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Daimler quarterly earnings rise 12% on sales of S class

Daimler HQ -Daimler quarterly earnings rise 12% on sales of S class

Daimler said second-quarter profit rose 12 percent as the top-of-the-line Mercedes-Benz S-class sedan’s sales doubled and the company scaled back spending.

Earnings before interest and taxes from ongoing business rose to €2.46 billion ($3.32 billion) from €2.19 billion a year earlier, Daimler said in a statement today.

Ebit at the Mercedes-Benz Cars division, which also includes Smart, widened to 7.9 percent of revenue from 6.4 percent.

“Our strategy is bearing fruit,” CEO Dieter Zetsche said in the statement. “Supported by our product offensive and the successful continuation of our efficiency programs, we look to the future with optimism.”

“We are continually looking at ways to improve our structural efficiency,” Zetsche told journalists during a conference call, while declining to put a figure on the extent of potential savings.

Currency volatility, mainly related to emerging markets including Brazil, sliced €260 million from Daimler’s earnings during the quarter.

Mercedes plans to employ about 7,600 temporary workers during the traditional summer vacation period to maintain production and keep to delivery schedules, Daimler said today. The carmaker is “very satisfied” with vehicle pricing, and S class assembly lines are working over capacity, Zetsche said

Zetsche has set dual goals for Mercedes to retake the lead in global premium-car deliveries by the end of the decade from BMW and Audi, currently the top two brands, and to generate an Ebit margin from automaking of 10 percent of revenue.

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

Other analysts were skeptical that Daimler will reach or maintain its 10 percent margin target.

“If all markets perform well and the product is good, Daimler can reach the 10 percent even without a new savings program,” said Arndt Ellinghorst, London-based analyst at investment researchers ISI Group. “Whether the margin would be sustainable is a different matter.”

Max Warburton, an analyst at Sanford C. Bernstein, said Mercedes is still a long way from the target. “We remain of the view” that Mercedes “will struggle to close the gap fully with BMW and Audi,” he wrote in a note to clients.

Zetsche’s growth strategy includes bringing out 30 new models and reducing spending by €2 billion in the two years through 2014. Daimler stopped giving a deadline for the profitability goal in 2012 after missing earlier dates.

“Generally, Mercedes should be able to reach a higher margin level than BMW,” Daniel Schwarz, a Frankfurt-based analyst at Commerzbank, said before the figures were published. “Mercedes can charge higher prices than BMW and Audi and they are making improvements on the cost side.”

The Mercedes marque fell behind BMW’s namesake brand in deliveries in 2005, and Audi overtook it in 2011.

In the past year, Mercedes has updated and expanded its compact lineup in addition to bringing out a new version of the S class and a revamped E-class sedan. First-half sales jumped 13 percent to 783,500 autos, outpacing gains at the other two premium manufacturers, as demand for the S class surged. Even so, Mercedes remained almost 103,000 deliveries behind BMW in the period. The three German carmakers are all targeting record sales this year.

Second-quarter Ebit at Mercedes-Benz Cars jumped 35 percent to €1.41 billion, while Daimler Trucks posted a 4.8 percent increase to 455 million euros.

The carmaker stuck to targets to “significantly” increase Ebit from ongoing business, sales and deliveries this year.

Daimler scaled back its forecast for global auto-market growth to 4 percent from a predicted 4 percent to 5 percent range.