Mercedes-Benz shares climb 5% on share buyback, despite ‘exceptional’ uncertainty ahead

Mercedes Benz The German automaker’s shares rose about 5% on Thursday morning after it beat fourth-quarter profit estimates and announced a new share buyback program, despite warning of “unusual” risks in the year ahead.

Fourth-quarter earnings before interest and tax (EBIT) came in at 4.33 billion euros ($4.7 billion), slightly above consensus estimates, bringing the full-year figure to 19.66 billion euros. Revenue in 2023 will grow by 2% to 153.2 billion euros from 150 billion euros in the previous year.

The group also announced an additional share buyback program worth up to 3 billion euros, which was subsequently cancelled.

However, Mercedes-Benz warned that supply chain bottlenecks for key parts remained a “significant risk factor” and said there was an “exceptional degree of uncertainty” over geopolitical events and trade policy, particularly the Russia-Ukraine relationship. The shape of conflict in the Middle East and tensions between Western powers and China.

The company expects growth to be flat in 2024 due to the impact of inflation and supply chain costs, while Mercedes’ adjusted return on sales is expected to slip to 10% to 12% from 12% to 14% in 2023.

Auto analysts at Jefferies said in a reaction note Thursday that while there were no major earnings surprises, the cash-back policy “is a sign of confidence and consistent with premium/luxury positioning, buybacks will remain Earnings per share (EPS) growth.”

Mercedes-Benz Chairman Ola Källenius told CNBC on Thursday that the company is well prepared to overcome various macroeconomic headwinds.

“Today we showed very strong numbers for Mercedes-Benz Cars and it’s been a really good year for our light commercial vans segment,” he said.

Mercedes-Benz commercial vehicle revenue increased 18% year-on-year to 20.3 billion euros, adjusted profit before interest and tax soared 59% to 3.1 billion euros, and sales increased 8% to a record 447,800 vehicles.

But Kallenius noted that supply constraints did have an impact on the company in the second half of 2023 and will continue to have an impact in the first quarter of 2024.

“But we’re working through it with our partners and we’re putting in more capacity now that we’ve had over the last few months, so as we get into the first quarter and toward the end, I think we’ll address those. problem, so in the second quarter we can get back to a more normal supply situation,” he added.

Although Kallenius acknowledged that the macroeconomic environment is “challenging” amid escalating conflicts and geopolitical tensions, continued high interest rates in China and structural economic headwinds, Kallenius said Mercedes would not scale back investments in future development .

“That doesn’t mean we’re exiting any of the markets, but we’re always trying to maximize the potential in the more than 150 countries in which we’re active,” he told CNBC’s Annette Weisbach. Nor has the company. “divest” its investments.

“In fact, we are actually making the highest level of investment in the history of the company to prepare a whole new generation of products – some of which will be launched this year, but it is really a product offensive, especially in pure electric vehicles from 2025 starting and continuing until 2026 and beyond,” Kallenius said.

“As a result, we are moving full steam ahead in developing new technologies, innovations and a broad range of products over the next few years.”