FRANKFURT (Reuters) – German automaker Daimler (DE:) raised its 2020 profit outlook on Friday as a 24% jump in demand for luxury cars in China in the third quarter, a new record, helped turn around margins at its Mercedes-Benz cars division.
Benefiting from improved pricing and a fall in fixed costs, adjusted return on sales at the company’s Mercedes-Benz Cars & Vans division rose to 9.4% in the quarter, up from 7% a year earlier and above the minus 1.5% margin in the second quarter.
The car and truck maker said it now expected full-year earnings before interest and taxes (EBIT) to reach prior-year levels, compared with the previous expectation of a drop in earnings.
“We appreciate the fact the Mercedes can deliver very high margins whilst selling an increasing number of electrified vehicles (EVs). This should calm down some of the fears concerning alleged material profitability erosion from EVs,” Arndt Ellinghorst, analyst at Bernstein Research said on Friday.
The company’s adjusted EBIT rose to 3.479 billion euros ($4.11 billion) in the quarter, up from 3.14 billion euros in the year-earlier period.
However, quarterly deliveries of Mercedes Benz Cars and Vans were down 4% as the COVID-19 pandemic continued to weigh on demand, prompting Daimler to reiterate that it expects group unit sales and revenue in 2020 to be significantly lower than the previous year.
Daimler said its outlook is based on the premise that conditions will continue to normalise and that no further setbacks occur as a result of the Covid-19 pandemic.
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