Cash generation faces H2 headwinds

研报英文原文证据摘录

Cash generation faces H2 headwinds

Barclays | Mercedes-Benz Group (MBGGR)

Key conference call takeaways

China outlook has deteriorated further but management remains strategically committed.

Management recorded €844mn of valuation adjustments related to China investments,

including €752mn of impairments on Chinese equity-accounted holdings. While non-cash,

management acknowledged these reflect lower expected future profit contributions from

China. Nevertheless, the company reiterated its long-term commitment to China, emphasising

increased localisation, deeper partnerships, expanded R&D capabilities and local production of

the China-specific GLE beginning in August. Management stressed that China remains a

strategic pillar despite significantly lower industry demand and intense pricing pressure.

H2 MB Cars margins are expected to be weaker than H1 despite strong product

momentum. Management reiterated that Mercedes-Benz Cars' FY26 adjusted margin should

remain within the 3-5% range but now expects performance to finish in the lower half of the

corridor. While new model launches, stronger BEV demand, improved mix and lower product

lifecycle expenses should support H2, these benefits are expected to be more than offset by

higher raw material, energy and freight costs, increased depreciation from the launch

programme, normalisation of tariff impacts versus Q1, and weaker contributions from Chinese

JVs and parts supply activities. While management did not provide a specific raw material cost

assumption, it appeared to endorse analyst estimates implying a headwind of roughly 100bp to

MB Cars profitability in H2. Efficiency measures are therefore being accelerated further in the

second half.

Cost-reduction efforts remain a major strategic focus.