Mercedes gets shares boost on stable second quarter despite China woes

By Rachel More

BERLIN, July 28 (Reuters) - Shares in Mercedes-Benz got a boost on Tuesday after the German premium automaker reported a second-quarter rise in operating profit and stuck by its core margin forecast, despite continued weakness in China looming over its cars business.

Mercedes, which like German peers Volkswagen and BMW is facing mounting tariff costs and intensifying competition from Chinese rivals, also pledged to accelerate cost-cutting measures with a focus on its German plants.

Mercedes' shares rose 5.6% following the results announcement.

The company reported a 22% rise in second-quarter operating profit to €1.5 billion ($1.7 billion), helped by cuts to administrative and research & development spending, but missed a Visible Alpha consensus of €1.6 billion.

It scrapped forecasts of stable car sales and group revenue, saying it now expects a slight decline on both fronts compared to the previous year. But it maintained its core margin guidance for the year at 3%-5%, with CFO Harald Wilhelm adding that the car business was expected at the lower end of that range.

The group result was supported by strong earnings at its financial services and vans units. It also benefited from a €131 million gain linked to the planned sale of its leasing subsidiary Athlon.

"Despite a demanding market environment, we remained on track in the second quarter while continuing to advance our product launch programme," CEO Ola Kaellenius said, vowing further cost-cutting in the second half of the year.

Second-quarter car sales slumped 30% in China, the world's largest auto market, where a crowded race with locals to develop cheaper, tech-laden EVs has ended the decades-long dominance of foreign automakers.

Building on a 25% reduction in fixed costs since 2019, the company said it began intensifying global productivity measures in June, with a particular focus on its German locations.

($1 = 0.8795 euros)

(Reporting by Rachel More; Editing by Linda Pasquini and Varun H K; Editing by Joe Bavier)