Daimler Q2 profit falls on costs to add compact cars
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FRANKFURT (Bloomberg) -- Daimler reported a 13 percent decline in second-quarter profit as spending to expand the lineup of Mercedes-Benz compact cars offset higher deliveries.
Earnings before interest and taxes fell to 2.24 billion euros ($2.7 billion) from 2.58 billion euros a year earlier, the company said in a statement today.
The figure matched the 2.2 billion-euro average of 13 analyst estimates compiled by Bloomberg. Sales rose 10 percent to 28.9 billion euros.
"Economic uncertainty and risks exist in nearly all regions," CEO Dieter Zetsche said in the statement. "We therefore remain vigilant in our monitoring of general economic developments and the volatile markets.
After opening a new plant Hungary in March, Daimler unveiled plans last week to double investment in a German compact-car factory to 1.2 billion euros as it rolls out five new compact models to catch up with BMW, which is the world's leading seller of luxury cars followed by Audi and Mercedes ranks third.
The expansion counters a slowdown in Europe, where auto demand is poised to decline for the fifth straight year, prompting efforts by mass-market rivals such as PSA/Peugeot-Citroen and General Motors to shut factories in the region.
Profit promise
Daimler stuck to its goal to increase deliveries in 2012 and match last year's operating profit from ongoing business of 9 billion euros.
Investors aren't as optimistic. The average of 21 analyst estimates compiled by Bloomberg is for the company to generate 8.5 billion euros in EBIT this year.
Shares in Daimler, also Europe's largest maker of heavy-duty trucks, have risen 6.5 percent this year, valuing the company at 38.5 billion euros.
The company reiterated its goal to lift its operating profit margin next year for the Mercedes-Benz Cars division, which also makes the Smart ForTwo minicar, to 10 percent of sales from 9 percent last year.
Mercedes profit margin fell to 8.6 percent in the second quarter from 10.7 percent a year earlier. The unit's EBIT fell 16 percent to 1.31 billion euros, while sales rose 5 percent to 15.4 billionm euros.
Record car sales
Deliveries of Mercedes cars rose 6.9 percent to a record 652,924 cars in the first six months of 2012 boosted by demand for the revamped B-class compact.
The company expanded capacity of the new A-class compact by signing an agreement with Finland's Valmet Automotive to produce more than 100,000 vehicles between 2013 and 2016. Daimler has more than 40,000 orders for the A class, which goes on sale in September.
Still, Mercedes has struggled to keep pace with rivals. BMW sales rose 8.3 percent to 747,064 vehicles in the first six months of 2012, while Audi's deliveries surged 12 percent to 733,250 cars and SUVs. Audi parent Volkswagen Group is scheduled to publish second-quarter figures tomorrow. Munich-based BMW plans to report on Aug. 1.
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