Daimler’s sentimental upswing driven by positive cash flow and June recovery

Amidst quarterly losses, Daimler’s sentiments rose by around 93% in Q2 2020 (quarter ended June 2020*) as compared to Q1 2020 (ended March 2020), driven by improvements in cash flow and June sales, according to GlobalData, a leading data and analytics company.

Despite the COVID-19 pandemic driving financial constraints during Q2 2020, free cash flow (among the top mentions in the earnings transcript) grew by over 100% as compared to Q1 2020, improving from past negative margins. The company’s unit sales also recovered to pre-lockdown levels in June 2020.

There were signs of recovery in June 2020 as monthly passenger car unit sales grew by around 28% as compared to May. Positive comments on improving sales and profits in the upcoming quarters also influenced sentimental growth.

Rinaldo Pereira, Senior Analyst at GlobalData, says: “Daimler’s restructuring helped it offset financial struggles during the pandemic. In 2019, the company announced restructuring plans in an attempt to save US$1.6bn by 2022. The luxury carmaker now expects to boost its labor cost savings by cutting jobs, as it looks to improve its cash flow further. According to the company, its stringent cost-cutting measures helped it weather the impact of plant shutdowns. Daimler has also come to a consensus with German unions to cut employee hours and bonuses.

In the Q2 2020 earnings transcript, S-class was a top brand mention as the company witnessed a late recovery of the S-Class Maybach luxury sedan, according to CFO Harald Wilhelm. Mentions of pricing in Daimler’s earnings transcript also rose in Q2 2020, as the company witnessed favorable overall pricing growth.

Pereira concludes: “The luxury carmaker expects the strongest growth in the high-end luxury segment. However, there is a cloud of uncertainty over Daimler’s future performance, as fears of a second wave of coronavirus may cause governments across the globe to enforce further lockdowns.”

*Earnings transcript released on July 23, 2020