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Daimler: Profit Up, Chinese Activity Cooling

Daimler AG saw its second-quarter profits swell by nearly a third though revenues came in below expectations amid signs of a growth slowdown in China.

FRANKFURT, Germany (AP) -- Daimler AG saw its second-quarter profits swell by nearly a third though revenues came in below expectations amid signs of a growth slowdown in China.

In a statement Wednesday, the company revealed that net profit was up around 30 percent at euro1.7 billion ($2.5 billion) from euro1.3 billion a year ago. Mercedes did well, posting its strongest quarter ever with operating earnings rising 14 percent to euro1.56 billion, even as red-hot sales growth in China eased.

Daimler CEO Dieter Zetsche, who also heads the Mercedes division, told a journalists' conference call, that Mercedes' growth in China slowed considerably, to 8 percent compared to the 82 percent surge recorded in the first quarter.

Mercedes' sales in China stood at 52,498 in the quarter, just shy of the company's longtime profit center in the United States, where Mercedes sold 54,193 vehicles. Mercedes earnings still rose thanks to high profit margins overall and a good model mix in China -- tilted toward higher priced SUVs and luxury cars.

The slowdown in the Chinese growth rate may help explain why overall revenues rose only 5 percent to euro26.3 billion. That was short of analyst expectations for euro28 billion, and the company's shares slipped.

Daimler traded down 2.4 percent to euro50.55 in morning trade in Frankfurt.

Nevertheless, the company said 2011 would turn out better than expected and that operating earnings would "very significantly exceed" last year's results. Earnings of euro1.51 a share in the second quarter outstripped expectations of euro1.43.

Stuttgart-headquartered Daimler and German competitors BMW AG and Volkswagen AG have turned in strong earnings in recent quarters thanks to rapidly rising demand in emerging markets such as China, along with the recovery in sales in the United States.

"With our excellent first half of the year, we are fully on schedule to turn 2011 into one of the most successful years in our long corporate history," Zetsche said in a statement.

Analysts at Sanford C. Bernstein said the company's profit margins of 10.7 percent at Mercedes and 9.2 percent at the vans business were "great" but that the company's earnings basically confirmed existing expectations for a good year.

"These are strong results, but we had hoped for more due to Mercedes regional mix (very strong in China)," they said in a note to investors.

Bernstein's analysts said that as good as they are, Daimler's margins may lag its peers. Volkswagen reports Friday while BMW releases its earnings on Aug. 3.

As well as a strong performance in the Mercedes Benz Cars division, earnings were also up at the company's separate truck, Mercedes van, and financial services divisions. Only its bus-making operation showed lower profits, but still made euro61 million.

Zetsche said the company could do still better. "We're not in the highest gear," he said on a conference call with journalists. "We can do more."

The company is readying a new version of its smaller Mercedes B-Class car for the Frankfurt auto show in September.

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