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Daimler first-quarter hurt by production delays at Mercedes, China slowdown

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Via Reuters Finance

FRANKFURT (Reuters) – Daimler’s first-quarter operating profit fell 16 percent on Friday as a 718 million euro ($800 million) one-off gain failed to offset costs from a production delay for its Mercedes-Benz GLE and higher raw material costs.

FILE PHOTO: An illuminated logo of Mercedes is seen on the Mercedes-Benz F105 at an exhibition before the Daimler annual shareholder meeting in Berlin, Germany, April 5, 2018. REUTERS/Hannibal Hanschke

“We cannot and will not be satisfied with this, as expected, moderate start to the year. We now have to work hard to achieve our targets for 2019,” Chief Executive Dieter Zetsche said in a statement to accompany his final quarterly results as boss.

Earnings before interest and tax (EBIT) fell to 2.80 billion euros, below the 2.89 billion expected by analysts despite a 718 million euros valuation boost from the merger of the mobility services divisions of Daimler and BMW.

Daimler shares slipped in early trading and were down 0.35 percent at 0710 GMT.

Daimler said problems launching a new sports utility vehicle platform at its plant in Tuscaloosa, Alabama caused production delays for its GLE model, leading the return on sales at Mercedes-Benz cars to fall to 6.1 percent, down from 9 percent a year earlier.

Mercedes-Benz sales in China, the world’s largest car market, also fell 3 percent and sales in smaller compact vehicles helped erode margins, Daimler said.

Daimler said it had also incurred costs after ceasing production of its X-Class sports utility vehicle in Argentina. Markets in South America were not ripe for a premium pickup truck, Chief Financial Officer Bodo Uebber said.

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Daimler reiterated it expected slight growth in unit sales, revenue and EBIT on a group level this year, but only after cost-cutting measures are implemented.

At the same time Daimler lowered the outlook of its vans division saying the EBIT margin range would be 0 to 2 percent, rather than 5 percent to 7 percent.

Jefferies analyst Philippe Houchois said: “The outlook feels slightly optimistic given the weak start to the year.”

Reporting by Edward Taylor; Editing by Jason Neely and Keith Weir

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