Mercedes more upbeat on signs U.S., China picking up

BERLIN --  Mercedes-Benz struck a slightly more optimistic tone alongside its first quarter results, saying demand in the U.S. and China was showing signs of picking up as markets recover from inflationary and supply chain shocks.

Demand in Europe was still sluggish, but the German automaker expects that to improve in the coming months as consumer confidence rebuilds.

The automaker warned in February it expected lower earnings this year, even with sales remaining stable, because of high costs and inflationary pressure.

But on Friday it lifted guidance for the annual adjusted return on sales at its vans division to 11 percent-13 percent from 9-11 percent, and said it expected to hit the higher end of its 12 percent-14 percent forecast for returns in the cars division.

That came after it reported group earnings of 5.5 billion euros ($6.06 billion) for the first quarter, and adjusted return on sales for its cars division of 14.8 percent, above expectations but below last year's 16.4 percent margin.

The vans division saw an adjusted margin of 15.6 percent, up from last year's 12.6 percent, boosted by improved deliveries and pricing.

Mercedes boosted earnings in 2022 by hiking prices by more than the rise in its own costs, and planned to carry on doing this throughout 2023, Chief Financial Officer Harald Wilhelm said.

The company's decision to cut costs with a direct sales model is underway, with the transition in Germany taking place in the second half of the year and 80 percent of the European market to be migrated to the new system by 2025, Wilhelm said.

Overall, global growth is likely to remain subdued, but inflation is gradually declining, energy prices are expected to be less volatile, and raw material prices are improving, Mercedes said.

Russian exit

Wilhelm said Mercedes does not currently expect to exercise the buyback option in the sale of its shares in Russian subsidiaries to Avtodom, which it said had a low three-digit million euro effect on Mercedes-Benz Mobility's balance sheet.

"We do not currently expect that option to be exercised," Wilhelm said on a press call in reference to the buyback option, adding that the company did not want to comment further on hypotheticals given the political context.