Daimler Revenue, Profit Drops As Coronavirus Slows Auto Sales

(Bloomberg) -- Daimler AG said sales and operating profit slumped in the first quarter as the maker of Mercedes-Benz luxury cars was laid low by the coronavirus.

• Sales declined 6% to 37.2 billion euros ($40.4 billion) in the first three months of the year as the number of vehicles sold dropped 17% to 644,300. Daimler reiterated that full-year earnings before interest and taxes will be below last year, without being more specific.

Key Insights

• Daimler is among carmakers that has shuttered factories and car dealerships from the U.S. to China, with Ford Motor Co. forecasting a more than $5 billion second-quarter operating loss on Tuesday. Plants are now starting to reopen, as governments grapple with how to safely lift society lockdowns.
• After closing factories in March to preserve cash and manage costs, Daimler has now “started with a gradual ramp-up” of production, Chief Executive Officer Ola Kaellenius said in a statement.
• Chief Financial Officer Harald Wilhelm said on April 8 the crisis could help accelerate overhaul efforts to save 1.4 billion euros in labor costs by 2022. The plans include slashing costs to revive margins that were already squeezed before the virus crisis escalated.
• Daimler mapped out plans last year to eliminate more than 10,000 jobs worldwide in an effort to cut costs and invest in electrification.

Market Reaction

• Daimler shares have lost 38% since the beginning of the year, about in line with the STOXX 600 Automobiles & Parts Index.

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• Full statement breakdown here.
• The proposed 2019 dividend of about 1 billion euros “remains at risk,” Bloomberg Intelligence analyst Michael Dean said in a report. Daimler didn’t mention the dividend in its statement.
• Fitch Ratings downgraded Daimler’s long-term issuer default rating to BBB+ from A- this month, citing a deteriorating financial profile and assuming a potential recovery will be slow
• Related: VW, Daimler Map Out Plans to Revive Factory Output

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