STUTTGART: Mercedes maker Daimler pledged on Thursday to improve on last year's record sales and profit, despite slowing US and Chinese car markets and persistently weak truck demand that led it to miss fourth-quarter earnings forecasts.
The German group also signalled higher spending on electrified vehicles and internet-connected services, adding to investor concerns that earnings growth may be tailing off.
Earnings before interest and tax (EBIT) will increase "slightly" in 2017, Daimler said after posting 3.46 billion euros ($3.7 billion) for the fourth quarter - up 19 percent but below the 3.71 billion expected by analysts in a Reuters poll.
Daimler shares were down 2.7 percent to 68.14 euros at 1219 GMT, within a European auto sector down 0.6 percent. Revenue edged 1 percent higher to 41 billion euros, rounding off a year in which Mercedes-Benz dethroned rival BMW as the world's leading luxury carmaker. "We are confident that we will be able to improve on these record results once again in 2017," Chief Financial Officer Bodo Uebber said.
But quarterly adjusted earnings fell 47 percent at the trucks division and 38 percent in vans, a combined 112 million euros short of the market consensus.
Profit at Mercedes cars jumped 22 percent to 2.63 billion euros - for an 11 percent operating margin - and will this year rise "significantly above" its 2016 total, Daimler said.
Global deliveries rose 18.3 percent in January, the division announced separately on Thursday.
Daimler proposed an unchanged dividend of 3.25 euros per share.
The 2017 goals point to EBIT somewhere between 13.2 billion and 14.2 billion euros; the higher figure was already anticipated by analysts in the Reuters poll. Market expectations are now "at the very high end of company guidance", said Evercore ISI analyst Arndt Ellinghorst.
"There is very little room for positive earnings revisions."
Morgan Stanley analysts cited a weak outlook outside the Mercedes division among signals to Daimler shareholders that now could be a good time to cash in recent gains.
"The flat dividend highlights Daimler's need for future (investment) spending to follow the electric vehicle strategy," the bank added.
Daimler is pushing heavily into self-driving car technologies, connected on-board services and transmissions powered by batteries or fuel cells - all areas where mass uptake and returns on investment remain uncertain.
The technology drive will bring higher spending on plants, research and development in 2017-18, CFO Uebber said. The 30 billion euros earmarked over two years compares with 13.5 billion invested last year alone.
"This substantial expenditure is required because the automotive industry is faced with a fundamental transformation," Uebber said. "We are in an investment phase - these businesses will be profitable in the long term."
Trucks will put a brake on performance this year, Daimler cautioned, with divisional profit expected to fall further. North American demand continues to contract, with little sign of recovery in the blighted Brazilian and Turkish markets.
In cars, US demand will flatten out as its current high level while China's market growth slows, Daimler predicted.
For 2016 overall, the group reported a 5 percent gain in sales volume and 3 percent revenue increase to 153.3 billion euros. Net income was a record 8.78 billion euros for the full year and 2.21 billion in the last quarter.
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