Daimler Third-Quarter Operating Profit Up Boosted By Mercedes Sales

Daimler shares were 5.4% higher in early trading. Daimler said it would review costs after the margin at Mercedes-Benz Cars dropped to 6%, down from 6.3% in the year-earlier period due to production problems with the Mercedes GLS and because cars were being fitted with costly anti-emissions filters.

Daimler reported a slight rise in third-quarter operating profit on Thursday boosted by sales of Mercedes-Benz cars, sending its shares higher, but announced cost cuts and warned legal provisions tied to diesel litigation could rise. Group earnings before interest and taxes (EBIT) rose 8% to 2.69 billion euros, up from 2.49 billion euros in the year-earlier period, boosted by an 8% rise in sales of luxury cars and solid cash flow.

Daimler shares were 5.4% higher in early trading. Daimler said it would review costs after the margin at Mercedes-Benz Cars dropped to 6%, down from 6.3% in the year-earlier period due to production problems with the Mercedes GLS and because cars were being fitted with costly anti-emissions filters. “In order to master the transformation in the next few years, we need to increase our efforts considerably: we have to significantly reduce our costs and consistently strengthen our cash flow,” Chief Executive Ola Kaellenius said, without elaborating.

Philippe Houchois, analyst at Jeffries who has an underperform rating on Daimler, said third-quarter results revealed disappointing margins at Mercedes cars and weaker than expected profit at the trucks division but solid cashflow. Daimler is due to give a detailed presentation on strategy and costs on November 14 and Chief Financial Officer Harald Wilhelm said investors should not expect a strategy U-turn.

Daimler reiterated that it expected group earnings before interest and taxes to be significantly lower than last year, and warned it now sees revenue at the trucks division to be at the year-earlier level instead of expecting slight revenue growth. Daimler said current legal proceedings tied to diesel emissions may result in additional expenditures which may hit profits at Mercedes-Benz Cars and Mercedes-Benz Vans.