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Daimler AG (stock-exchange symbol DAI) achieved Group EBIT of €1,921 million in the third quarter of 2012 (Q3 2011: €1,968 million). Net profit for the period was €1,205 million (Q3 2011: €1,360 million), leading to earnings per share of €1.03 (Q3 2011: €1.21). “Considering the significantly more difficult market conditions, Daimler achieved good earnings in the third quarter,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
“Due to the economic challenges, Daimler will not match the high prior-year EBIT in full-year 2012, but will still post good earnings once again,” emphasized Zetsche. With regard to the company’s ambitious targets, the CEO stated: “But we are not yet at the level that we aim to reach in the medium to long term. We have therefore initiated appropriate measures for all divisions and are thus prepared for a difficult market environment. At Mercedes-Benz Cars, we are adding an important element to our Mercedes-Benz 2020 growth strategy: ‘Fit for Leadership.’ With this program, we are combining existing and additional efficiency measures in order to secure our short-term targets and to give our business system an optimal and sustainable positioning.”
The development of earnings at the Daimler Group in the third quarter of 2012 reflects further increases in unit sales at Mercedes-Benz Cars and Daimler Trucks, which were achieved despite more difficult conditions in some markets. Mercedes-Benz Vans and Daimler Buses posted lower unit sales. Group EBIT was reduced by higher expenses in connection with the expansion of Mercedes-Benz Cars’ product portfolio and the current product offensive at Daimler Trucks. Daimler Financial Services did not quite reach the level of earnings achieved in the prior-year quarter due to increased cost of risk. Exchange-rate effects made a positive contribution to earnings. EBIT once again included higher charges for the compounding of non-current provisions as well as effects relating to lower discount factors of an aggregate €194 million (Q3 2011: €41 million).
The special items shown in the table on page 10 affected EBIT in the third quarters of the years 2012 and 2011.
Group revenue up by 8%
In the third quarter of 2012, Daimler sold 528,600 cars and commercial vehicles worldwide, surpassing the prior-year total by 1%.
Revenue of €28.6 billion was 8% above the prior-year level. Adjusted for changes in currency exchange rates, the increase amounted to 3%.
The free cash flow of the industrial business amounted to minus €200 million in the third quarter, including an increase in working capital of €800 million. This increase is partially related to growth in inventories in preparation for the market launch of the new A-Class, for which more than 70,000 orders have already been received.
At the end of the third quarter of 2012, Daimler employed 275,451 people worldwide (end of Q3 2011: 269,887). Of that total, 166,888 were employed in Germany (end of Q3 2011: 167,948).
Details of the divisions
Mercedes-Benz Cars set a new record for unit sales in the third quarter of 2012: The division’s total sales increased by 2% to 345,400 units. Revenue amounted to €15.2 billion (Q3 2011: €13.8 billion). In a significantly more difficult economic environment, Mercedes-Benz Cars achieved EBIT of €975 million in the third quarter (Q3 2011: €1,108 million). The division’s return on sales was 6.4% (Q3 2011: 8.0%).
Growth in unit sales, especially in the United States, had a positive impact on earnings. High growth rates were achieved in particular with SUVs. Better pricing also helped the division to achieve increased earnings. In addition, exchange-rate effects had a positive effect on earnings. Earnings were reduced by expenses for the enhancement of the products’ attractiveness. Other factors were expenses connected with the expansion of production facilities and higher advance expenditure for new technologies and vehicles. The compounding of non-current provisions and effects from changes in interest rates also led to higher charges.
Daimler Trucks increased its unit sales by 3% to 119,100 vehicles in the third quarter. Revenue amounted to €8.1 billion (plus 6%). The division posted EBIT of €507 million and a return on sales of 6.3% (Q3 2011: €555 million and 7.3%).
Daimler Trucks had a good development of unit sales and revenue in the NAFTA region and Asia in the third quarter. In addition, lower warranty costs and exchange-rate effects also contributed positively to earnings. There was an opposing, negative effect on earnings from the continuation of falling demand in Brazil and Western Europe; this was related to the weaker economy and in Brazil additionally to the introduction of new emission standards. The division’s EBIT was additionally impacted in the third quarter by expenditure for the current product offensive. Additional expenses resulted from the compounding of non-current provisions and changes in interest rates.
Unit sales by Mercedes-Benz Vans decreased to 55,700 vehicles due to the market decline in Western Europe (Q3 2011: 63,500). Revenue of €2.1 billion was also lower than in the prior-year quarter (Q3 2011: €2.2 billion). The division posted EBIT of €75 million for the third quarter (Q3 2011: €200 million). Return on sales amounted to 3.6%, compared with 9.0% in the third quarter of last year.
The main negative effects on earnings were from a market-related drop in unit sales, particularly in Western Europe. Expenses in connection with the market launch of the Citan were an additional factor. There was an opposing, positive impact on earnings from exchange-rate effects.
Daimler Buses sold 8,300 buses and bus chassis worldwide (Q3 2011: 9,200). Revenue decreased by €90 million to €951 million. The division’s EBIT amounted to minus €45 million and was thus below the prior-year figure of plus €25 million. Return on sales decreased accordingly from plus 2.4% in the third quarter of 2011 to minus 4.7% in the period under review.
As in the previous two quarters, the fall in earnings is primarily due to lower unit sales of bus chassis caused by the difficult business situation in Latin America. Furthermore, expenses of €16 million for the repositioning of the European and North American business and negative exchange-rate effects reduced the division’s earnings. The cost situation improved, however.
Daimler Financial Services’ positive business development continued in the third quarter. Worldwide, approximately 268,000 new leasing and financing contracts were concluded in a total volume of €10.0 billion, or 16% more than in the prior-year quarter. Growth was achieved in all regions. By the end of September, contract volume had reached €77.5 billion, which is 8% higher than at the end of 2011. Adjusted for exchange-rate effects, the increase was 7%.
With EBIT of €322 million for the third quarter, Daimler Financial Services did not quite reach the level of earnings it achieved in the prior-year period (Q3 2011: €337 million). The main reason for this earnings development was normalization of the cost of risk, which had been unusually low in 2011 as well as lower net interest income. However, a higher contract volume and positive exchange-rate effects had a positive effect on EBIT.
The reconciliation of the divisions’ EBIT to Group EBIT primarily reflects the proportionate share of the results of the equity-method investment in EADS, as well as other gains and losses at the corporate level.
Daimler’s proportionate share of the net result of EADS in the third quarter of 2012 amounted to €104 million (Q3 2011: €15 million). At the corporate level, there were expenses of €7 million (Q3 2011: expenses of €250 million). The expenses in the prior-year period primarily reflected the impairment of the carrying value of the investment in Renault.
Outlook
On the basis of the divisions’ planning, Daimler expects its total unit sales in the year 2012 to be higher than the figure of 2.1 million vehicles achieved in the year 2011.
Mercedes-Benz Cars assumes that it will further increase its unit sales this year. Mercedes-Benz Cars will continue to profit from strong demand for its cars in the C-Class segment. Further growth is anticipated for the SUVs, primarily due to the full availability of the new M-Class as well as the new GL. The new models in the high-volume compact-car segment will also contribute towards growth in unit sales. The new A-Class became available in September 2012, at first mainly in Western Europe. And a completely new automobile concept was launched in the same month: the CLS Shooting Brake. In regional terms, further growth opportunities are seen above all in North America. For the smart brand, an ongoing stable level of unit sales is expected.
In the fourth quarter of this year, Mercedes-Benz Cars expects to post higher unit sales than in the prior-year quarter despite a weaker market development in Europe. The increase will be driven by the new models in the compact-car segment. On the earnings side, charges are anticipated from measures taken to support the dealer network in China.
Daimler Trucks anticipates an increase in unit sales in 2012, with the NAFTA region and Asia as the main growth drivers. The division anticipates a relatively stable development of unit sales in the European market, although there will be distinct differences between the various countries. Daimler Trucks assumes that sales will develop better than the European market as a whole, so that its market leadership will be further extended. In Western Europe, about as many trucks will be sold as in the prior year, due in particular to the development of demand in Germany. Unit sales in Latin America are expected to be significantly lower than in record year 2011, due to the sharp drop in demand in the first three quarters of this year.
The development of unit sales in the fourth quarter at Daimler Trucks will be impacted by weaker demand than had previously been expected in major markets. This applies above all to Western Europe and Brazil, but demand in the NAFTA region is also likely to level off in the medium duty segment. Expenses will result from market entry in India and the start of business by the joint venture in China.
Mercedes-Benz Vans anticipates unit sales in 2012 at slightly below the prior-year level. The launch of the new Citan in the small-van segment will help to boost unit sales in Europe, although they will probably be slightly lower than last year as a result of weak demand in key markets. In the United States, the division assumes that unit sales will rise by a double-digit rate. In addition, Mercedes-Benz Vans will benefit in the Latin American markets from the introduction of the current model generation of the Sprinter. Unit sales in China are expected to be lower than last year.
The launch of the new Citan will lead to an increase in Mercedes-Benz Vans’ unit sales in the fourth quarter. But the weak development of Western European van markets will continue to have a negative effect on the division’s business. In Latin America, the division will benefit from the full availability of the current model generation of the Sprinter.
Daimler Buses assumes that unit sales in 2012 will be significantly lower than in 2011. Weaker demand is expected above all in Latin America, because the introduction of Euro V emission standards led to purchases being brought forward in 2011.
As worldwide demand for buses is generally likely to remain weak, Daimler Buses’ unit sales in the fourth quarter will be lower than in the prior-year period. The repositioning of the European and North American bus business will be continued, leading to related expenses of approximately €40 million in the fourth quarter of 2012.
Daimler Financial Services assumes it will achieve renewed growth in contract volume and new business in 2012.
A normalization of credit risks is expected – and thus a moderate increase compared with the unusually low level of the year 2011. The division anticipates further normalization of risk costs compared with the fourth quarter of 2011.
Following substantial growth in the year 2011, Daimler assumes that the Daimler Group’s revenue will continue to grow in 2012 and will be significantly higher than €110 billion. The biggest increases will come from the Mercedes-Benz Cars and Daimler Trucks divisions. The key driver of this revenue growth is the higher volume of unit sales, especially in the NAFTA region. Revenue at Daimler Buses will be below the prior-year level, whereby the percentage decrease will be significantly lower than for unit sales due to the shift in the sales structure towards higher-value complete buses. In regional terms, above-average growth rates are expected in the emerging markets and in North America.
In view of the significant worsening of the market environment in major markets in recent months and the more intense competition, Daimler has adjusted its earnings forecasts. On the basis of current market expectations and the planning of the divisions, Daimler expects Group EBIT from the ongoing business of approximately €8 billion in 2012.
Daimler has the following expectations for the divisions’ EBIT from the ongoing business:
- Mercedes-Benz Cars: approximately €4.4 billion
- Daimler Trucks: approximately €1.7 billion
- Mercedes-Benz Vans: approximately €650 million
- Daimler Buses: approximately minus €80 million
- Daimler Financial Services: approximately €1.3 billion
Against the backdrop of a significant worsening of the market environment in recent months, Daimler will consistently implement its measures to strengthen the Group’s profitability. These include the programs “Fit for Leadership” at Mercedes-Benz Cars and “Daimler Trucks #1.” The Group will continue the product offensive and the renewal of its product portfolio in the next two years, so that the product range will have a significantly younger and more global lineup in the coming years.
Daimler has defined return targets as of 2013 for the automotive business and all the divisions over the respective business cycles. The achievement of those targets has become much more challenging due to the significantly more difficult market conditions prevailing at present. The Group assumes that the targets will be not met until a later date, but continues to pursue them vigorously, with the support of measures taken and programs initiated in all divisions.
In order to achieve its ambitious growth targets, Daimler will expand its product range in the coming years and will develop additional production and sales capacities. This will involve a further increase in investment in property, plant and equipment (2011: €4.2 billion). The focus of the total volume and of the growth will once again be at the Mercedes-Benz Cars division. As well as the introduction of new products, major investments will be made in component projects and in the expansion of capacities outside Germany. At Daimler Trucks, slightly lower capital expenditure is anticipated due to the successful implementation of the product offensive.
Research and development expenditure is planned in the magnitude of the prior year (2011: €5.6 billion). The focus here will also be on the Mercedes-Benz Cars and Daimler Trucks divisions. Most of the expenditure will flow into new models. Another focus is the reduction of engines’ fuel consumption and emissions.
Daimler assumes that its worldwide workforce will expand compared with the end of 2011. From today’s perspective, employment effects from the adjustment of production programs will be managed by using working-time accounts and by reducing the numbers of temporary agency workers.
The special items shown in the following table affected EBIT in the third quarters of 2012 and 2011.
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Daimler AG (stock-market symbol DAI) achieved very good earnings in the second quarter of 2012. The Daimler Group’s EBIT amounted to €2,243 million (Q2 2011: €2,581 million) and net profit for the period was €1,515 million (Q2 2011: €1,704 million). This led to earnings per share of €1.34 (Q2 2011: €1.51). “Despite the high expenses as previously announced for new products and technologies, our company was once again very profitable in the second quarter. We achieved strong growth in unit sales and revenue,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
With regard to the second half of the year, Dr. Zetsche said: “On the basis of current market expectations and the divisions’ planning, we aim for Daimler to achieve EBIT from the ongoing business in full-year 2012 that is in the magnitude of the prior year. However, economic uncertainty and risks exist in nearly all regions. We therefore remain vigilant in our monitoring of general economic developments and the volatile markets.”
Despite more difficult conditions in some markets, the good level of earnings reflects the ongoing growth in unit sales at Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz Vans. Unit sales at Daimler Buses decreased, however. The Group’s EBIT was also affected by a partially less favorable model mix as well as higher expenses relating to the expansion of the product portfolio at Mercedes-Benz Cars and the current product offensive at Daimler Trucks. Exchange-rate effects had a positive impact on earnings.
In addition, EBIT includes slightly higher charges for the compounding of non-current provisions as well as effects relating to lower discount factors (Q2 2012: €84 million).
The decision made in the first quarter of 2012 to reposition the European and North American business of Daimler Buses resulted in charges of €46 million in the second quarter of this year.
The special items shown in the table on page 8 affected EBIT in the second quarters of the years 2012 and 2011.
Second-quarter unit sales up by 8%
In the second quarter of 2012, Daimler sold 570,300 cars and commercial vehicles worldwide, surpassing the prior-year total by 8%.
The Daimler Group’s second-quarter revenue increased by 10% to €28.9 billion. Adjusted for exchange-rate effects, revenue grew by 4%.
The free cash flow amounted to €1.0 billion in the second quarter of 2012. At June 30, 2012, the net liquidity of the industrial business amounted to €8.4 billion.
At the end of the second quarter of 2012, Daimler employed 273,749 people worldwide (end of Q2 2011: 266,114). Of that total, 166,477 were employed in Germany (end of Q2 2011: 166,840).
Details of the divisions
Mercedes-Benz Cars once again set a new record for unit sales in the second quarter of 2012, with total sales by the car division rising by 4% to 370,400 units. Revenue increased by 5% to €15.4 billion. With EBIT of €1,314 million in the second quarter of 2012, Mercedes-Benz Cars did not quite match the very good earnings of the prior-year period (Q2 2011: €1,566 million). The division’s return on sales was 8.6% (Q2 2011: 10.7%).
The development of earnings was primarily driven by ongoing growth in unit sales, especially in the United States and Asia. Mercedes-Benz Cars achieved particularly high growth rates in the compact-car segment and with SUVs. Exchange-rate effects also had a positive impact on earnings. Against the backdrop of a more difficult economic situation in Europe, negative effects on earnings resulted for example from a less favorable model mix and a shift in the regional sales structure. In addition, there were expenses connected with the expansion of production facilities, as well as higher advance expenditure for new technologies and vehicles and ongoing increases in material costs.
Daimler Trucks increased its unit sales in the second quarter of 2012 by 34% to 122,200 units. Revenue grew by 22% to €8.1 billion. The division posted EBIT of €524 million (Q2 2011: €486 million). Return on sales was 6.4%, compared with 7.3% in the prior-year period.
Daimler Trucks continued its good sales and revenue development in the NAFTA region and Asia. Positive exchange-rate effects also contributed to earnings. There was an opposing, negative effect on earnings from generally declining demand in Brazil; this was related to the weaker economy as well as the introduced new emission standards. Second-quarter EBIT was also impacted by expenditure for the current product offensive.
Unit sales by Mercedes-Benz Vans increased to 69,300 vehicles (Q2 2011: 68,000). Revenue of €2.4 billion was also higher than in the prior-year period (Q2 2011: €2.2 billion). The division’s EBIT of €197 million was slightly lower than in the prior-year period (Q2 2011: €206 million). Earnings were primarily affected by weaker pricing. There was an opposing, positive impact on the division’s earnings from exchange-rate effects. Return on sales was 8.1% (Q2 2011: 9.2%).
Daimler Busessold 8,400 buses and bus chassis worldwide (Q2 2011: 10,600). As in the first quarter, the decrease in unit sales was caused by weaker demand for bus chassis in Latin America, while the business with complete buses was at the prior-year level. Revenue amounted to €1.0 billion (Q2 2011: €1.2 billion). The division posted EBIT of minus €57 million (Q2 2011: plus €61 million) and a return on sales of minus 5.6% (Q2 2011: plus 5.2%).
The development of earnings was primarily caused by the difficult business situation in Latin America, which was mainly reflected by an anticipated decrease in unit sales of bus chassis. There was also an effect from expenses of €46 million for the repositioning of the European and North American business. Exchange-rate effects had a positive influence on earnings, however.
Daimler Financial Services’ business continued to develop positively in the second quarter. Worldwide, approximately 267,000 new leasing and financing contracts worth a total of €9.4 billion were concluded (+12%). Contract volume reached €76.1 billion at the end of June, which is 6% higher than at the end of 2011. Adjusted for exchange-rate effects, there was an increase of 5%.
EBIT of €338 million was at the level of the prior-year quarter (Q2 2011: €340 million). A higher contract volume positively impacted earnings. On the other hand, there was an impact from a slight increase in cost of risk, which had been at an unusually low level last year.
The reconciliation of the divisions’ EBIT to Group EBIT primarily reflects the proportionate share of the results of Daimler’s equity-method investment in EADS, as well as other gains and losses at the corporate level.
Outlook
On the basis of the divisions’ planning, Daimler expects its total unit sales in the year 2012 to be higher than the figure of 2.1 million vehicles achieved in the year 2011.
Mercedes-Benz Cars assumes that it will further increase its unit sales this year and will grow faster than the market as a whole. Unit sales in each of the remaining quarters of 2012 are expected to be higher than in the respective prior-year periods. The division will profit from the continuation of strong demand for its cars in the C-Class segment. Further growth is anticipated for the SUVs, due to the full availability of the new M-Class and other new models. The new generations of the GLK compact SUV and the G-Class have been available since June 2012, and the new GL will be launched in September.
The new models in the high-volume compact-car segment are also contributing towards growth in unit sales: The new B-Class was launched in November 2011 with the new A-Class to follow this September; within just a few weeks, orders for more than 40,000 units of the new A-Class have already been received. And a completely new automobile concept will come onto the market in October: the CLS Shooting Brake. In regional terms, further growth opportunities for 2012 are seen above all in North America, as well as in China, India and Russia. For the smart brand, an ongoing stable level of unit sales is expected.
Daimler Trucks anticipates another rise in unit sales this year. In Europe, the division will make use of its competitive advantages with the new Actros. It is assumed that Daimler Trucks’ sales will develop better than the European market as a whole, facilitating the further extension of market leadership. In Brazil, the market environment remains very difficult due to the introduction of stricter emission standards. On the basis of the products’ popularity in that country, however, Daimler Trucks intends to maintain its strong market position. Rising demand for Euro V vehicles is anticipated in the second half of the year. Strong demand is expected in the NAFTA region in the full year, along with a good development of unit sales for Trucks NAFTA. As before, the main driver will be the high average age of the trucks on the road and the resulting need to invest in replacements.
High growth rates are also anticipated in Asia. Demand in Japan continues to be driven by the work of reconstruction following the natural disaster in connection with state subsidies, and is leading to increasing unit sales by Trucks Asia.
Mercedes-Benz Vans expects to further increase its unit sales in 2012. The launch of the new Citan in the small-van segment will help to boost unit sales in Europe. Overall, the division intends to maintain the 2011 level of unit sales in Europe. Furthermore, Mercedes-Benz Vans assumes that it will sell more vehicles than in the prior year in the United States. It should also be able to profit from the launch in Latin American markets of the current model generation of the Sprinter.
Daimler Buses assumes that unit sales in the year 2012 will be lower than in 2011. The division expects weaker demand this year above all in Latin America due to the introduction of Euro V emission regulations, which led to purchases being brought forward in 2011. Due to the upcoming implementation of state incentives in Brazil, demand is expected to revive in the second half of the year. A slight recovery of the business with complete buses in Europe is anticipated.
Later this year, Daimler Buses anticipates expenses of approximately €45 million from the repositioning of the European bus business and of approximately €20 million from the repositioning of the North American bus business.
Daimler Financial Services expects to achieve renewed growth in contract volume and new business in 2012. A normalization of credit risks is anticipated – and thus a moderate increase compared with the unusually low level of the year 2011.
Following the significant growth of the year 2011, the Daimler Group assumes that its total revenue will increase again in the year 2012. In regional terms, above-average growth rates are expected in the emerging markets and in North America.
On the basis of current market expectations and the planning of the divisions, Daimler aims to achieve Group EBIT from the ongoing business in 2012 that is in the magnitude of the prior year. This target is based on the assumption of currency exchange rates close to their present levels.
The following targets have been set for the divisions’ EBIT from the ongoing business:
- Mercedes-Benz Cars: in the magnitude of the prior year
- Daimler Trucks: at least at the prior-year level
- Mercedes-Benz Vans: in the magnitude of the prior year
- Daimler Buses: below the prior-year level
- Daimler Financial Services: slightly below the prior-year level
Economic uncertainty and risks exist in nearly all regions. Daimler therefore remains vigilant in its monitoring of general economic developments and the volatile markets.
For the automotive business, Daimler aims to achieve an annual average return on sales of 9% across market and product cycles. This is based on targeted returns on sales for the individual divisions, to be achieved on a sustained basis as of the year 2013, of 10% for Mercedes-Benz Cars, 8% for Daimler Trucks and 9% for Mercedes-Benz Vans. Daimler Buses should achieve its targeted return on sales of 6%. The target for the Daimler Financial Services division is a return on equity of 17%.
The special items shown in the following table affected EBIT in the second quarters of 2012 and 2011:Credits: Daimler AGCopyright © 2012, mercedesgla. All rights reserved.
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Daimler AG (stock-market symbol DAI) achieved EBIT of €2,130 million in the first quarter of 2012, which is slightly higher than the high prior-year level (Q1 2011: €2,031 million). Net profit increased by 20% to €1,416 million (Q1 2011: €1,180 million) and earnings per share rose to €1.25 from €0.99 in the first quarter of 2011. “We have started the year with a strong first quarter. Despite higher investment in future growth and a challenging market environment, we succeeded in surpassing the very good prior-year results in terms of unit sales, revenue, EBIT and net profit,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars. “We are on schedule to meet our targets for this year as well as our medium-term targets.”
The development of earnings is primarily a reflection of the ongoing growth of unit sales at Mercedes-Benz Cars and Daimler Trucks. There were opposing, negative effects on earnings mainly in connection with the expansion of the product portfolio, including the current product offensive at Daimler Trucks. Exchange-rate movements had a positive effect on earnings.
The decision to reposition the European business of Daimler Buses resulted in charges of €36 million.
The special items affecting EBIT in the first quarters of 2012 and 2011 are shown in the table at the botton of this page.
First-quarter unit sales up by 9%
In the first quarter of 2012, the Daimler Group sold a total of 502,100 cars and commercial vehicles worldwide, surpassing the prior-year number by 9%.
Daimler’s first-quarter revenue increased by 9% to €27.0 billion. Adjusted for exchange-rate effects, revenue grew by 7%.
The free cash flow of the industrial business decreased compared with the first quarter of 2011 to minus €2.0 billion, due to the normal seasonal development of working capital and in particular to increased inventories. Higher levels of stocks are related to the start of the peak selling season in spring at Mercedes-Benz Cars and the market launch of new products such as the B-Class, the SL and the SUVs. At Daimler Trucks, inventories increased towards the end of the first quarter in anticipation of stronger demand in the NAFTA region and in Asia. Additional factors reducing the free cash flow were the higher level of investment in property, plant and equipment and intangible assets as well as capital contributions in connection with the transfer of the Bergen business to Engine Holding (a joint venture of Daimler and Rolls-Royce relating to Tognum) and the joint venture between Daimler Trucks and Foton in China.
Compared with December 31, 2011, the net liquidity of the industrial business decreased by €1.9 billion to €10.1 billion. This was primarily due to the negative free cash flow.
At the end of the first quarter of 2012, Daimler employed 274,127 people worldwide (end of Q1 2011: 261,718). Of that total, 168,017 were employed in Germany (end of Q1 2011: 164,131).
Details of the divisions
Mercedes-Benz Cars achieved a new record for unit sales in the first quarter of 2012. Total sales by the car division rose by 9% to 338,300 units (Q1 2011: 310,700). First-quarter revenue increased by 8% to €14.9 billion.
With EBIT of €1,252 million, Mercedes-Benz Cars achieved earnings close to the level of the prior-year period (Q1 2011: €1,288 million). The division’s return on sales was 8.4% (Q1 2011: 9.3%).
The development of earnings was primarily driven by ongoing growth in unit sales, especially in Europe and the United States. Mercedes-Benz Cars achieved particularly high growth rates in the C-Class segment and with SUVs. Positive exchange-rate effects also boosted earnings. One of the reasons for the reduction in earnings was the temporarily weaker pricing in China. In addition, there were expenses in connection with the expansion of production capacities as well as higher advance expenditures for new vehicles and technologies.
Daimler Trucks increased its unit sales by 21% to 107,700 vehicles. Revenue rose by 18% to €7.4 billion (Q1 2011: €6.2 billion).
The division’s EBIT of €383 million was lower than in the prior-year period (Q1 2011: €413 million). Return on sales was 5.2% (Q1 2011: 6.6%).
Earnings were affected on the one hand by the positive development of unit sales and revenue in the NAFTA region and Asia. On the other hand, there were expenses relating to the current product offensive. There was another negative impact on earnings from falling unit sales in a difficult market environment in Latin America.
Unit sales by Mercedes-Benz Vans decreased in the first quarter of this year to 51,200 vehicles, primarily due to the market weakness in Western Europe (Q1 2011: 54,000). Revenue of €2.1 billion was above the prior-year level (Q1 2011: €2.0 billion).
The division achieved an operating profit of €168 million (Q1 2011: €173 million). Return on sales amounted to 8.0%, compared with 8.8% in the first quarter of last year.
Despite the lower unit sales, an unfavorable model mix and higher expenditure for research and development, Mercedes-Benz Vans was able to maintain a high level of earnings. This was due in particular to lower warranty costs.
Worldwide unit sales of 4,900 buses and bus chassis by Daimler Buses were below the prior-year number of 7,700 units. The decrease was primarily due to weaker demand for bus chassis in Latin America. The business with complete buses in Europe and the United States remained at a low level. In line with the development of unit sales, revenue of €730 million was lower than in the prior-year period (Q1 2011: €831 million).
The division’s EBIT was minus €103 million (Q1 2011: minus €33 million), primarily due to the decline in unit sales of 37%. Shipments decreased compared with the high levels of the prior-year quarter especially in Latin America. Furthermore, the repositioning of the European business decided upon in the first quarter of 2012 led to charges of €36 million.
As a major element of its strategy, Daimler Buses has started its “GLOBE 2013” growth-and-efficiency offensive. The program is designed to achieve the targeted 6% return on sales in the coming years, and is being rolled out over the entire value chain and at all of the division’s sites. One goal is the more intensive networking of all the plants in the European production network. Within the context of “GLOBE 2013,” Daimler Buses will also utilize existing growth potential in its traditional markets while further expanding its business in new markets.
Daimler Financial Services’ business continued to develop positively in the first quarter. Worldwide, approximately 234,000 new leasing and financing contracts worth a total of €8.3 billion were concluded, representing growth of 20% compared with the prior-year period. Contract volume amounted to €71.6 billion at the end of the first quarter of 2012, remaining stable compared with the end of 2011. Adjusted for exchange-rate effects, there was an increase of 1%.
The division achieved earnings of €344 million, thus surpassing the prior-year figure of €321 million. The main reason for this positive development was the increased contract volume compared with the first quarter of last year. There was an opposing effect from lower interest margins.
The reconciliation of the divisions’ EBIT to Group EBIT primarily reflects the proportionate share of the results of Daimler’s equity-method investment in EADS, as well as other gains and losses at the corporate level.
Daimler’s proportionate share of the net profit of EADS in the first quarter of 2012 amounted to €133 million (Q1 2011: €74 million). The reconciliation alsoincludes an expense at the corporate level of €35 million (Q1 2011: expense of €189 million).
Outlook
On the basis of the divisions’ planning, Daimler expects its total unit sales in the year 2012 to be higher than the figure of 2.1 million vehicles sold in the year 2011.
Mercedes-Benz Cars assumes that it will further increase its unit sales this year and will grow faster than the market as a whole. The division expects its unit sales in each of the remaining quarters of 2012 to be higher than in the respective prior-year period. Mercedes-Benz Cars will profit from the continuation of strong demand for its cars in the C-Class segment. At the end of March, it launched a new model of the SL, the icon in the sports-car sector. The division anticipates further growth for its SUVs, primarily due to the full availability of the new M-Class and as of September 2012 also of the new GL. In addition, the new generations of the GLK compact SUV and of the G-Class will be launched in June 2012. The new models in the high-volume compact-car segment will also contribute towards growth in unit sales; the new B-Class was launched in November 2011 with the new A-Class to follow this September. And a completely new automobile concept will come onto the market in September: the CLS Shooting Brake.
In regional terms, further growth opportunities are seen for 2012 above all in North America, as well as in China, India and Russia. For the smart brand, an ongoing stable level of unit sales is expected.
Daimler Trucks anticipates another rise in unit sales this year. In Europe, the division intends to develop better than the market as a whole, thus further extending its market leadership. The most important model in this respect is the new Actros. Market effects connected with the introduction of stricter emission regulations in Brazil mean that the sales situation there will be difficult, but Daimler Trucks expects to maintain its good market position. Because the average age of trucks is still very high in the NAFTA region, there is a high demand for replacement vehicles and a renewed increase in unit sales is therefore expected in that market. Growth in unit sales is also anticipated in Japan – driven by the reconstruction work following the natural disaster.
Daimler Trucks is about to take another major step in the development of new sales markets: In India, the division will start production of trucks under the BharatBenz brand in the third quarter. In the world’s biggest truck market, China, Daimler Trucks is pursuing a dual strategy: the sale of high-value Mercedes-Benz trucks for the premium segment in parallel with the sale of trucks in the lower-priced volume market through its cooperation with Foton. The joint venture will begin producing trucks to be sold under the Auman brand in the third quarter. Together with the strategic partner Kamaz, Daimler Trucks is developing the growing Russian market through two joint ventures and is thus further expanding its global presence.
Mercedes-Benz Vans assumes that it will further increase its unit sales in 2012. The launch of the new Citan in the small-van segment will help to revive unit sales in Europe. Overall, the division expects to maintain the level of unit sales in Europe that it achieved in the year 2011. Furthermore, Mercedes-Benz Vans expects to sell more vehicles than in the prior year in the United States. And it should be able to participate in the positive development of the Latin American markets due to the launch there of the current model generation of the Sprinter.
Daimler Buses anticipates a decrease in unit sales in the year 2012, whereby complete buses should account for a larger proportion of total unit sales. Weaker demand is expected this year above all in Latin America due to the introduction of the Euro V emission regulations, which led to purchases being brought forward in 2011. A slight recovery of the business with complete buses in Europe is anticipated.
Daimler Financial Services expects to achieve renewed growth in contract volume and new business in 2012. A normalization of credit risks is to be expected – and thus a moderate increase compared with the unusually low level of the year 2011.
Following the significant growth of the year 2011, the Daimler Group assumes that its revenue will increase again in the year 2012. In regional terms, above-average growth rates are expected in the emerging markets and in North America.
On the basis of current market expectations and the planning of the divisions, Daimler aims to achieve Group EBIT from the ongoing business in 2012 that is in the magnitude of the prior year. This target is based on the assumption of currency exchange rates close to their present levels.
The following EBIT targets from the ongoing business have been set for the individual divisions:
- Mercedes-Benz Cars: at the prior-year level
- Daimler Trucks: at least at the prior-year level
- Mercedes-Benz Vans: at least at the prior-year level
- Daimler Buses: below the prior-year level
- Daimler Financial Services: slightly below the prior-year level
Later this year, Daimler Buses anticipates expenses of up to €50 million from the repositioning of the European bus business and of approximately €60 million from the repositioning of the North American bus business.
Due to strong demand for its products, Daimler assumes that its worldwide workforce will expand compared with the end of 2011.
For the automotive business, Daimler aims to achieve an annual average return on sales of 9% across market and product cycles. This is based on targeted returns on sales for the individual divisions, to be achieved on a sustained basis as of the year 2013, of 10% for Mercedes-Benz Cars, 8% for Daimler Trucks and 9% for Mercedes-Benz Vans. Daimler Buses has the target of 6% to be reached in the coming years. The target for the Daimler Financial Services division is a return on equity of 17%.
The special items shown in the following table affected EBIT in the first quarters of 2012 and 2011:Credits: Daimler AG Copyright © 2012, mercedesgla. All rights reserved.
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