By Edward Taylor
STUTTGART (Reuters) - Daimler (DE:DAIGn) said sales momentum at its Mercedes division would help it achieve significantly higher revenue and operating income this year, as it announced further cost-cutting plans and a 10 percent jump in fourth-quarter profit.
Daimler is the first of the German premium auto makers to release fourth-quarter results. The company has lagged rivals in terms of global sales and profitability in recent years and is battling to narrow the gap.
"Daimler is on an upward curve," Chief Executive Dieter Zetsche told a news conference on Thursday, announcing its highest-ever dividend for 2014. "We plan to attain a level of earnings that has never been seen before at this company."
Shares group rose 2 percent to 84.33 euros by 0906 GMT, leading the gainers in a flat German blue-chip DAX index (GDAXI) and outperforming a 1.5 percent gain in the European cars sector (SXAP).
Earnings momentum will continue this year, Daimler said, with significant growth in revenue, earnings before interest and tax (EBIT) and unit sales from ongoing business.
Analysts at Bankhaus Lampe, who rate Daimler "buy", said the results confirmed their view that the company would outperform rivals Audi (DE:NSUG) (DE:VOWG_p) and BMW (DE:BMWG) this year.
"Daimler ended 2014 on a strong note, which led to a dividend proposal that beat our expectations," they wrote.
The global rollout of a new version of its top selling C-Class sedan helped Mercedes raise its operating margin, lifting EBIT adjusted for one-offs to 2.82 billion euros (2 billion pounds).
This beat the 2.66 billion euros average forecast in a Reuters poll.
The proposed dividend of 2.45 euros per share, equating to 37.6 percent of net profit, was also above the 2.42 euros average forecast. Daimler said it aimed to raise its payout ratio to around 40 percent in coming years.
Zetche said decisions taken years ago to modernise and expand the Mercedes range were starting to pay off.
"This progress is the result of consistent hard work," he said. "Our planned growth will be accompanied by absolute increases in our fixed costs and net assets. However the structural changes we plan to make will significantly limit these increases," he said without elaborating.
In the fourth quarter, the return on sales from ongoing business at Mercedes-Benz Cars reached 8.7 percent, versus 8.0 percent a year before. In 2013, Audi's return on sales was 10.1 percent and BMW reported an automotive operating margin of 9.4 percent.