By Scott Kanowsky
Investing.com -- Mercedes-Benz Group AG (ETR:MBGn) reported better-than-expected income in the fourth quarter, thanks to a spike in electric vehicle sales that helped offset weakness at its financing business stemming from elevated borrowing costs.
In the final three months of 2022, the Germany-based automaker posted earnings before interest and taxes of €5.4B, an increase of nearly a third compared to the same period in the prior year. Bloomberg consensus estimates had placed the figure at €4.5B.
Despite flagging a "challenging" macroeconomic environment and geopolitical concerns, Mercedes-Benz sold 2.04 million passenger cars over the quarter, leading to core profit for the division of €4.24B that was higher than anticipated. Partly driving this uptick was strong demand for electric vehicles, a key pillar of the company's long-term strategy, with sales of these units surging by 67%.
Shares in the group rose in early European trading on Friday.
Van sales also grew by 8% worldwide, but were weighed down by supply chain constraints and logistics issues, Mercedes-Benz said. But returns at Mercedes-Benz's financing and leasing arm dropped by 44%, as higher interest rates and a subdued economic outlook led to a jump in cost of credit risk. Volumes were lower as well following the spin-off of the Daimler Truck unit in December 2021.
"We have redesigned Mercedes-Benz to be a more profitable company thanks to our focus on desirable products and disciplined margin and cost management. We cannot control macro or world events, but 2022 is a case in point that we are moving in the right direction," said chief executive officer Ola Källenius in a statement.
The company added that it would launch a share buyback program worth up to €4B, stripping away incidental costs, that will last for up to the next two years. For 2022, a dividend of €5.20 per share was set, translating to a payout of €5.6B.
However, Mercedes-Benz warned that core earnings will be slightly below the prior-year level in 2023, while annual revenue would remain unchanged, as headwinds linger from the war in Ukraine, raw material costs, and possible supply chain disruptions.
"In addition, continued inflationary pressure for consumers and companies and the associated central bank increases in interest rates, as well as a more pronounced growth slowdown in the economy, make the outlook more difficult," it said.
Meanwhile, first quarter trading in China - the world's largest auto market - was impacted by spill-over effects from an uptick in COVID-19 cases following the country's sudden move away from pandemic-era restrictions late last year. Orders in Europe have also been "sluggish," Mercedes-Benz noted.