Daimler Truck Takes Chinese JV Write-Down, Cites Weak Sales
[Stay on top of transportation news: Get TTNews in your inbox.]
Daimler Truck will take a writedown on the value of its Chinese joint venture due to a persistently weak market in Asia’s largest economy, the German truck manufacturer said July 16 in a preview for its upcoming second-quarter 2024 earnings release.
The writedown comes after the manufacturer on July 8 said that its Asian subsidiary posted a 29.3% slump in sales to 28,342 in Q2 from 40,097 vehicles in the year-ago period.
Daimler Trucks Asia and Daimler’s global truck business broadly is set to take the equivalent of a $130.8 million noncash charge on adjusted earnings before interest and taxation due to the at-equity book value impairment on Beijing Foton Daimler Automotive, it said July 16.
Daimler Truck reports earnings and expectations in euros, and currency conversions were correct as of July 17.
Overall, Daimler Truck sold 112,195 trucks and buses in the most recent quarter, a 14.9% decrease compared with the prior-year period’s 131,888, with weak Asian sales a big reason why.
However, Daimler Trucks North America — which owns the Freightliner and Western Star brands in the U.S. — exceeded expectations in Q2. DTNA sold 48,230 vehicles in Q2, a 4.7% decrease compared with 50,618 trucks and buses in the same period in 2023. The unit posted adjusted EBIT of $957.1 million, compared with consensus expectations that Daimler said were tabbed at $836.9 million. In Q2 2023, DTNA posted adjusted EBIT of $856.7 million.
DTNA posted a return on sales of 14.5% in the most recent three-month period, compared with what the company said were consensus expectations of 12.7% and an ROS of 13.1% in the year-ago period.
Daum
The Q2 performance of Freightliner, Western Star and school bus builder Thomas Built Buses was no surprise to company executives or the market. On Daimler Truck’s first-quarter earnings call May 3, CEO Martin Daum said North America offered a much brighter outlook than Europe or Asia, noting that orders were continuing to come in strong while earlier labor relations issues have been settled.
“We are fully prepared to go full steam throughout the entire year,” he said. “I’m really glad that we were able to settle with the [United Auto Workers union] without any strike, so we don’t have a loss on that side. I feel much more positive about the market.”
“When you look at the U.S., the highway business is certainly down compared with last year, and it is compensated by what we call the vocational business, and the medium-duty business,” he said.
Order activity at DTNA for Q1 — the most recent data available — jumped 31% year on year from 34,068 to 44,530.
Deutsche Bank analyst Nicolai Kempf noted July 7 that orders were likely to continue to improve in North America, particularly the vocational and medium-duty segments.
At the global level, the outlook is not as positive, with Daimler Truck’s European business joining the Asian operations on a rough ride through Q2.
Want more news? Listen to today's daily briefing above or go here for more info
The Europe-focused Mercedes-Benz unit posted sales of 30,604 in Q2, down 22% compared with 39,236 a year earlier. Mercedes-Benz’s adjusted EBIT for the quarter was $327.0 million, compared with consensus expectations of $440.7 million, while its adjusted ROS was 6.5%, compared with a consensus 8.7%, Daimler said. A year earlier, adjusted EBIT and ROS came in at $595 million and 9.4%, respectively.
As a result of the weaker-than-expected performance of the European and Asian units, Daimler Truck is reviewing its full-year earnings guidance.
In the most recent quarter, adjusted EBIT for the company’s industrial business — which manufactures vehicles — was $1.264 billion, compared with an expected $1.318 billion and $2.705 billion in the year-ago period.
Daimler Truck’s full quarterly results and first-half report will be published on Aug. 1.
