Surge in Sales Propels Daimler Profits

Revenues up 6% as demand grows for new S-Class, other models.

by on Jul.23, 2014

Daimler AG CEO Dieter Zetsche during a recent product unveiling. Mercedes plans to launch 30 new models by the end of the decade.

Promising to regain its once-formidable lead as the world’s top luxury car manufacturer, Daimler AG has unleashed an unprecedented product assault that has begun gaining traction with consumers – driving a surge in second-quarter sales and earnings for the parent of the Mercedes-Benz and Smart brands.

With revenues up 6%, to $42.4 billion, Daimler posted a net profit of nearly $3 billion for the April to June period. But perhaps more telling was the fact that earnings before interest and taxes, or EBIT, shot to 7.9% of revenue during the latest quarter, up from 6.4% a year earlier.

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“We are growing profitably, our strategy is bearing fruit,” said Daimler AG Chief Executive Dieter Zetsche in statement accompanying the earnings announcement. “We are very satisfied with the second quarter and continue to work effectively on structural improvements.”

Daimler has faced a number of challenges in recent years. On the automotive side, it has continued to struggle to right its once-promising Smart brand which produces a line of urban-oriented microcars. It this month unveiled a pair of new models developed as part of an expanding alliance with France’s Renault and Japan’s Nissan. The Mercedes brand will also get new products from that partnership, along with a new plant in Mexico.

(For more on the new Mexican plant – and the alliance – Click Here.)

The luxury marque is planning to roll out 30 new models by the end of the decade, about one every quarter, a blitz that began in the 2014 model-year with the launch of products including a completely redesigned S-Class flagship and, at the other end of the spectrum, a new compact line, the CLA.

Both have scored well with consumers, the S-Class, in particular, delivering the high margins that are helping boost Daimler’s profitability – while the sales numbers for the CLA are assisting Mercedes in its bid to recapture the global lead from rival BMW AG, while fending off the ever more aggressive Audi AG, the luxury arm of the Volkswagen Group.

All told, Daimler sold 628,900 vehicles during the quarter, including 418,685 wearing the Mercedes-Benz tri-star logo. Demand for the luxury marque’s products climbed to 81,900 vehicles in the U.S., record numbers in its largest market, while also posting double-digit gains in China.

The latter achievement was particularly important because Mercedes’ Chinese operations have been plagued with turmoil in recent years, forcing a number of senior management changes in a market dominated by Audi.

(Click Here to check out the new Mercedes-Benz S65 AMG Coupe.)

Daimler CEO Zetsche has been under heavy pressure to deliver results after seeing the Mercedes brand slip to third place, behind both BMW and Audi in 2011. But he still has a way to go to achieve his promised target of delivering 10% margins.

Nonetheless, “Our strategy is paying off,” the executive, known for his wide, handlebar moustache, told journalists during a media call.

(Ford’s Fields makes mark with new appointments. Click Here for more on the management changes.)

The S-Class saw deliveries double during the second quarter, but Daimler is hoping to grow the model even further as it expands the range with variants such as the new S63 AMG coupe it unveiled at the New York Auto Show in April. And the German maker will soon attempt to re-enter the ultra-luxury segment it abandoned when it shuttered the poorly performing Maybach brand by adding a new S-Class Pullman, a three-row limousine model.

Despite the unexpectedly strong second-quarter numbers Daimler is sticking with a target of “significantly” increased sales and earnings this year. Meanwhile, Zetsche stressed the company plans to deliver 4 billion Euros in group earnings improvements near year.

(Click Here to check out the new Smart Fortwo and Forfour models.)

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