Daimler AG (stock-exchange symbol DAI) has reported first-quarter EBIT of €1,190 million, as previously disclosed on April 19, 2010 (Q1 2009: minus €1,426 million). “This very good result for the first quarter shows that we did our homework in the crisis and are now firmly on track for success once again,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
The very positive earnings development is reflected by ongoing upward trends in nearly all divisions. Mercedes-Benz Cars in particular posted significantly positive earnings for the first quarter of 2010, due to increased unit sales in the E-Class and S-Class segments.
The positive development of EBIT led to net profit for the Group of €612 million, representing a considerable improvement over the prior-year result (Q1 2009: net loss of €1,286 million). Earnings per share amounted to €0.65 (Q1 2009: loss per share of €1.40).
Total unit sales up by 21% in the first quarter
In the first quarter of 2010, Daimler sold 402,700 cars and commercial vehicles worldwide, which was 21% more than in the same period of last year.
The Daimler Group’s first-quarter revenue increased significantly from €18.7 billion to €21.2 billion; adjusted for exchange-rate effects, revenue grew by 15%.
The free cash flow from the industrial business was positive and increased compared to the prior-year quarter from minus €1.1 billion to plus €0.3 billion.
At the end of the first quarter of 2010, Daimler employed 254,779 people worldwide (Q1 2009: 263,819). Of that total, 161,449 people were employed in Germany (Q1 2009: 164,983).
Details of the divisions in the first quarter
Mercedes-Benz Cars achieved a very positive business development in the first quarter of 2010. Due in particular to strong growth in the E-Class and S-Class segments, unit sales increased compared to the first quarter of last year by 20% to 277,100 vehicles (Q1 2009: 231,200). This year, therefore, the car division has continued its positive development of the fourth quarter of 2009. First-quarter revenue rose by 28% to €11.6 billion.
The division’s EBIT amounted to €806 million (Q1 2009: minus €1,123 million). The main factors contributing to this distinct earnings improvement were the significant increase in unit sales, especially in the full-size and luxury segments, the related improvement in the product mix and improved pricing. The division increased its unit sales above all in the United States and China. Currency translation had a negative impact on earnings, but was partially offset by efficiency gains and cost reductions.
Daimler Trucks sold 70,600 vehicles in the first quarter of 2010 (Q1 2009: 65,400). Lower unit sales in Germany, the Middle East and Japan were more than offset by higher volumes in Latin America (+79%) and Southeast Asia (+48%). Revenue of €4.9 billion was close to the level of the prior-year period.
The division’s EBIT of €130 million was positive again (Q1 2009: minus €142 million). This earnings improvement is primarily due to the good business development in Latin America. Other positive effects resulted from the measures taken to reduce costs, especially from the repositioning of the subsidiaries Daimler Trucks North America and Mitsubishi Fuso Truck and Bus Corporation. Implementing these programs impacted EBIT by minus €17 million in the first quarter of this year (Q1 2009: minus €45 million).
Mercedes-Benz Vans increased its unit sales to 46,700 vehicles following a slight market recovery (Q1 2009: 28,800). Revenue of €1.7 billion was also higher than in the prior-year quarter (€1.3 billion).
The division achieved EBIT of €64 million (Q1 2009: minus €91 million). The positive development of earnings was mainly the result of higher unit sales compared to the prior-year quarter, especially in Western Europe. Charges from currency effects were largely offset by efficiency improvements and cost savings.
Daimler Buses significantly increased its worldwide unit sales to 8,400 buses and bus chassis (Q1 2009: 6,800). Revenue of €1,011 million was higher than in the first quarter of last year (€904 million).
The division posted EBIT of €41 million; as expected, this was lower than the high level of earnings in the prior-year quarter (€65 million). The development in earnings is primarily due to lower unit sales in Western Europe, which could not be fully offset by the positive business development in Latin America.
Daimler Financial Services’ worldwide contract volume amounted to €59.9 billion at the end of the first quarter of 2010, representing a year-on-year decrease of 3%. Compared with the end of the year 2009, contract volume increased by 3%; adjusted for exchange-rate effects, the portfolio decreased by 1% compared to year-end. New business increased compared to the first quarter of last year by 6% to
€6.2 billion; adjusted for exchange-rate effects, there was an increase of 5%.
The division achieved EBIT of €119 million (Q1 2009: minus €167 million). The improvement in earnings was mainly caused by lower provisions for risks and higher interest margins. On the other hand, charges were recognized in particular from the valuation of non-automotive assets held for sale, which are subject to leasing agreements (minus €46 million).
The reconciliation of the divisions’ EBIT to Group EBIT primarily reflects Daimler’s proportionate share in the results of its equity-method investment in EADS, as well as further gains or losses at corporate level.
In the first quarter of 2010, Daimler’s proportionate share of the net result of EADS amounted to a loss of €269 million (Q1 2009: gain of €83 million). The substantial deterioration is primarily the result of additional provisions recognized by EADS in its 2009 consolidated financial statements relating to the A400M military transport aircraft. On the other hand, the sale of the 5.3% equity interest in Tata Motors led to a pre-tax gain of €265 million, which is reflected in the reconciliation to Group EBIT.
Outlook
Based on the divisions’ planning, Daimler expects total unit sales to increase significantly in 2010 (2009: 1.6 million vehicles).
Following a distinct decline in 2009, Daimler assumes that Group revenue will increase again in 2010, but will remain significantly below the level of 2008. All automotive divisions should contribute to this year’s growth.
Daimler expects to achieve Group EBIT from the ongoing business of more than €4 billion in 2010. The key factors for this expectation are the ongoing market revival, the improving economic environment and the market success of the Group’s products.
The division’s expectations for EBIT from the ongoing business in full-year 2010 are as follows:
- Mercedes-Benz Cars anticipates EBIT of €2.5 billion to €3 billion.
- Daimler Trucks expects EBIT of €500 million to €700 million.
- Mercedes-Benz Vans assumes it will achieve EBIT in the region of €250 million.
- Daimler Buses anticipates full-year EBIT of €180 million.
- Daimler Financial Services expects to post EBIT of more than €500 million.
Mercedes-Benz Cars will profit this year from the full availability of the new E-Class models. Following the very successful market launches in 2009 of the E-Class sedan, coupe and station wagon, the new E-Class convertible was launched in the first quarter of 2010. Unit sales will also be boosted by the new super sports car Mercedes-Benz SLS AMG, and as of autumn 2010 by the new generations of the
R-Class and the CL-Class. Furthermore, the division is continually launching additional fuel-efficient and environmentally friendly versions of existing models. Starting in the third quarter of 2010, new and particularly efficient six- and eight-cylinder gasoline engines will become available. The already extensive portfolio of BlueEFFICIENCY models will be expanded to 85 model versions by the end of 2010. For the smart brand, Daimler anticipates an increase in demand following the launch of a new generation of the smart fortwo in the third quarter of 2010.
On the basis of an attractive and competitive range of vehicles, Mercedes-Benz Cars assumes it will be able to strengthen its market position in 2010 even with a continuation of difficult conditions, and that it will grow at about double the rate of the global car market. From today’s perspective, global demand for cars should increase this year by between 3 and 4 percent.
The division’s EBIT should be facilitated on the one hand by higher volumes and on the other hand by improved profit margins. The projected EBIT range is primarily dependent on market developments, exchange-rate volatilities and the macroeconomic situation. The division will continue to invest substantial amounts in the development and production of new drive technologies and innovative safety systems in order to improve its competitive position in this difficult market environment.
Daimler Trucks anticipates a recovery of unit sales this year, starting from the low level of 2009. The division expects growth impetus initially from some of the Latin American markets and – starting from a very low level – also from the NAFTA region. In Europe, however, a slight revival of demand is anticipated in the second half of 2010 at the earliest.
Against the backdrop of rising customer demand in the van sector and the stabilizing market situation, Mercedes-Benz Vans expects a significant increase in unit sales compared to the prior year.
Daimler Buses assumes that it will increase its unit sales in 2010, mainly due to strong demand in Latin American markets.
Daimler Financial Services anticipates stable development of its worldwide contract volume in the automotive business. The division assumes that credit-risk costs will decrease in full-year 2010 and that further efficiency improvements will be achieved.
As a result of the upturn in demand, Daimler assumes that the size of its worldwide workforce will remain constant or increase slightly this year compared to the end of 2009.
