Daimler Posts 1Q Loss As Mkt Downturn Bites

Daimler AG (DAI) Tuesday posted a worse-than-expected net loss in the first quarter as global demand for trucks and luxury cars collapsed, confirming that full-year revenue and vehicle sales will come in significantly lower than in 2008.

"Daimler anticipates a gradual improvement in operating profitability as the year progresses. Earnings in the second quarter are expected to be significantly negative once again, however," the German automaker said in a statement, adding that it targets EUR4 billion in cost savings this year.

Chief Financial Officer Bodo Uebber told reporters the company was striving to be profitable on a full-year basis, but due to the market's volatility it currently couldn't rule out posting a loss in 2009.

Daimler posted a net loss attributable to shareholders of EUR1.32 billion in the first three months of the year compared to net profit of EUR1.29 billion in the same period a year ago.

Daimler's closely watched earnings before interest and tax, or EBIT, came in at a EUR1.43 billion loss in the first quarter, missing analysts' expectations of a EUR1.08 billion loss. It posted a profit of EUR1.98 billion last year.

Revenue fell to EUR18.7 billion in the first quarter from EUR24 billion in 2008.

Daimler sold 332,300 cars and commercial vehicles worldwide in the first three months of the year, down 34% from the same period in 2008. Net liquidity of industrial business stood at EUR3.7 billion at the end of March, due to the EUR1.95 billion of cash raised from the share issuance to Abu Dhabi's Aabar Investments PJSC (AABAR.AD), which last month acquired a 9.1% stake in Daimler.

At 1236 GMT, Daimler shares traded down EUR1.94, or 7%, at EUR25.45, while the blue-chip DAX index traded down 2.9%.

A sharp deterioration in sales and a mix shift toward smaller and less profitable vehicles along with wide-ranging destocking are eating into automakers' earnings, with luxury car makers particularly hard hit amid recession.

Daimler's core Mercedes-Benz Cars unit, usually the company's cash-cow with its Mercedes-Benz, Smart and Maybach brands, reported a EUR1.12 billion EBIT loss in the first quarter after a profit of EUR1.15 billion last year.

The Stuttgart-based automaker now is pinning its hopes on the revamped Mercedes-Benz E-Class, which is poised to help sales volumes from the second quarter onward, as well as contribute to a better model mix.

Daimler said it expects Mercedes-Benz Cars to "at least maintain its market shares," adding that the division is believed to have reached its earnings trough in the first quarter.

"There should be a gradual improvement in profitability over the next three quarters and positive earnings in the second half of the year," it said.

The luxury car maker said it will increase prices of certain new models in some markets and launch the E-Class in the U.S. in June, earlier than initially planned.

Daimler said vehicle inventories at the end of the first quarter were lowered to the level of spring 2008. The company said it aims to further reduce inventories to "a level in line with current market volumes" by the end of the second quarter. Reducing inventory is an important instrument for the improvement of cash flows.

Daimler's truck division, the world's largest truck maker by sales, posted a EUR142 million EBIT loss after a profit of EUR403 million in the first quarter of 2008.

Its financial services unit also swung to an EBIT loss, of EUR167 million, after a profit of EUR168 million last year, mainly due to further increases in risk provisions.

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