Daimler raises earnings target, investors snub shares

27th July 2010, Comments 0 comments

A strong recovery by premium car makers has led the German group Daimler to ramp up output and forecast a handsome profit for 2010 on Tuesday.

Investors were told two weeks ago to expect an upgraded outlook however, and profit-taking drove Daimler's share price down sharply in Frankfurt.

Daimler raised its core earnings guidance for the year to six billion euros (7.8 billion dollars) as second-quarter net profit pulled from a loss to hit 1.3 billion euros.

"We anticipate significant revenue growth in 2010 and we are targeting EBIT (earnings before interest and tax) from the ongoing business of six billion euros," an English-language statement quoted Daimler chairman Dieter Zetsche as saying.

The group had earlier forecast earnings of four billion euros this year.

Its second-quarter net profit compared with a loss of 1.06 billion euros in the same period of 2009, meanwhile.

Daimler shares were nonetheless slammed on the Frankfurt stock exchange, losing 3.63 percent to 41.59 euros in late trading to top the list of falling stocks as the DAX index of leading shares was 0.39 percent higher overall.

Dow Jones Newswires quoted a trader as advising investors to "sell on good news."

On July 16, the auto giant reported a second-quarter operating profit of 2.1 billion euros, reversing a year-earlier loss of one billion euros.

The group said then that sales in the three months to June jumped to 25.1 billion euros from 19.6 billion euros a year earlier.

The results were led by Mercedes-Benz Cars, Daimler's auto division, and by stronger heavy truck sales, a sector in which Daimler is the world leader and which had suffered from the global economic slowdown.

"After surviving the crisis, Daimler has returned stronger to the race for the title of world's leading luxury car maker" that pits it against rivals Audi, which is owned by Volkswagen, and BMW, said Frank Schwope, an auto expert at the NordLB bank.

The leading contributor to Daimler's operating profit was its auto division, which transformed an operating loss of 340 million dollars in the second quarter of 2009 into a profit of 1.3 billion this time around.

The unit should earn an operating profit of four billion euros for the full year, Zetsche told a telephone news conference.

Like rivals, Daimler has benefited from a surge in demand from China, but the chairman said his group would not cut prices to gain market share there or focus excessively on one country.

"It's an important market," Zetche acknowledged, but the German group will not put "all our eggs in the same basket."

Chinese sales represent 14 percent of the total for Daimler "but volume remains smaller than in North America and in Europe so we're still very balanced," Zetsche noted.

Meanwhile, another key Daimler division showed signs of life, with sales of heavy trucks adding 300 million euros to the bottom line, compared with a loss of 508 million euros a year earlier.

Sales of Mercedes vans and busses also improved, and Daimler's financial services division showed a profit of 171 million euros.

Zetsche said in the statement that "our strategy is paying off: We have a very dynamic development of unit sales and revenue in all divisions."

The group forecast total sales would "increase significantly" this year from the 2009 figure of 1.6 million vehicles.

© 2010 AFP

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