April 29, 2020 / 5:59 AM / a month ago

Daimler sees profits at Mercedes-Benz Cars rising in 2020

FILE PHOTO: The Mercedes-Benz logo is seen near the Daimler headquarters, as the spread of the coronavirus disease (COVID-19) continues in Stuttgart, Germany, April 22, 2020. REUTERS/Andreas Gebert/File Photo

FRANKFURT (Reuters) - Daimler said it expected the full-year operating profit of its Mercedes-Benz Cars & 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.

Anticipating a higher rate of defaults among customers, the carmaker hiked risk provisions for delinquencies among customers who leased or bought Mercedes-Benz cars to 448 million euros($486.71 million), even as default rates have not yet started to spike.

Analysts applauded the carmaker’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.

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 Mercedes-Benz Cars & Vans division is now seen delivering EBIT above prior-year, the company said.

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% in first-quarter operating profit and warned that the cash flow it uses to pay dividends would fall this year.

First-quarter EBIT was 617 million euros, down from 2.8 billion euros in the year-earlier period, of which 510 million euros came from the Mercedes-Benz cars unit.

($1 = 0.9205 euros)

Reporting by Edward Taylor; Editing by Michelle Martin

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