Mercedes Reports Strong Cash Flow on Lower Working Capital

Wilfried Eckl-Dorna, Bloomberg News

A Mercedes-Benz Group AG Concept EQG, right, and the Mercedes-AMG C 63 S E Performance vehicle on display at the Japan Mobility Show in Tokyo, Japan, on Wednesday, Oct. 25, 2023. Japan's carmakers are staging their first motor show in four years to make the case they'll remain major forces to be reckoned with in the electric-vehicle age. Photographer: Kiyoshi Ota/Bloomberg , Bloomberg

(Bloomberg) -- Mercedes-Benz Group AG rose after reporting better-than-expected cash flow for last year as the luxury-car maker pivots to focus on its most profitable models.

Industrial cash flow amounted to €11.3 billion ($12.3 billion), the company said late Thursday in preliminary figures. That’s well ahead of last year’s level and above the €9.54 billion average of analysts’ estimates compiled by Bloomberg.

Mercedes shares rose as much as 3.3% in early trading, the biggest intraday gain since Dec. 14, helping pare losses to just over 10% in the past year.

Automakers have benefited from high order banks that have helped offset global economic headwinds following the surge in interest rates. At the same time, premium-car buyers such as Mercedes have been less exposed to inflation, which has hit mass-market volume producers.

Share Buyback

Investors will eye a strong dividend and potential new share buyback following Mercedes’s release, Bernstein analyst Daniel Roeska said in a note.

“Mercedes Benz should showcase its confidence by continuing its dividend and adding commitment to a new share buyback,” Roeska said.

Stifel analyst Daniel Schwarz sees the high cash flow as a guarantee that Mercedes continues its €4 billion buyback program started in February last year.

“There isn’t much else to do with that pile of cash,” he said.

During the first half of last year, a well-filled order book allowed the manufacturer to command higher prices as shortages of semiconductors still limited output. But in October, Mercedes said that margins had started to fall on higher costs and lower average car prices.

Mercedes didn’t detail other results besides cash flow. The Stuttgart-based company is due to report full-year earnings on Feb. 22.

(Updates with share price in third paragraph, analyst comment in seventh.)