BERLIN (Reuters) -Mercedes on Wednesday reported a 70% drop in operating profit in the third quarter, as the cost of job cuts added to U.S. tariff woes and weak demand for the German luxury carmaker.
Mercedes-Benz Surpasses Margin Expectations Driven by Premium Sales
Mercedes-Benz Financial Performance
By Rachel More and Ilona Wissenbach
Sales Growth in Premium Models
BERLIN/FRANKFURT (Reuters) -German carmaker Mercedes-Benz on Wednesday reported stronger than expected margins at its core autos business as improved sales of premium models helped to offset one-off charges related to ongoing job cuts.
Challenges in Key Markets
Like rivals including Porsche and BMW, Mercedes faces particular challenges in the Chinese premium and luxury market, where a price war driven by local carmakers is hitting demand, while U.S. import tariffs also weigh.
Restructuring and Profit Outlook
"The animal that is able to adapt is the one that survives and thrives in evolution," said Chief Executive Ola Kaellenius. "The hyper-competition in China is not going away any time soon. This is certainly a multi-year task."
In the third quarter, Mercedes-Benz's return on sales at its car division was 4.8%, up from 4.7% in the same period last year and beating the 3.9% average estimate in a Visible Alpha poll.
This was supported by a 10% increase in top-end models, including the high-margin Maybach and AMG brands, while free cash flow was about 1.4 billion euros ($1.6 billion), prompting the company to resume its share buyback programme.
Operating profit, meanwhile, fell 70% owing to charges related to layoffs as the company implements restructuring measures to save 5 billion euros globally by 2027.
This "should be good enough" for a positive market reaction, said one Frankfurt-based trader.
Shares in the company were up 6% at the top of Germany's blue-chip index.
Mercedes' challenges are spread across its most important markets: tariffs in the United States, falling sales in the highly competitive Chinese market and European emissions targets that have prompted an uneasy shift towards margin-squeezing electric vehicles (EVs).
($1 = 0.8575 euros)
(Reporting by Rachel More and Ilona WissenbachEditing by Christoph Steitz and David Goodman)
