Daimler AG says its financial outlook has improved dramatically in the third quarter after a steep drop in the first half of the year due to the rapid spread of COVID-19 around the globe, which is beginning to reappear across Europe.
The company’s rebound during the quarter just ended was boosted by a faster than expected market recovery and a particularly strong September performance, Daimler said in a statement released ahead of the full disclosure of the company’s quarterly financial report.
The recovery “combined with diligent cost discipline, extensive cash preservation measures and further efficiency enhancements, means that Industrial free cash flow is significantly above market expectations for the third quarter of 2020,” statement said.
Daimler Group earnings before interest and taxes or EBIT of 3.07 billion euros, or $3.6 billion, in the third quarter versus the consensus estimate by analysts of 1.95 billion euros
Officials also expect the upbeat results from the third quarter to have a positive impact for the remainder of the year. However, the guidance also included a note of caution as COVID-19 began to surge again in Europe. “Please note this statement is made under the assumption of no further COVID-19 lockdowns,” the company guidance noted.
“The third quarter shows a very strong performance and provides further proof that we are on the right path to reducing the break-even of our company,” stated Harald Wilhelm, member of the Board of Management of Daimler AG responsible for Finance and Controlling and Daimler Mobility.
“At the same time, we continued to seize opportunities from improving markets with the great products of Mercedes-Benz Cars & Vans and Daimler Trucks & Buses. This gives us confidence to push ahead with our work both on the strategic and operational side of the business. We expect positive momentum to continue in the fourth quarter, however with the regular year-end seasonality.”
The strong free cash flow in the quarter reflects the extensive cost and cash preservation measures and strong operative performances across all divisions leading to favorable cash-conversion ratios.
In addition, the quarter saw the expected receipt of a 1.2 billion euros dividend from Daimler’s Chinese joint venture BBAC and a positive contribution from working capital.
The preliminary results also include the following adjustments affecting earnings before interest and taxes or EBIT include expenses of 407 million euros mainly from ongoing efficiency programs and including 68 million euros for adjustment and realignment of capacities within the global production network in connection with the intended sale of the car plant in Hambach.
The legal proceedings around the ongoing “dieselgate” scandal also cost the Daimler Group an additional 2 million euros during the third quarter.