LEINFELDEN-ECHTERDINGEN (dpa-AFX) - Commercial vehicle manufacturer Daimler Truck suffered significant setbacks in its key North American market during the third quarter due to industry weakness. Both revenue and profit saw marked declines. In Europe, however, the company managed to regain some footing, partly thanks to its cost-cutting program. In the United States, order volumes appear to have bottomed out, showing a slight improvement compared to the very weak second quarter. Nevertheless, business conditions remain challenging due to the ongoing US industry slump and tariffs on steel and aluminum, prompting CFO Eva Scherer to now expect results at the lower end of the forecast ranges for sales and operating margin in the Swabian company's most important market.
Despite these challenges, Daimler Truck shares gained slightly, although early gains faded as trading progressed. Most recently, the stock was up by half a percent. Michael Aspinall, analyst at US investment bank Jefferies, noted solid order volumes in North America. However, the lack of a more pronounced improvement--combined with weak prospects for the operating margin in the second half of the year--could weigh on market expectations for the coming year.
Operating profit came in weaker than expected, wrote Harry Martin, an analyst at Bernstein. For investors, the key remains the outlook for the coming year as well as details regarding import tariffs on steel and aluminum.
The tariff increases imposed by US President Donald Trump on numerous trading partners have disrupted the US transport market. Freight companies can hardly forecast future transport volumes from the nation's ports and, amid this uncertainty, are ordering fewer trucks. Additionally, increased tariffs on steel and aluminum imports are raising costs for commercial vehicle manufacturers.
In the third quarter, customers in North America ordered 26,168 vehicles--almost double the previous quarter's figure. However, this still represented a decline of nearly one-third compared to the same period last year. Sales of trucks and buses fell even more sharply due to weak order volumes in previous quarters. North America, primarily with the Freightliner and Western Star brands, is typically Daimler Truck's most profitable market.
In Europe, business is picking up again following the economic downturn. Sales of the region's main brand, Mercedes-Benz, rose by 8 percent year-on-year, with orders up by more than a fifth. The operating margin also improved, slightly exceeding the sharply reduced return on sales in North America.
The company is currently cutting costs in both regions. CEO Karin Radstrom has launched a savings program aimed at boosting the chronically low margins of the Mercedes-Benz division in Europe over the long term. By 2030, ongoing costs on the home continent are to be reduced by more than one billion euros, with around 5,000 jobs in Germany expected to be cut, according to company statements. In North America, Daimler Truck is reducing production capacity, which will affect over 2,000 jobs in total, based on earlier information.
Revenue in the industrial business--excluding financial services--fell by 14 percent in the third quarter to around 10.6 billion euros, due to declining sales, the company announced Friday in Leinfelden-Echterdingen.
Adjusted group earnings before interest and taxes dropped by 40 percent to 716 million euros. In the industrial business, the operating margin decreased by three percentage points to 6.3 percent, coming in slightly weaker than analysts had expected.
Net profit attributable to shareholders fell by 29 percent to 434 million euros. The management confirmed the group-level outlook, which has been revised downward several times this year./men/lew/mis
