Daimler posts $3.6 billion operating profit in Q3 on sales recovery, cost cuts

Daimler’s earnings snapped back in the third quarter, with recovering car sales and cost cuts giving the Mercedes-Benz maker the confidence to predict its momentum will last through the end of the year.

Earnings before interest and taxes surged to 3.07 billion euros ($3.6 billion) for the three months ended in September, Daimler said late Thursday. The preliminary operating profit exceeds the company’s result a year ago and far surpasses the 1.61 billion-euro average estimate among analysts surveyed by Bloomberg.

“The third quarter shows a very strong performance and provides further proof that we are on the right path to reducing the break-even of our company,” CFO Harald Wilhelm said in a statement. “We expect positive momentum to continue in the fourth quarter.”

Daimler coped with the biggest disruption to the auto industry in decades better than feared, though it did suffer a 1.68 billion-euro ($1.97 billion) operating loss in the second quarter. Wilhelm told analysts on Oct. 6 that pricing and product mix held up well in the last three months and said the company will follow through with plans for a major restructuring aimed at reviving profit margins.

Industrial free cash flow was 5.14 billion euros ($6 billion) in the third quarter, exceeding analysts’ consensus for 2.97 billion euros, according to Daimler. The Stuttgart, Germany-based company burned through 1.3 billion euros ($1.5 billion) in the second quarter, when the pandemic forced the most widespread closing of factories since World War II.

The free cash flow beat is “a solid surprise,” Philippe Houchois, a Jefferies analyst with a buy rating on Daimler shares, wrote in a report.

Daimler’s bullish fourth-quarter outlook is predicated on there being no further lockdowns to contain the spread of COVID-19. German Chancellor ’s top health official ruled out a second nationwide shutdown earlier Thursday even as he warned Germany risks losing control over the resurgent coronavirus. The country has joined the likes of France and the U.K. in setting records for new cases this week.

CEO Ola Kallenius said last week that Mercedes has not lived up to its potential to turn sales success into profit growth. He said during Daimler’s Oct. 6 capital markets day that the company will put less emphasis on volume and more on improving earnings in the midst of a costly shift to electric cars.

Daimler said it expects to publish updated guidance for the full year when it reports full financial results on Oct. 23.

Reuters contributed to this report.

Read original article here.