FRANKFURT (Dow Jones)--German-U.S. automaker DaimlerChrysler AG (DCX) is expected Thursday to report a 38% rise in first-quarter net profit, boosted by a narrowed operating loss at its premium Mercedes Car Group division and cost savings.
Analysts will also be focused on the company's earnings forecast for the full year in light of the company's plan to cut 6,000 general and administrative staff worldwide by 2008 - on top of 8,500 job ongoing losses at Mercedes Car Group - and fierce competition for its Chrysler Group in the U.S.
The results will be the first quarterly earnings reported under the tenure of new Chief Executive Dieter Zetsche, who took the helm at the start of the year.
DaimlerChrysler's first quarter net profit is expected to be EUR397 million, up from EUR288 million a year earlier, according to a Dow Jones Newswires survey of eight analysts.
Group operating profit is expected to be around EUR818 million, up 30% from EUR628 million last year. The operating loss at Mercedes Car Groupis expected to reduce to EUR615 million, from EUR954 million in the first quarter of 2005.
Several one-off items are expected to impact the first-quarter, though analysts expect the level to be roughly the same as in the year earlier period. This time round, one-off charges will include around EUR800 million for restructuring at the troubled Smart minicar brand, part of the Mercedes Car Group, and around EUR200 million related to the ongoing job cuts of around 8,500 at Mercedes Car Group.
Earlier this year, DaimlerChrysler decided to cease production of the Smart brand's four-seater model Forfour and focus solely on its tiny two-seater model Fortwo in an effort to reach break-even at Smart next year. The company took a one-off charge of EUR800 million in the first quarter of 2005 related to previous restructuring measures at the Smart unit.
DaimlerChrysler last year said the planned job cuts at Mercedes Car Group would cost it EUR950 million, but EUR570 million of that was already booked in the fourth quarter of last year.
The one-off costs will be partly offset by a gain of around EUR400 million from the sale of diesel engine maker MTU Friedrichshafen to Swedish private equity company EQT. Analysts expect the MTU sale to boost operating profit at the company's Other Activities division to around EUR540 million, from EUR219 million in the first quarter last year.
Operating profit at the company's commercial vehicles division, the world's largest truck maker, is expected to fall 36% on the year to EUR455 million. Last year's first quarter figure of EUR714 million was boosted by a one-off compensation payment of EUR276 million from Mitsubishi Motors Corp. (7211.TO) due to quality problems at DaimlerChrysler's Japanese commercial vehicles unit Fuso, which was previously owned by Mitsubishi.
The truck division is expected to go through a cyclical demand downturn in the next year or two, but rival truck maker Volvo AB (VOLVY) Tuesday announced a 41% jump in net profit and raised its forecasts for the European and North American markets in 2006 due to pre-buying of trucks ahead of new emission standards.
Sales of Mercedes brand cars, meanwhile, are off to a strong start for the year, boosted by strong demand for the revamped M-Class sports utility vehicle and the new S-Class flagship model. The brand lost its position as the world's number one premium car maker last year to rival BMW AG (BMW.XE).
CEO Zetsche aims to reach 7% return on sales at Mercedes Car Group next year after the company's former cash-cow posted an operating loss of EUR505 million in 2005.
Chrysler's prospects will be a key focus in the results. The unit is still having to use a relatively high level of incentives to get buyers into showrooms amid fierce competition from Detroit rivals General Motors Corp. (GM) and Ford Motor Co. (F) and Asian automakers like Toyota Motor Corp. (TM).
Chrysler's first-quarter operating profit is expected to fall 50% on the year to EUR125 million, from EUR252 million a year earlier.
Earnings at DaimlerChrysler's financial services arm are expected to be stable, analysts said.
Following is a table of expectations for DaimlerChrysler's first quarter earnings, based on the average of eight analyst estimates.
DaimlerChrysler AG - Stuttgart, Germany
3 Mos end March 31:
Sales EUR34.426 Bln EUR31.744 Bln
Net Profit 397 Mln 288 Mln
Operating Profit 818 Mln 628 Mln
Earnings Per Share EUR0.39 EUR0.28
Operating profit by division
Mercedes Car Group (615) Mln (954) Mln
Chrysler Group 125 Mln 252 Mln
Commercial Vehicles 455 Mln 714 Mln
Financial Services 333 Mln 328 Mln
Figures in parentheses are losses.