Mercedes-Benz raises earnings outlook as supply snags ease

By Victoria Waldersee

BERLIN (Reuters) – German automaker Mercedes-Benz raised its earnings forecast on stronger orders, an improved supply chain and higher sales and said it would carry on combatting costs by hiking prices despite worries over inflation weighing on demand.

“Will the price lever be as strong in the coming quarters? We will be a bit more careful … but we still have cost increases to digest,” Chief Financial Officer Harald Wilhelm said on Thursday, following half-year results late Wednesday.

Luxury automakers from BMW to Porsche and Mercedes-Benz have been able to weather rising costs in everything from raw materials to logistics better than volume carmakers by passing them on to customers, playing on the exclusivity of their brands.

Still, Mercedes-Benz was cautious on economic prospects, pointing to high interest rates which could subdue consumer spending.

Earnings before interest and tax (EBIT) came in at 5 billion euros ($5.6 billion) for the second quarter, compared with analysts’ consensus forecast of 4.7 billion euros, helped by higher earnings at its vans division.

The company said in statements issued on Thursday that inventory was building up as a result of the roll-out of its direct sales model and a ramp-up in production with new models coming onto the market.

The supply chain was “noticeably improved”, it added, in contrast to Porsche which said on Wednesday it was struggling weekly with supply chain problems, particularly key components for electric cars.

Mercedes-Benz said it now expected full-year EBIT to be around the 20.5 billion euros ($22.7 billion) made in 2022, having previously projected a slight decline.

Forecasts for its cars division were kept unchanged for flat revenues and an adjusted return on sales of 12-14%.

But it raised the projected adjusted return on sales at its vans division to 13-15% from 11-13%, marking the second upgrade in less than three months after a significant increase in sales in the second quarter.

Mercedes-Benz shares were up 1.7% at 0845 GMT.

This month, the company reported 6% growth in its second-quarter vehicle sales as a result of high demand for all-electric and top-end vehicles, posting growth in Europe, Asia and North America.

($1 = 0.8981 euros)