FRANKFURT -- Daimler said it expected the full-year operating profit of its Mercedes-Benz cars and vans division to be above the prior-year level but warned that the coronavirus pandemic will push the group to an operating loss in the second quarter.
Daimler reiterated it expects group revenue and earnings before interest and taxes (EBIT) to be below 2019 levels but given substantial one-off charges in the year-earlier period, the cars and vans division is now seen delivering EBIT above prior-year, the company said on Wednesday.
Daimler is also sticking to its dividend proposal and ruled out needing to apply for state-backed loans, given an adequate cash position.
Last week Daimler pre-released results, showing a plunge of nearly 70 percent in first-quarter operating profit and warned that the cash flow it uses to pay dividends would fall this year.
First-quarter earnings before interest and taxes (EBIT) were 617 million euros ($669.45 million), down from 2.8 billion euros in the year-earlier period, of which 510 million euros came from the Mercedes-Benz Cars unit. Revenue declined 6 percent to 37.2 billion euros ($40.4 billion) in the first three months as the number of vehicles sold dropped 17 percent to 644,300.
Anticipating a higher rate of defaults among customers, Daimler hiked risk provisions for delinquencies among customers who leased or bought Mercedes cars to 448 million euros ($486.71 million), even as default rates have not yet started to spike.
Analysts applauded the automaker's cash management.
"There is nothing cheering in the auto numbers we have seen so far across the industry but Daimler seems to have had a decent start to Q1 and managed working capital better than we had feared," Jefferies analyst Philippe Houchois said.
After closing factories in March to preserve cash and manage costs, Daimler has now "started with a gradual ramp-up" of production, CEO Ola Kaellenius said on Wednesday.
CFO Harald Wilhelm said on April 8 the crisis could help accelerate overhaul efforts to save 1.4 billion euros ($1.5 billion) 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.
