Profit rises sharply: Daimler has a surprisingly good quarter

Friday 29th January 2021

Profit rises sharply
Daimler has a surprisingly good quarter

Last year was not a good one for Daimler either, but at least the last quarter went surprisingly well. Above all, profits are skyrocketing. But that is also due to the mass layoffs.

Strong sales of premium cars in China and cost savings brought Daimler a surprisingly strong profit jump last year. Especially the fourth quarter, in which the entire automotive industry recorded strong growth, spurred the Stuttgart Dax group. Daimler was even able to increase the free cash flow in the industrial business sixfold – and thus has a stable financial cushion in view of the upheavals in the industry and the burdens caused by the pandemic.

"All business areas have contributed to this success," said the company about the surprising presentation of the key figures. "Our strategic initiatives and our intensive operational measures together lead to a significant improvement in financial performance throughout the company," said CEO Ola Källenius. Since the business figures were well above the analysts' expectations, Daimler had to bring them forward.

However, Daimler remained cautious about the outlook for 2021. The business development should be positive overall. "The current semiconductor bottlenecks and impairments caused by Covid-19 are (but) likely to affect the first quarter of 2021," announced the group. A specific forecast is to be published on February 18 to present detailed business figures.

The truck and bus business is weak

In the past year, Daimler increased EBIT by half compared to the previous year to 6.603 billion euros. Analysts had only expected 5.2 billion euros. The premium car business in particular gave the group a tailwind: the operating result in the Mercedes-Benz Cars & Vans division reached just under 5.2 billion, around 1.3 billion euros more than expected on the market. In the previous year, when the two divisions Cars and Vans had not yet been merged, Daimler had only earned just under 300 million euros operationally due to a high billion-dollar loss at Vans. The operating margin at Mercedes-Benz Cars & Vans now reached 6.9 percent.

In contrast, things went less well in the truck and bus business: Here, EBIT dropped by around 80 percent to 525 million euros. This puts Daimler slightly below the analysts' estimates. The weaker economy around the globe as a result of the restrictions to contain the corona pandemic slowed the world's largest truck manufacturer Daimler.

Overall, however, CEO Källenius should be satisfied with the group's figures. In particular, the free cash flow in the industrial business of 8.259 billion after just under 1.4 billion euros in the previous year developed significantly better than expected. Analysts had only expected 5.3 billion euros. The large difference is due to significant cost savings, including job cuts.