* Q1 adjusted EBIT 2.1 bln euros vs forecast 1.9 bln
* Mercedes sales up 14 pct, margins more than double
* Reiterates sees significantly higher EBIT this year
* Shares drop 2 percent after strong run
(Adds CFO comments on dividend and currency exposure)
By Edward Taylor
FRANKFURT, April 30 Daimler's
first-quarter operating profit more than doubled as surging
sales of new cars and improving margins in its Mercedes-Benz
luxury autos division extended its recent recovery.
Having dropped to third place in luxury car sales rankings
in 2011 behind BMW and Volkswagen's Audi,
Mercedes-Benz closed the gap in 2013 thanks to redesigned
vehicles and new compact cars such as the A-Class sedan.
The group said on Wednesday sales of Mercedes-Benz cars rose
14 percent in the first quarter, driven by demand from China and
the United States, as it prepares to roll out a fresh version of
its new C-Class model, currently the best selling Mercedes-Benz.
"Daimler's rebirth and rehabilitation continues with these
first-quarter results. This is supposed to be Merc's weakest
quarter of 2014 with the changeover of the C-Class, so it bodes
well for the rest of the year," said Bernstein analyst Max
Warburton in a note to clients.
Daimler shares, which have outperformed Germany's blue-chip
DAX index this year, were down 1.7 percent at 1315 GMT
due to what traders said was an opportunity to take profits.
Daimler said group earnings before interest and tax (EBIT)
from ongoing business rose to 2.07 billion euros ($2.9 billion)
in the three months ended March, up from 949 million euros in
the year-earlier period, and above the 1.906 billion forecast in
a Reuters poll.
Including buses and trucks, total sales rose 13 percent.
Profitability at Mercedes-Benz has improved as a range of
new vehicles including the A- and B-Class compact cars as well
as its flagship S-Class hit showrooms, more than doubling the
division's return on sales from ongoing operations to 7 percent
in the quarter, up from 3.3 percent in the year-earlier quarter.
Daimler said it aimed to increase that to 10 percent in the
The company reiterated it saw significantly higher EBIT from
ongoing business this year, despite currency headwinds of about
1 billion euros, which were mainly related a weaker dollar, yen
and also rouble against the euro.
Daimler has hedged around two thirds of its currency
exposure, Chief Financial Officer Bodo Uebber said on a
Daimler is still targeting a dividend payout ratio of around
40 percent of EBIT, and will use 2.4 billion euros in proceeds
from a sale of its stake in a power systems company to
Rolls-Royce Holdings PLC to invest in its core business
rather than in a special dividend, Uebber said.
The Stuttgart-based automaker's first-quarter results stand
in sharp contrast to last year, when Daimler warned it might
have to cut its profit expectations only nine weeks after it had
reported full-year results, blaming a slump in car sales.
In February this year, Daimler said it expected group EBIT
to increase "significantly" in 2014 from the 7.9 billion euros
it reported for last year.
Furthermore it said it saw significantly higher sales at
Mercedes-Benz than the 1.566 million cars it sold in 2013.
Daimler said it would take no action in response to the
West's standoff with Russia over its actions in Ukraine, and
that investments would continue.
"This is a matter for politics to resolve. It would be a
mistake to put everything on hold," Uebber said.
Daimler sold 11,000 passenger cars and 500 trucks in Russia
in the first quarter.
($1 = 0.7237 Euros)
(Editing by Victoria Bryan and Mark Potter)