Surging S-Class sales keep Mercedes on track to catch up

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Dorothee Tschampa Frankfurt

Daimler’s plan to restore its Mercedes-Benz brand to the top of the luxury-car market gained traction in the second quarter as surging deliveries of the flagship S-Class sedan propelled a rise in profitability.

Earnings before interest and tax (Ebit) at Mercedes-Benz Cars, which also includes the Smart urban-vehicle marque, widened to 7.9 percent of revenue from 6.4 percent a year earlier, Daimler said yesterday.

Mercedes is attracting customers with a new S-Class version that reached showrooms a year ago and other variants that will culminate next year with the $1 million (R10.5m) Pullman limousine featuring three rows of seats.

Daimler chief executive Dieter Zetsche laid out a strategy for Mercedes to retake the worldwide lead in premium-vehicle sales by the end of the decade after the brand fell to third place in 2011, ranking behind fellow German manufacturers BMW and Volkswagen’s Audi brand.

Zetsche’s plan also includes making Mercedes the most profitable luxury vehicle producer, with a targeted margin of 10 percent.

“Daimler is delivering,” said Frank Biller, an analyst at LBBW in Stuttgart. “The new models allow Mercedes to close the gap to the competition. We see Audi, BMW and Mercedes approximately at eye-level” over the long term.

Daimler’s stock jumped the most in three months after the Stuttgart-based car maker said second-quarter Ebit from ongoing business rose 12 percent to e2.46 billion (R35bn) while revenue increased 6.2 percent.

Daimler stuck to targets of “significantly” increasing sales, deliveries and ongoing Ebit this year, and achieving e4bn in group earnings improvements from efficiency measures by next year.

“Our strategy is paying off,” Zetsche said. “We’re growing and, what’s more, we’re growing profitably.”

First-half deliveries of the top-of-the-line S-Class more than doubled, while the Mercedes compact range, which includes recently introduced models such as the CLA four-door coupé and GLA sport utility vehicle, won 24 percent more buyers, Daimler said earlier this month.

Even so, with sales of 783 500 vehicles in the period, Mercedes remained almost 103 000 deliveries behind BMW’s namesake brand.

Mercedes planned to employ about 7 600 temporary workers during the traditional summer vacation period to maintain production and keep to delivery schedules, Daimler said.

Zetsche said the car maker was “very satisfied” with vehicle pricing, and S-Class assembly lines were working over capacity.

Daimler shares rose as much as 2.6 percent, the steepest intraday gain since April 17, and were trading up 1.4 percent at e67.01 as of 11.49am in Frankfurt. The stock has gained 6.6 percent this year, valuing the firm at e71.7bn.

BMW reported a 9.4 percent margin from car making last year, while Audi had an operating margin of 10.1 percent.

Mercedes “is still a long way from” its 10 percent target and “will struggle to close the gap with BMW and Audi”, Sanford C Bernstein analyst Max Warburton wrote. – Bloomberg


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