GERMAN AUTOMOTIVE group Daimler reported a surprise rise in first-quarter operating profit, in part thanks to stronger than expected earnings at the financial services business that offers loans and leases to car buyers.
Shares underperformed other European car stocks, however, after investors were unimpressed that Daimler’s cash pile had shrunk by nearly €21 million.
Results were boosted by lower quality earnings – from the financial services unit as well as the contribution from its stake in aerospace group EADS – and by monetary policies designed to drive down borrowing costs in many developed nations. “These are especially good conditions for financial services, with low borrowing costs, low credit risk and high residual values so it is not really sustainable,” said WestLB analyst Adam Hull. Financial services “is at a peak level, and the market tends not to value these profits with a particularly high multiple”.
Earnings before interest and tax (Ebit) rose 5 per cent to €2.13 billion, better than the 5 per cent drop to €1.93 billion estimated in a Reuters poll. – (Reuters)