Daimler’s Q1 2015 operating profit is up 41%

Article by Andrew Christian, on May 2, 2015

The operating profit of Daimler for the first quarter of 2015 grew by 41% primarily due to the impact of launching new models and record-breaking sales of Mercedes-Benz vehicles. According to a statement released recently by the company, its overall adjusted group earnings before interest and tax (EBIT) surged to 2.93 billion euros (or $3.19 billion).

Mercedes-Benz Cars posted a 9.2% return on sales from ongoing business, considerably higher than the 7% recorded in the first quarter of 2014. The growth is fuelled by record-breaking passenger-car deliveries. Mercedes-Benz presently ranks third among luxury vehicle makers.

Daimler CEO Dieter Zetsche has set a goal for Mercedes to outdo sales of BMW and Audi by the end of the decade and increase profitability to 10% of its revenue. Quarterly passenger sales were 18% higher than last year with 459,708 units sold.

A contributing factor is last month’s record deliveries in the U.S., China, and Europe. In a statement, Zetsche said that this rise in figures was driven by its growth strategy, its product offensives and its efficiency programs.

He praised the company’s current achievements and said that it is now confidently looking into the future. Daimler emphasized that from its ongoing business, it anticipates major growth of revenue, EBIT and unit sales. It plans to make a 25-billion euro investment to develop models and construct plants through 2016.

Analysts predict that the brand’s sales momentum will persist because of the recent launches of models as well as those of upcoming ones. For this year, a range of SUVs will come out this year.

These include the all-new GLE coupe and the GLC model, which succeeds the GLK compact SUV. Stuart Pearson, an analyst with Exane BNP Paribas, said that the brand is in a “sweet spot” because of the combination of better products, firm pricing, and a cost base that has become more efficient.

According to Bankhaus Metzler's Juergen Pieper, sales and earnings did much better than expected and Daimler had strong results across the board, which includes its truck and van models.

It’s obvious that the company is intent on keeping the momentum with this investment program. Helping the Mercedes-Benz Cars unit to improve its earnings was the release of a new version of its very popular C-class sedan. In the first quarter, the EBIT of the division, which includes the Smart city-car brand, rose by 56% to 1.84 billion euros.

Meanwhile, the Daimler Trucks unit, which produces Mercedes and Freightliner commercial vehicles, reported a 38% climb in EBIT to 472 million euros. At the Mercedes-Benz van business, earnings increased by 75% to 215 million euros.

In a recent conference call, Chief Financial Officer Bodo Uebber said that step by step, it is nearing its profitability goals for all of the divisions. He added that Mercedes-Benz Cars is now “much closer” to hitting its targets.

So far, Daimler is the first of the top three Germany luxury car companies to release its quarterly earnings. There are some analysts who suggested that the sluggish Chinese economy may limit the demand.

Topics: daimler, profit

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