is expected to be more profitable in 2021 than it has been in more than 14 years, boosting the war chest of parent company
which is staking its future on ambitious plans for the flagship luxury-vehicle brand.
Shares in the German automobile giant climbed more than 1% higher in Frankfurt trading after the group released earnings for the first quarter of 2021.
The back story. Daimler prereleased headline figures for the first quarter on Apr. 16, revealing that strong sales, particularly in China, helped the company speed back to prepandemic levels after a dire year for the global auto industry.
The results last week significantly outpaced analysts’ consensus expectations across most major measures. Adjusted earnings before interest and taxes (Ebit)—a figure closely watched by analysts—was €4.97 billion ($5.96 billion) across the group, almost €1 billion more than forecast, while adjusted Ebit of €3.8 billion at Mercedes-Benz alone was around €800 million more than expected.
The earnings were a lift for a company in the midst of a massive transformation—and the stock, which is up around 30% this year. In February, Daimler announced plans to spin off its trucks and buses unit—which contributes to more than 15% of earnings—and rename itself Mercedes-Benz, the group’s flagship luxury brand. The group is also doubling down on its shift toward electric vehicles, with ambitious plans for Mercedes-Benz to dominate the luxury end of the segment.
More immediate pressure on the industry comes from the global shortage of semiconductors, which are components in critical systems from power steering to parking sensors. Earlier this week, Daimler said it would cut the hours of around 18,500 workers at its factories due to the chip shortage, and introduce temporary production halts at two plants.
What’s new. Daimler’s complete earnings for the first quarter of 2021 released on Friday confirm the preannounced figures. “Deliveries, revenues and profits increased significantly, particularly thanks to tailwinds in China, a strong product mix and favorable pricing, supported by industrial performance enhancements and cost control,” said
the group’s chief financial officer.
But the results also point to a well-paved road ahead for Mercedes-Benz. Daimler said that margins—expressed as adjusted return on sales—in its premium-vehicles division would rise to 10% to 12% in 2021, upping its previous forecast of 8% to 10%. Margins at Mercedes were 6.9% in 2020 and 5.8% in 2019, and haven’t been as high as double digits since before Daimler sold its Chrysler arm in 2007.
Daimler also noted that the global semiconductor shortage impacted deliveries in the first quarter and could affect sales in the second quarter. However, the group expects any lost volumes to be partly recovered by the end of the year.
“After this promising start, we are very confident that we can keep up the pace to improve our margins on a sustainable basis and at the same time expand our electric vehicle lineup,” Wilhelm said.
The group confirmed that the expected spin off of Daimler Trucks and Buses was “well on track” to be completed before the end of the year.
Looking ahead. Daimler isn’t alone in feeling the pinch from the chip shortage, but it also shouldn’t dig into profits too much. In fact, analysts at Swiss bank
expect Daimler and other auto makers to take advantage of their pricing power from the restricted supply amid booming demand coming out of the Covid-19 pandemic.
But the profitability targets for Mercedes-Benz should be the real focus. Daimler’s strategy for the future involves doubling down on the premium brand for profits, because margins are wider at the upper end of the auto industry. That should help fund the group’s ambitious plans to pivot to electric vehicles amid a wider industry shift. The fact that Mercedes is already well on its way is a sign that the group is on track.