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Mercedes-Benz increases profit forecast due to luxury cars boom By Stocksak


© Stocksak. FILE PHOTO – The Mercedes Benz star is seen on a new Mercedes-Benz S-Class limousine near Immendingen in Germany, October 14, 2020. REUTERS/Arnd Wiegmann/File Photo

By Victoria Waldersee

BERLIN (Stocksak). Mercedes-Benz increased its full-year profit forecast Wednesday due to strong demand for luxury vehicles and cost savings. This was in spite of the supply chain bottlenecks that have hampered the industry’s output this year.

German automaker Volkswagen stated that it now expects group earnings to increase by at least 15% this fiscal year. This is in contrast to a previous forecast of 5%-15% growth. The profits at its cars division nearly tripled in the third quarter, which was pre-pandemic.

Harald Wilhelm, chief financial officer, stated that the company would be able to sustain itself through next year due to high demand in Europe and a large order backlog. He also said that the company would prioritize reducing inventory in the fourth quarter. The company anticipates a slight rise in fourth-quarter sales over a year ago.

Mercedes-Benz, then part of Daimler OTC: Group, pledged in 2020 to reduce fixed costs, capital expenditure, and research and development spending by more that 20% by 2025. This marked increase in profitability is evident.

Harald Wilhelm, chief financial officer, said that inflation in its own cost means it may have to make greater cuts than originally planned to achieve that target.

The cars division made 4.03 billion euros in the third quarter from 28.2 million revenue, compared to 1.4 billion and 23.5 billion respectively in that quarter of 2019.

The company increased its full-year margin forecasts for the cars division from 12-14% to 13-15%.

RUSSIA WITHDRAWAL

Wilhelm also stated on an analyst’s conference that the group would withdraw its Russian market shares and sell off its Russian subsidiaries – which consist of its industry, financial services businesses – to local investors.

Following Russia’s invasion, Ukraine’s invasion, the company had to suspend exports of passenger cars to Russia and local manufacturing.

Mercedes-Benz has a car factory in Esipovo, 40 km (25 miles) north of Moscow. It employs over 1,000 people and produces E-class sedans as well as SUVs.

Wilhelm stated, “(The withdrawal),” is not expected have any other significant effects on the group’s profitability and financial situation than those reported in the previous quarters.

The group earnings reached 5.2 Billion Euros in July-September, an 83% increase over last year. Revenue increased by a fifth or more to 37.7 Billion euros, with adjusted returns of 14.5% and 12.7% for Mercedes-Benz Vans.

Mercedes-Benz Vans saw sales increase by just under a fifth, to 104,000 vehicles. Electric van sales increased by a third this past year.

Luxury sales at the top of the market accounted for 15% of total car sales in the third quarter.

($1 = 1.0047 euros)

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