UPDATE 1-Daimler posts surprise gain in Q1 profits


* Q1 EBIT 2.13 bln eur vs Reuters poll avg 1.93 bln

* Mercedes Q1 EBIT margin drops 90 bp to 8.4 pct

* Industrial Free Cash Flow -2.0 bln eur

* Maintains full-year guidance (Adds details)

FRANKFURT, April 27 (Reuters) - German automotive group Daimler reported a surprise increase in first-quarter operating profit on Friday, in part thanks to stronger than expected earnings at its financial services business.

Earnings before interest and tax (EBIT) rose 5 percent to 2.13 billion euros ($2.82 billion), better than the 1.93 billion estimated in a Reuters poll of 15 banks and brokerages.

Daimler said it still expects its ongoing operations to report an EBIT in the magnitude of last year, when it earned 9.0 billion euros before interest and tax, guidance so far deemed as credible by the market.

"We have started the year with a strong first quarter, despite higher investment in future growth and a challenging market environment," said Chief Executive Dieter Zetsche in a statement, pointing to higher quarterly car sales, revenue, EBIT and net profit.

The margin at the Mercedes car brand, the metric most comparable with profitability at rivals BMW and Audi , slid about 90 basis points to 8.4 percent.

By comparison, Volkswagen reported on Wednesday that Audi's margin widened 80 basis points to 11.4 percent over the period.

Daimler blamed a seasonal increase in inventories for having burned 2 billion euros in free cash at its industrial operations over the first three months of this year, reducing its cash pile to 10.1 billion at the end of March.

"Higher levels of stocks are related to the start of the peak selling season in spring at Mercedes-Benz Cars and the market launch of new products such as the B-Class, the SL and the SUVs," it said.

($1 = 0.7559 euros) (Reporting by Christiaan Hetzner)



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