The 2010 E-Class is receiving a solid reception and helping revive Daimler's financial fortunes.
Less appears to be more for Daimler AG.
The German maker, parent to Mercedes-Benz, Smart and Maybach, among other operations, has disclosed partial financial information indicating third-quarter operating profits and sales were lower than a year ago but better than anticipated, particularly since top-line revenue dropped 18%.
Industry analysts were particularly upbeat on the news, suggesting that the solid reception for the latest-generation Mercedes E-Class sedans and coupes could trigger a much-needed turnaround. Of course they could just be peddling stock in a depressed company.
The company said its cash flow was better than expected during the third quarter. Daimler, like other automakers, has seen its reserves and resources drained by the global recession.
Daimler, however, said its industrial business generated a free cash flow of roughly $3.22 billion in the first nine months of this year. Net liquidity increased to approximately $9.4 billion as of Sept. 30. The fact the company disclosed the information ahead of general release of financial information, which is set for Oct. 27, underscores the pressure Daimler is under to show improvements in its financial performance, and perhaps trim its borrowing costs as lines of credit rollover.
The company’s financial troubles, which were offset by an infusion of cash from the Middle East, have led to speculation, in Germany, that CEO Dieter Zetsche’s job could be on the line.
“The free cash flow of the industrial business in the third quarter was affected by an increase in liabilities due to the higher production volume after the production break in August, as well as positive management of accounts receivable,” Daimler said, in a statement, adding that “Daimler anticipates a positive free cash flow in the industrial business in full-year 2009.”
The company, which has largely pared back its broad industry operations to focus on automotive ventures, also reported the industrial side of Daimler got a boost from transfer payments across the company from the financial services group of about $850 million. The financial services group is consistently profitable.
The preliminary information from Stuttgart-based company said group operating profit amounted to about $700 million, down nearly 38% from the operating profit in the third quarter of 2008.
Group revenue for the quarter amounted to $ 27.2 billion from $34 billion in the third quarter 2008, an 18% decrease.
Operating earnings were expressed as EBIT, or earnings before interest and taxes. Daimler did not provide net profit figures or extensive detail in its Monday statement. It releases a full third quarter report on October 27.
Daimler said its Mercedes-Benz Cars unit, a key profit center for the company, reported a 68 percent increase in operating profit.
Earlier this month, Daimler said its September 2009 sales were the best of the year, thanks to growing demand in China and the Middle East. However, they were lower than September 2008 levels. The trucks division had third quarter operating loss. But Mercedes-Benz vans and Daimler busses eked out small profits.
“We are significantly more optimistic than consensus,” pronounced a report from Deutsche Bank, “mostly on Mercedes.” DB analysts pointed a “better mix with rising E-Class sales,” along with improved cost-cutting, to justify a “Buy recommendation for Daimler stock.
Joe Szczesny reported on this story.