DMLRY Mercedes Benz Group AG (PK)

--Daimler's 1Q earnings dropped 15% on lower Mercedes-Benz sales and higher raw-material prices at its trucks unit

--Short-term cost-cutting measures will be unavoidable to meet 2019 targets

--The company backs its full-year targets, forecasting slight earnings and revenue growth

 
   By Max Bernhard 
 

German luxury-car maker Daimler AG (DAI.XE) on Friday reported a drop in first-quarter earnings on lower sales of its Mercedes-Benz cars, prompting its chief executive to warn that cost cuts will be unavoidable to achieve full-year targets.

Daimler said it sold 773,800 of its passenger cars and commercial vehicles during the first three months of the year, 4% less than a year ago. Earnings before interest and taxes fell 15% to 2.80 billion euros ($3.12 billion) from EUR3.3 billion.

Chief Executive Dieter Zetsche, who is set to leave in May, said the company now has to work hard if it still wants to meet its 2019 targets.

"In view of the major changes taking place in the automotive industry and in individual mobility, there is no way around short-term cost-cutting measures and long-term strategic decisions," he said.

Incoming CEO Ola Kallenius plans to slash up to EUR6 billion in costs at its Mercedes-Benz passenger car division and EUR2 billion in savings at Daimler Trucks over the next three years after taking up his position next month, German business publication Manager Magazin reported last week. The savings program would also include up to 10,000 job cuts, the report said.

Auto makers have been struggling with a slowdown in China, the world's most important market for cars, as well as rising trade tensions, stricter emissions legislation and the high costs of developing electric and self-driving vehicles.

Earnings at Daimler's core passenger-car unit were hit by lower sales and changes in the sales structure, while earnings at the truck division were weighed down by higher raw-material prices and supply-chain bottlenecks, Daimler said.

Its Mercedes-Benz Vans and Daimler Buses division both swung to a loss, in part due to higher upfront investments into new technologies for vans and delivery delays for its buses.

Daimler benefited from a significant earnings increase at its financial services unit and the merger of its ride-hailing and car sharing businesses with those of BMW AG (BMW.XE), which added EUR718 million to earnings. But those gains couldn't offset the overall earnings slump.

Industrial free cash flow swung to negative EUR2.0 billion, from positive EUR1.8 billion a year ago, while revenue edged lower to EUR39.70 billion, from EUR39.79 billion. Net profit fell to EUR2.10 billion in the period from EUR2.27 billion a year earlier.

Daimler confirmed its 2019 guidance, expecting slight growth in unit sales, revenue and earnings.

Write to Max Bernhard at max.bernhard@dowjones.com; @mxbernhard

(END) Dow Jones Newswires

April 26, 2019 04:04 ET (08:04 GMT)

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