German carmaker Daimler declined to give a detailed earnings outlook for 2009 when posting a fourth-quarter operating loss, saying only that it expected demand to fall about 10% in 2009.
On top of a “pronounced decline” in all major car markets in the first half of 2009, Daimler said group vehicle sales should drop due to a substantial fall in heavy truck sales in developed markets and a weakening trend in emerging markets.
“The risk is very big that this year a loss will be made,” said Metzler Bank analyst Juergen Pieper. “The expectation that the passenger car market this year contracts by only 10% is too optimistic.”
Morgan Stanley was also downbeat. “Consensus still expects Daimler to post a positive EBIT (earnings before interest and taxes) in 2009. The question is not if Daimler loses money in 2009, but how much,” it said in a research note.
Daimler swung to a fourth-quarter loss before interest and tax of €1.95 billion, significantly short of the average estimate of a €250 million loss in a Reuters poll of 21 analysts.
“As revenues continue to fall, we also expect further substantial pressure on earnings, both at group level and at the individual divisions,” chief executive Dieter Zetsche said.
He promised more cost-cutting but would not give a concrete 2009 profit forecast after posting fourth-quarter results that fell far short of expectations because of €2.2 billion ($2.8 billion) in Chrysler losses and other one-offs.
“In total, we anticipate potential savings in all of our divisions and at headquarters of several billion euros this year,” Zetsche told reporters.
Full-year net profit slumped 65% to €1.41 billion, prompting Daimler to cut its 2008 dividend to €0.60, down from €2.00 a year ago.
It burned €3.2 billion in quarterly free cash at its industrial operations as inventories rose at the Mercedes-Benz brand, and suffered abnormally high payments to suppliers. It also bought 10% of Russian truckmaker Kamaz stake and prepared for the launch of the new Mercedes-Benz E-Class model.
Exposure to Chrysler reduced group 2008 group EBIT by €3.23 billion in total, encompassing Daimler's share of operating losses proportionate to its 19.9% equity stake along with €1.84 billion for the impairment of loans and other related assets.
Daimler had already said sales at Mercedes-Benz fell 2.3% to €1.26 million vehicles in 2008. Its heavy trucks business managed growth of nearly 1% to 472,000 vehicles.
As a result of the ferocious downturn, Zetsche has called 2009 a “Darwinian year” for the auto industry.
Much like rival BMW, Mercedes-Benz benefited from debt-fueled consumerism in rich countries where it pushed volumes with attractively priced leasing deals.
According to StarMine, which weights analysts' forecasts according to their track record, shares in Daimler trade at 11.6 times forward earnings. This values it in line with fellow car and heavy truck maker Fiat but considerably cheaper than BMW's 18.1 multiple for the next 12 months.
“We believe consensus (forecast) must fall more significantly for Daimler for the 2009-2011 timeframe than for any other stock in our coverage,” Morgan Stanley said. (Reuters)