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UPDATE 1-Daimler sees first-quarter earnings well below Q4 level
March 28, 2013 / 3:56 PM / 5 years ago

UPDATE 1-Daimler sees first-quarter earnings well below Q4 level

* European demand for cars, trucks weaker than expected

* Robust Mercedes sales growth in China not seen soon

* EADS stake sale possible starting from July

* Shares in Daimler down 2.4 pct, lag sector (Adds CFO comments)

By Hendrik Sackmann

STUTTGART, Germany, March 28 (Reuters) - Germany’s Daimler AG forecast first-quarter operating profit to be significantly lower than in the last three months of 2012 after premium car and commercial truck markets were weaker than it expected.

“Operating profit will very clearly be below the level of the fourth quarter, but that should mark the low point for the year,” finance chief Bodo Uebber told Reuters in an interview at the group’s headquarters on Thursday.

Shares in Daimler extended their losses, trading 2.4 percent lower by 1516 GMT, trailing a 1.1 percent drop in the European automotive sector.

Uebber reaffirmed the group expected a stronger second half at its flagship Mercedes-Benz premium car business, with margins recovering after an initial drop.

“Demand for cars, trucks and transporters in Europe was more restrained than we expected,” the Daimler CFO said, adding that truck markets in the United States and Japan were also rather weak.

China also has not been kind to Daimler’s Mercedes-Benz brand of luxury cars, with sales falling a total of 20 percent in the first two months of 2013.

“It will take longer before Mercedes can return to robust sales growth in China,” said Uebber.

Thanks mainly to a 709 million euro ($906.2 million) one-off gain from the December sale of a 7.5 percent stake in EADS , Daimler was able to grow earnings before interest and taxes (EBIT) year-on-year by 7 percent to 2.32 billion euros in the fourth quarter, its strongest reporting period of 2012.

CASH GAIN

On Wednesday, Daimler said it would book a 1.34 billion euro non-cash gain in the second quarter from the revaluation of its remaining 7.5 percent stake in EADS after a loss of influence forced it to change the method used to account for the holding.

A source familiar with the matter told Reuters this could materialise into a cash gain, since the company aimed at realising the paper profits by selling the last portion of EADS shares on its books in the course of the second half.

Uebber confirmed what the source said, indicating that the cash was already being budgeted into his plans for this year in order to help fund the dividend payout in April of next year.

“The inflow from the sale of our EADS stake that is possible starting from July means that I expect our cash flow to be positive overall in 2013,” the Daimler CFO told Reuters.

“So along with the earnings from our continuing business, the planned sale of our remaining EADS shares will support our dividend policy,” he said.

Uebber also indicated that the company was not planning any job reductions simply in order to achieve its 2 billion euro cost cutting programme at Mercedes by the end of next year.

“We could take advantage of natural fluctuation and become more efficient with the same workforce, in view of lower assembly times and rising car sales volumes. There are no decisions over job cuts at Mercedes-Benz Cars,” he said.

“We will reach this year’s planned target of saving 30 percent of the overall 2 billion euros,” Uebber added.

$1 = 0.7824 euros Writing by Christiaan Hetzner; Editing by Maria Sheahan and David Holmes

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