Despite ‘Exceptional’ Uncertainty, Mercedes Shares Jump Up 5% On Share Buybacks

(CTN News) – Despite warnings of “exceptional” risks in the year ahead, Mercedes-Benz shares gained around 5% on Thursday morning.

The earnings before interest and taxation (EBIT) for the fourth quarter were 4.33 billion euros ($4.7 billion), slightly ahead of consensus expectations, taking the full-year figure to 19.66 billion euros. From 150 billion euros in 2022, revenues rose by 2% to 153.2 billion euros in 2023.

Furthermore, the company announced an additional share buyback program worth up to 3 billion euros, which will be canceled after the shares have been repurchased.

However, Mercedes-Benz warned that supply chain bottlenecks for critical components remain a “significant risk factor,” and said geopolitical events and trade policy remain uncertain, especially the Russian-Ukraine conflict and the Middle East conflict as well as the tensions between Western powers and China.

Mercedes-Benz Cars’ adjusted return on sales is expected to drop to 10% to 12% by 2024 from 12-14% in 2023 due to inflation and supply chain costs.

According to Jefferies auto analysts, despite the lack of major surprises in earnings, the cash return policy was a sign of confidence and consistent with the premium/luxury positioning, with buybacks ensuring that earnings per share continue to grow.

Ola Källenius, chairman of Mercedes-Benz, told CNBC on Thursday that the company was well positioned to overcome macroeconomic challenges.

We are presenting strong results for Mercedes-Benz Cars today, as well as a standout year for our light commercial van division.

A record 447,800 vehicles were sold at Mercedes-Benz Vans, with revenue rising 18% to 20.3 billion euros and adjusted EBIT surging 59% to 3.1 billion euros.

Nevertheless, Källenius noted that supply constraints have impacted the company in the second half of 2023, and will continue to do so in the first quarter of 2024.

However, we are working with our partner to resolve this issue, and we are now putting in more capacity that has been planned over the past few months, so I believe we will be able to resolve those issues in the first quarter, so that we can return to a normal supply situation in the second quarter,” he said.

Mercedes said it would not scale back its investments in future development, despite the macroeconomic environment being “challenging” in light of escalating conflict and geopolitical tensions, high interest rates, and structural economic headwinds in China.

The company is not withdrawing from any markets, he told Annette Weisbach, adding that it is not “peeling back” its investments either.

Our investment level is in fact the highest in the company’s history, as we prepare a whole new generation of products, some of which will be released this year, but a product offensive, particularly with regard to battery electric vehicles, will take place starting in 2025, continuing through 2026 and beyond,” Källenius said.

In the coming years, we will develop a broad range of new products and technologies.”

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