Growing demand for Mercedes-Benz products has parent Daimler AG swimming in cash.
A 27% increase in sales during the second quarter has prompted Daimler AG to raise its estimate on full year profits to more than $7.6 billion.
“Our strategy is paying off. We have a very dynamic development of unit sales and revenue in all divisions. After what was already a very good first quarter, we achieved excellent results in the second quarter,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
Mercedes-Benz Cars and Daimler Trucks, in particular, posted significant improvements in their operating profit, added Zetsche, who should feel some personal relief at the latest developments. Only a year ago, despite the Daimler board’s decision to extend his contract, there were sharp questions being raised about the chairman’s personal long-term prospects.
“We anticipate significant revenue growth in 2010 and we are targeting earnings before interest and taxes from the ongoing business of Euro 6 billion.”
The positive development of EBIT in the second quarter led to a significant improvement in net profit to 1.312 billon euro, compared with the net loss of 1,062 million Euro during the second quarter of 2009.
Earnings per share amounted to Euro 1.18 versus a loss of 1 Euro per share a year ago for the German auto giant, which had to cancel its shareholder dividend earlier this year.
In another welcome development for Daimler’s management, The free cash flow of the industrial business was positive and increased substantially by 1.1 billion Euro to 2.5 billion euro.
The Daimler Group’s second-quarter revenues increased by 28% to 25.1billion Euro from 19.6 billion Euro in 2009. Even adjusted for exchange-rate effects, revenue grew by 21%, the company said in its financial statement.
For the Mercedes-Benz brand, this was the strongest second quarter ever; its unit sales rose by 24% to 314,400 vehicles even with the diminishing sales of Smart cars.
Mercedes-Benz Cars’ revenue increased by 33% to 14.0 billion Euro and the division’s return on sales was 9.8%, compared to a minus 3.2% during the second quarter last year.
The very positive earnings trend was primarily the result of increased vehicle shipments, especially in China, as well as an improved product mix, Zetsche said.
The substantial improvement in profitability was also caused by better pricing, efficiency enhancements and slightly positive exchange-rate effects, he added.
Daimler Trucks increased its unit sales by 55% to 83,800 vehicles. All of the division’s major markets contributed to this positive development, including Indonesia where sales climbed 130% the United States, where sales were up 44%, Brazil where sales jumped 50%, and Europe where sales climbed 34%.
Revenue of Euro 5.9 billion was also well above the prior-year level of 4.2 billion euro. The division also achieved a significant improvement in its operating performance, with a return on sales of 5.1% compared to the negative 12% in the same period a year ago.