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Daimler's group profits fall while truck orders bulge
October 20, 2017 / 5:54 AM / a month ago

Daimler's group profits fall while truck orders bulge

BERLIN (Reuters) - Daimler (DAIGn.DE) lifted the outlook for its trucks division for a second time in three months on Friday while its overall profit fell on costs related to diesel-engine updates, vehicle recalls and restructuring.

Earnings before interest and taxes (EBIT) at Daimler Trucks, the group’s second-largest unit by revenue, will significantly exceed year-ago levels after jumping by a third to 614 million euros ($725 million) in the July-to-September period, the company said.

Daimler and rivals in the truck industry including Sweden’s Volvo (VOLVb.ST) and Volkswagen (VOWG_p.DE) have seen rising demand this year for commercial vehicles.

In late July, Daimler said it expected EBIT at trucks operations to be flat after previously guiding for profit to fall below 2016 results.

“Truck growth is in full swing, and order books are going from strength to strength,” said Bernstein analyst Max Warburton who has an “Outperform” rating on Daimler stock.

Quarterly truck orders at Daimler surged 47 percent thanks to strong demand in North America and Asia where the German manufacturer is market leader, and increased 11 percent in Europe, according to Warburton.

Volvo’s shares hit a record high on Friday as it also raised its outlook for truck markets on both sides of the North Atlantic this year and forecast a further strong recovery in 2018.

Daimler shares were flat at 68.92 euros as of 1207 GMT.

GROUP COSTS BITE

Group operating profit at Daimler meanwhile slipped to 3.98 billion euros from 4.04 billion a year earlier, including 523 million euros in one-time costs.

FILE PHOTO: The Mercedes star logo of an E Coupe is pictured before the annual news conference of Daimler AG in Stuttgart, Germany, February 2, 2017. REUTERS/Michaela Rehle/File Photo

Daimler spent 223 million euros last quarter to update over three million Mercedes diesel-engine models in Europe to curb pollution and help avert driving bans.

It added another 230 million euros to fund a recall of more than 1 million Mercedes models worldwide to address potential unintended air bag deployments.

Besides another 70 million euros for trucks restructuring, Daimler said it also needs to spend 100 million euros to fund a planned reorganization of its passenger-cars and trucks units.

“If special items are excluded, Daimler delivered excellent results, with trucks and luxury cars being the main drivers,” said LBBW analyst Frank Biller who has a “Buy” recommendation on the shares.

Third-quarter sales of luxury Mercedes-Benz cars rose 7.9 percent to a record 573,026 models, powered by strong demand for sport-utility vehicles such as the GLA and GLC models and the E-Class.

That beat the 1.2 percent gain to 499,467 autos at rival BMW (BMWG.DE), which Mercedes last year eclipsed as the world’s biggest premium automaker by sales, and the 3.6 percent rise to 471,850 cars at Volkswagen’s (VOWG_p.DE) Audi brand.

The group stuck with its guidance for a significant increase in group EBIT this year and said it expects EBIT at its finance arm to also significantly beat year-earlier levels, having previously guided for earnings to rise only slightly.

Separately, Daimler has asked the European Commission to act as principal witness in investigations of an alleged collusion among German carmakers to be exempt from potential fines, finance chief Bodo Uebber said on an earnings call.

European Union and German antitrust regulators have been investigating whether Daimler, VW, BMW, Porsche and Audi (NSUG.DE) colluded to discuss prices, suppliers and standards to the detriment of foreign carmakers.

“In principle, this is about possible antitrust agreements (among German carmakers) that have been discussed in the media some time ago,” Uebber said, declining to be more specific.

Reporting by Andreas Cremer; Editing by Maria Sheahan and Elaine Hardcastle

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