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DaimlerChrysler net 'weak'
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February 25, 1999: 6:33 a.m. ET
First earnings report since merger at low end of forecast; stock falls
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LONDON (CNNfn) - Shares in DaimlerChrysler dropped sharply Thursday after the company reported a 29 percent rise in net profits to 10.2 billion marks ($5.75 billion), excluding one-time items.
These are the first results since the merger last year that created the world's fifth-largest carmaker. The group reported operating profits up 38 percent to 16.8 billion marks ($10.1 billion) on revenues of 257.7 billion marks.
The stock was down 3 percent in Frankfurt, at 88.95 euros, and analysts blamed earnings that were at the bottom end of expectations.
Greg Melich, auto analyst at Morgan Stanley Dean Witter, pointed out that Daimler's stock jumped 2 percent Wednesday in anticipation of the earnings. "People had expected Daimler to put out really strong results. They are a little bit worse than expected," he said.
The lack of detail that accompanied the results also left the market confused. Analysts were left wondering how the newly-formed entity was treating items such as currency translation effects and what tax charge it took on the previously-announced 1.3 billion marks in pretax merger costs.
Investor sentiment was also affected by the downbeat assessment of the auto industry's prospects this year by rival Volkswagen Wednesday. "In this vacuum all we have out there are the comments from Volkswagen and that has put a bit of a downer on the market," said Steve Haggerty, auto analyst at Schroders in London.
Melich believed VW had good reason for adopting a cautious tone. He maintained management was aiming to drive down analysts' high growth expectations for the current year, as well as position the company ahead of a round of wage talks with the unions.
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DaimlerChrysler
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