Daimler Announces Q2 2011 Results

So Daimler announced its Q2 2011 financial results today. But this post is less about Daimler's financial numbers, and more about the media. In many ways I am a numbers guy, but the irony is that I myself don't trust numbers. In my opinion, numbers on its own are meaningless, and the information they represent are only as valuable as the intellect, or even position of the person who reads it. Numbers are relative. They can carry a very positive meaning when compared to one set of reference, but yet can carry a very negative meaning when compared to another set of reference. It's all a matter of how the person reading the numbers want to present, or should I say, massage the numbers. Every time someone quotes some study or survey results, the first thing I do is to check who is paying or sponsoring for the study, or who has the most vested interest in the results.

Just look at the two different headlines below, from two different sources. Both are reporting on the same issue.

This is the headline from Daimler's official press release

According to Daimler,
Daimler AG (stock-exchange symbol DAI) achieved earnings in the second quarter of 2011 that were among the best in a quarter in the Group’s entire history: Group EBIT amounted to €2,581 million (Q2 2010: €2,104 million).
Net profit increased to €1,704 million, which was also a record level (Q2 2010: €1,312 million), and earnings per share amounted to €1.51 (Q2 2010: €1.18).

This is the headline from Reuters.

Reuters article opens with :
German car and truck maker Daimler's (DAIGn.DE) second quarter revenues fell short of expectations, indicating that demand for cars in emerging markets may be starting to cool.

Second-quarter revenues rose about 5 percent to 26.34 billion euros (22.36 billion pounds), Daimler said on Wednesday, missing an average estimate of 27.99 billion in a Reuters poll.

So on the surface, it seems Daimler missed its earnings target, which is quite a big hoo-ha in the stuffy world of shareholders, suited men in corporate board rooms. But was it really that big of a big deal? Below is Daimler's quarterly earnings history from 2010 to Q1 2011. Also shown in the pop-up is the estimate for Q2 2011. The estimated earnings were the result of estimates provided by 11 financial analysts. The earnings estimate range from a pessimistic 25.8 billion Euros to a highly optimistic 29.3 billion Euros. So Daimler's 26.3 billion Euros revenue results for Q2 was well within range.


Source : Bloomberg

Between 2010 to Q1 2011, sales of Mercedes-Benz passenger vehicles rose a whooping 86%. Obviously that was a short anomaly and cannot be sustained, even for a high growth market like China. The China factor is a quite a major variable in Daimler's earnings. Currently, China is Mercedes-Benz's third largest market after Germany and USA. But more crucially on the profit front, China is Mercedes-Benz's largest market for its top of the line (and more importantly, high margin) S-class limousine model. Last year, in a bid to counter the worsening traffic situation, the city of Beijing implemented its most drastic traffic control measure in automotive history - by limiting vehicle registration to just 240,000 vehicles a year, down from 850,000 vehicles a year. That's a massive 70% drop in car sales.

On top of that, the Chinese government is struggling to reign in inflation, which threatens to overheat the Chinese economy. Bank lending will be tightened but these are all part and parcel of a normal economic cycle. Daimler's quarterly and annual earnings have been on an uptrend almost like a clockwork. It is not realistic to expect this trend to continue perpetually.

Every media company, is owned by someone, and with that comes along their own vested interest, and also their own perspective of things. One can't report something or present any critique without taking any position on the topic. Which is fine, because that is only part of human nature. Hence the need to have a balanced viewpoint and refer to multiple sources.