Projection in February Undershot Latest Attempt By €2.5 billion
The forecasters at Mercedes must be getting nervous about their jobs. In February they reckoned Mercedes cars would earn EBIT of €1.5 billion in 2010. By the end of July they had to admit they had missed the probable outcome by €2.5 billion, after undershooting by up to €1.5 billion three months earlier.
At the start of the year the powers-that-be at Daimler said 2010 would be a terrible year and investors should batten down the hatches. Perhaps that was understandable then because Daimler announced a shocking loss for 2009, and scrapped the dividend.
(In the fourth quarter of 2009 Daimler lost €352 million, and for the full year red ink amounted to €2.6 billion, compared with a profit of €1.4 billion the previous year.)
Many investors at the time found Daimler’s gloom and doom mood for 2010 exaggerated and inexplicable. After all, the new E class was selling like hotcakes all around the world, and the high margin S class was too.
In late April, Daimler changed its forecast for 2010 to show an operating profit of €2.5 billion to €3 billion at Mercedes cars, much better than the forecast in February of more than €1.5 billion. Another three months have gone by and Daimler has changed its forecast again. Now it expects Mercedes Cars to earn €4 billion in 2010, while Daimler as a whole should make 2010 EBIT (earnings before interest and taxes) of €6 billion, not the “over” €4 billion of the previous forecast.
No complaints on the upside
You might ask what the point of a forecast is if it can change so drastically and so quickly, but investors won’t be too upset. When the errors occur in the plus column, it’s hard to complain.
Mercedes has been benefitting from big sales in China of the E class. Things look tougher though, because BMW has just launched the new 5 series and Audi unveils the new A6 next year. The dollar’s strength against the euro has helped pricing and profits in the U.S.
Neil Winton – August 1, 2010