Germany's Daimler sees 2021 pandemic recovery driving sales, profits

By Nick Carey

LONDON (Reuters) - Daimler AG expects significant improvements in sales and operating profit in 2021 and will make up for lost production caused by a semiconductor chip shortage by the end of the year, the German carmaker said on Thursday.

The outlook sent shares in the maker of Mercedes-Benz cars up 2.5% in early trading.

Bottlenecks causing a shortage of semiconductor chips will reduce its sales mostly in the first quarter, Daimler said. Much of the auto industry has struggled to maintain production levels because of the chip shortage.

Chief Executive Ola Källenius said during a video conference that Daimler expects chip supply to improve in the second quarter.

He said Daimler had made its sales expectations clear to its suppliers, but did not find out until Dec. 31 that it would face a shortage in the first quarter.

The automaker also confirmed its preliminary financial results for 2020, said economic conditions in major markets should return to normal in 2021 and that it did not expect further setbacks as a result of the pandemic.

In common with rivals, Daimler is racing to bring more electrified models to market to meet tightening CO2 emissions standards in Europe and China.

CEO Källenius said that sales of electric vehicles in 2021 could double as a percentage of Daimler's overall sales.

Sales of plug-in hybrids and fully-electric vehicles made up 7.4% of Mercedes-Benz car sales in 2020, up from 2% in 2019.

Following cost savings and a faster-than-expected recovery in the auto sector, Daimler said last month its group earnings before interest and taxes (EBIT) for 2020 came to 6.60 billion euros ($7.95 billion).

This month, it said it planned to spin off Daimler Truck, the world's largest truck and bus maker, as it seeks to increase its investor appeal as a focused electric, luxury car business.

CHINA'S 'REMARKABLE RECOVERY'

Daimler ended 2020 with adjusted free cash flow of 9.2 billion euros versus 2.7 billion a year earlier.

Plant shutdowns in the first half of 2020 to slow the spread of the novel coronavirus led many in the industry to expect a disastrous year, but a market rebound spurred by China helped the industry recover faster than expected.

Like its German rivals BMW and Volkswagen AG, Daimler benefited from Chinese demand for high-margin luxury vehicles.

"China had a remarkable recovery," Källenius said.

Mercedes-Benz sales in China jumped more than 22% in the fourth quarter and 11.7% for 2020 as a whole.

While Daimler said it expected its premium car business to increase more than 7.5% in 2021, it expected its sales in China this year to grow at a slower pace of between 2% to 7.5%.

Group revenue and operating profit for 2021, it expected to rise more than 7.5%, with an adjusted margin from its Mercedes cars and van business of between 8% and 10%.

($1 = 0.8304 euros)

(Reporting By Nick Carey; Editing by Kim Coghill, Keith Weir and Barbara Lewis)