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Daimler sees profits rise in Mercedes-Benz Cars by 2020

Image:-Mercedes-cla car

Daimler (DAIGn. DE) said it expected its Mercedes-Benz Cars & Vans division's full-year operating profit to be above the level of the previous year but warned that the coronavirus pandemic would push the group into operating loss in the second quarter.

In anticipation of a higher default rate among customers, the carmaker raised risk provisions for delinquencies among customers who rented or purchased Mercedes-Benz cars to EUR 448 million ($486.71 million), even though default rates have not yet begun to spike.

Analysts have applauded cash management by the carmaker.

"In the car numbers we've seen so far across the industry, there's nothing cheering, but Daimler seems to have gotten off to a decent start to Q1 and managed working capital better than we feared," said Jefferies analyst Philippe Houchois.

Daimler reiterated that group revenue and earnings before interest and taxes (EBIT) are expected to be below 2019 levels, but given substantial one-off charges over the previous year, the division of Mercedes-Benz Cars & Vans is now seeing EBIT delivered above the previous year, the company said.

Daimler also sticks to its dividend proposal and, given an adequate cash position, has ruled out the need to apply for state-backed loans.

Daimler (DAIGn. DE) pre-released results last week, showing a drop in operating profit of nearly 70 per cent in the first quarter and warned that the cash flow used to pay dividends would fall this year.

EBIT for the first quarter amounted to EUR 617 million, down from EUR 2.8 billion in the previous year, of which EUR 510 million came from the Mercedes-Benz cars unit.