Daimler disappoints as outlook lacks detail

Reuters (Stuttgart) - German carmaker Daimler (DAIGn.DE) posted disappointing fourth-quarter earnings, with an upbeat outlook from CEO Dieter Zetsche failing to deliver the specific details analysts said was needed to reassure investors.

Daimler's lackluster showing follows sobering news from lower-margin French mass market players Renault (RENA.PA) and PSA Peugeot Citroen (PEUP.PA), which both underwhelmed markets with their results last week.

JP Morgan analyst Ranjit Unnithan summed up the general dissatisfaction with Daimler's results thus: "On balance, a weak fourth quarter 2010 and no specific 2011 outlook."

Shares in the German carmaker were down 3.3 percent by 1512 GMT on Wednesday, despite Daimler delivering a higher-than-anticipated dividend payout of 1.85 euros per share for 2010, against a poll forecast of 1.75 euros.

It posted fourth-quarter earnings before interest and taxes (EBIT) of 1.56 billion euros ($2.1 billion), compared with a forecast for 2.05 billion in a Reuters poll.

Daimler predicted a considerable gain in earnings this year on better sales of its Mercedes premium cars and a turnaround at its industry-leading trucks business.

The company said 2011 earnings before interest and tax would be significantly above last year's figure.

But after previously flagging 2011 as a "very good" year thanks to strong Chinese demand for Mercedes-Benz saloons, the financial community had wanted more flesh on the bone.

Daimler did make one forecast. Chief financial officer Bodo Uebber told a news conference he expected global car markets to grow 5-7 percent in 2011.

But analysts were disappointed with the lack of detail.

"(Guidance) ... was light versus the level of detail that the market had wanted to see. We were looking for north of 9 billion euros in terms of full year 2011 EBIT guidance," Credit Suisse analyst David Arnold said.

Daimler raised its outlook three times last year, most recently forecasting in October that group EBIT would top 7 billion euros for 2010.

Although group full-year industrial free cash flow doubled to 5.4 billion euros from 2.7 billion in 2009, Bernstein analyst Max Warburton said free cash flow of only around 100 million euros in the last quarter was "disappointing for a 1.5 billion euro EBIT quarter."

He said this could be explained by a Mercedes inventory build-up.

Daimler, which recently celebrated the 125th anniversary of Carl Benz inventing the modern automobile, is the first German carmaker to report 2010 results, ahead of BMW (BMWG.DE) and Volkswagen (VOWG_p.DE).

As a group, Daimler expects its raw material costs to be about 700 million euros higher in 2011 than in 2010. It said it hopes to offset these via efficiency gains and higher sales volumes.

However it continues to invest heavily as Chinese demand for its premium cars rises. Research and development spending was almost 15 percent higher in 2010 than a year earlier, with a 400 million euro increase at the Mercedes-Benz Cars division alone.

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In comments unrelated to its earnings, Uebber said Daimler found it hard to understand why French authorities suspected the German carmaker of insider trading in shares of planemaker Airbus' parent company EADS (EAD.PA).

EADS shareholder Daimler said last week it had been placed under formal investigation in France over alleged insider dealing in EADS but was confident of being cleared.

"We consider the entire process to be extremely unusual and difficult to understand," he said, in the text of a speech distributed at the conference.

Later Daimler's Chief Executive Dieter Zetsche signaled the German carmaker could make a change to its holding in EADS, but said no decision had been made yet.

"We intend to maintain industrial leadership, but the stakes and the structure could be under discussion in the future," Zetsche told Reuters Insider TV in an interview.

Government sources told Reuters last week that the German government is seeking a new private investor for EADS in light of Daimler's possible departure.

Asked about a possible tie-up with Fiat Industrial's (FI.MI) Iveco business, Zetsche said the company had found synergies but "could not reach an agreement over valuations."