With sales of high-line models, like the 2010 Mercedes-Benz S-Class, showing renewed strength, Daimler AG is forecasting a good year ahead.
Daimler expects to post a substantial profit this year, following the announcement by the German automaker that it earned net income of $816 million for the first quarter of 2010.
“This very good result for the first quarter shows that we did our homework in the crisis and are now firmly on track for success once again,” stated Dr. Dieter Zetsche, Chairman of Daimler AG and head of Mercedes-Benz Cars.
That’s a sharp turnaround compared to the nearly $1.7 billion Daimler lost during the first-quarter of 2009. The very positive earnings were reflected by what Zetsche called the “upward trends in nearly all divisions.”
Overall, following “a distinct decline” in 2009, Daimler assumes revenue will increase again in 2010 “but will remain significantly below the level of 2008.” All automotive divisions, including the maker’s small car brand, Smart, are expected to contribute to this year’s projected growth.
Daimler, which earlier this month reduced its dividend to zero, now expects to achieve earnings before interest and taxes from the ongoing business of more than $5.3 billion in 2010. The key factors for this expectation are the ongoing market revival, the improving economic environment and the market success of the Group’s products, Zetsche said.
However, the new guidance is more than double what Zetsche provided only two weeks ago at the company’s shareholders meeting in Berlin, leading to complaints, in Germany, that Daimler’s executives are either unsure of what is going on at the company or are manipulating critical information.
In the first quarter, Mercedes-Benz Cars, in particular, posted significantly positive earnings due to increased sales in the E-Class and S-Class segments. Daimler sold 402,700 cars and commercial vehicles worldwide, which was 21% more than in the same period of last year.
The Daimler Group’s first-quarter revenues increased from $25 billion to $28billon; adjusted for exchange-rate effects, revenue grew by 15 percent.
On the non-automotive side, during the first quarter of 2010, Daimler’s proportionate share of the net result of EADS, the parent of Airbus, amounted to a loss of $350 million. That compared to a small profit of $116 million during the same period last year. The substantial deterioration is primarily the result of additional provisions recognized by EADS in its 2009 consolidated financial statements relating to the A400M military transport aircraft.
Meanwhile, Daimler’s sale of the 5.3% equity interest in Tata Motors led to a pre-tax gain of $350 million.
Daimler also noted that starting in the third quarter of 2010, new and particularly efficient six- and eight-cylinder gasoline engines will become available from Mercedes-Benz The already extensive portfolio of BlueEFFICIENCY products will be expanded to 85 models by the end of 2010.
For the Smart brand, Daimler anticipates an increase in demand following the launch of a new generation of the Smart fortwo in the third quarter of 2010. Turning things around for the long-troubled Smart was a key reason for Daimler’s recent decision to enter a partnership with the Euro-Asian Renault-Nissan Alliance.
Daimler’s Truck, Van and Bus business also are expecting a recovery this year, following the low level of sales in 2009. Demand is expected to be particularly brisk in Latin America. Truck sales also are expected to grow in North America.