The Wall Street Journal-20080215-Earnings Digest- Daimler Scores Profit on Its Own
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Earnings Digest: Daimler Scores Profit on Its Own
Full Text (474 words)FRANKFURT -- Daimler AG's divorce from Chrysler is starting to pay off.
Daimler said it swung to a net profit in the fourth quarter, driven by earnings momentum at its core Mercedes-Benz brand. The German luxury-car maker also reported full-year profit growth and gave an optimistic outlook for 2008. Chief Executive Dieter Zetsche said much of the gain was due to management's ability to concentrate fully on turning around Mercedes-Benz, after years of struggling to integrate with Chrysler.
Following the sale of an 80.1% stake in Chrysler to a unit of Cerberus Capital Management LP in August, Daimler "had an opportunity to focus on the businesses where we feel most at home," Mr. Zetsche told reporters. Net profit in the fourth quarter was 1.69 billion euros ($2.47 billion), compared with a loss of 12 million euros in the same period a year earlier.
Daimler forecast higher unit sales this year, thanks to growth in emerging markets and despite signs of economic weakness in North America. Daimler said that for this year it expects earnings before interest and taxes "well above the prior-year level," with further growth anticipated in 2009.
Earnings before interest and taxes rose 74% to 8.7 billion euros for 2007, up from 4.99 billion euros in 2006. The boost was driven by an improvement in profitability at Mercedes-Benz Cars and continued profitability of its truck division despite a collapse in truck demand in North America.
Due to a 2.2 billion euro tax write-down associated with the sale of Chrysler and other charges, net profit in 2007 rose 5% to 3.98 billion euros, from 3.78 billion euros in 2006. Revenue increased to 99.39 billion euros in 2007 from 99.22 billion euros a year earlier.
At Mercedes-Benz Cars, a unit that includes the ultrasmall Smart and high-end Maybach brands as well as Mercedes, revenue rose to 52.43 billion euros in 2007 from 51.4 billion euros in 2006.
Mercedes-Benz Cars will strive to post another year of record sales in North America, but will aim for "profitable growth," said Mr. Zetsche, indicating Daimler wouldn't increase volume at any price. Profit in the U.S. has been eaten away by an unfavorable dollar-euro exchange rate, as well as by competition for market share, with many car makers offering discounts to boost sales. Daimler plans to increase profits by launching new vehicles and pushing deeper into emerging markets like Russia, India and China.
Daimler unveiled a raft of charges in the fourth quarter, including 235 million euros for a delayed A400M military transport aircraft made by Airbus and 322 million euros of costs related to additional restructuring steps at Chrysler due to its agreement with the United Auto Workers union. Daimler holds a 19.9% equity interest in Chrysler and a 15% stake in Airbus parent European Aeronautic Defence & Space Co.
Daimler's shares rose 0.4% to 53.95 euros.
