Mercedes-Benz Expects Lower Earnings But Lifts Dividend — Update

By David Sachs

Mercedes-Benz Group raised its dividend despite posting a decline for fourth-quarter sales and net profit, and forecast lower earnings this year on geopolitical and macroeconomic uncertainty.

The German luxury-car maker said Thursday that net profit slipped 21.5% on year to 3.16 billion euros ($3.42 billion), as inflation and supply-chain costs pressured the company's bottom line. Analysts expected net profit to finish the quarter at EUR2.80 billion, according to Visible Alpha.

Quarterly group revenue ticked down 1.8% to EUR40.26 billion after fewer cars and vans were sold. Analysts had forecast sales of EUR39.15 billion, according to Visible Alpha. For the full year, group revenue rose 2.1% compared with EUR153.22 billion.

Mercedes hiked its dividend to EUR5.30 a share from EUR5.20 for 2022. Late Wednesday, the carmaker committed to share buybacks of up to EUR3 billion, expanding on a EUR4 billion program launched last year.

Looking ahead, Mercedes forecasts 2024 group EBIT slightly below last year's level of EUR20.46 billion, which was down 3.9% on year, on stable revenue expectations. The company also cited uncertainty around trade policy stemming from the conflict in the Middle East, the Russia-Ukraine war, and tensions between China and both the EU and U.S.

"The economic situation and automotive markets continue to be characterized by an exceptional degree of uncertainty," Mercedes said. "Unexpected developments may arise in particular from geopolitical events and trade policy."

The firm expects an adjusted EBIT margin of 10%-12% in its cars division after finishing 2023 at 12.6%, in line with its target. The company blamed the softer goal on expectations of flat sales volumes offset by a high share of top-end vehicle sales, Mercedes said.

It targets a 12%-14% adjusted margin for vans with softer sales in the second half after a strong first quarter. The vans business finished the year with an adjusted EBIT margin of 15.1%, slightly above its targeted range, Mercedes said.

Industrial free cash flow is expected to finish 2024 at slightly below last year's level of EUR11.3 billion, the company said.

Mercedes said late Wednesday that it will institute a new buyback policy. After reserving cash for dividends of around 40% of net income and for smaller acquisition investments, it will use the rest of its available cash from industrial operations to repurchase shares.

The carmaker also introduced a new performance indicator to account for hybrid-electric cars and vans, differentiating them from battery-electric vehicles, which are fully powered by batteries.

Write to David Sachs at david.sachs@wsj.com

(END) Dow Jones Newswires

February 22, 2024 02:52 ET (07:52 GMT)

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