Surprising profit growth at Mercedes pulls Daimler

FRANKFURT Mon Apr 19, 2010 4:58pm EDT

FRANKFURT (Reuters) - Daimler's (DAIGn.DE) Mercedes Benz cars unit is returning to its role as the company's cash cow.

The luxury carmaker this year might earn twice as much as it previously forecast from the division after lively demand for the limousines in the first three months bolstered its confidence in a recovering market.

Earnings before interest and tax from ongoing business in the Mercedes division will reach 2.5 billion euros ($3.5 billion) to 3 billion euros in 2010, the company said on Monday.

Daimler previously had forecast an EBIT of more than 1.5 billion euros for this year for the division, the company's largest by sales.

"The EBIT in the first quarter was supported by very solid results at Mercedes-Benz Cars in consequence of strong sales, model mix and pricing as well as a favorable overall cost position during the first quarter," it said.

The announcement after markets were closed in Frankfurt came as a surprise as the company had been slated to release results not before April 27.

Mercedes had been losing out both to larger rival BMW (BMWG.DE) and its fleet of more fuel-efficient cars, as well as to premium carmaker Audi, whose high profitability is due in part to sharing costs with parent Volkswagen (VOWG_p.DE).

But sales of Mercedes Benz cars in the first three months of the year pointed to an improvement, rising more than 10 percent every month compared to the previous year.

Sales growth might be key for earnings this year as it will help companies to make the most of the cost cuts forced upon them by the global economic slump. <ID:GEE5AT291>

Daimler shares still have to reflect that. They have dropped 1.9 percent so far this year, while the Stoxx European autos sector .SXAP has added 0.9 percent.

The trucks business also is beating Daimler's expectations. EBIT for the division will reach 500 million euros to 700 million euros from ongoing business, as much as three times more than the 200 million euros it had forecast in February.

The trucks as well as the Mercedes Benz cars division lost money last year.

Daimler as a whole posted EBIT of 1.2 billion euros in the first quarter, reversing a 1.4 billion euro loss from the first quarter 2009, it said.

"These Q1 figures are preliminary and not reviewed by the auditor," the carmaker said.

Daimler plans to publish final numbers and the group guidance as well as further details of its quarterly financial statements on April 27, it said.

(Reporting by Peter Dinkloh; editing by Carol Bishopric)