissions and winning over younger drivers. Mercedes will also introduce a revamped M-Class sport-utility vehicle in 2011. Mercedes-Benz Cars Ebit rose 60 percent in the quarter to 1.29 billion euros.

Truck Profit

Daimler, which owns Kawasaki, Japan-based truckmaker Fuso as well as Freightliner in the U.S., is also benefiting from recovering demand in North America and Europe for heavy trucks following the global financial crisis.

Daimler, the world’s largest truckmaker, said the trucks unit’s operating profit more than tripled to 415 million euros from 130 million euros a year earlier.

The trucks division took a charge of 49 million euros related to damages and lost production caused by the March 11 earthquake in Japan. Daimler’s financial services unit booked charges of 29 million euros because of the earthquake.

Daimler and London-based plane-engine maker Rolls-Royce Group Plc are jointly seeking to buy Tognum AG, an engine manufacturer in which Daimler holds a 28.4 percent stake. The carmaker has pledged its holding in the offer. The suitors have stuck to a 24 euro-a-share bid, even though Tognum stock has hovered above the offer price. The tender offer started April 6 and expires May 18.