Daimler achieves third-quarter EBIT of €2.5 billion in a volatile environment

Daimler achieves third-quarter EBIT of €2.5 billion in a volatile environment

25.10.2018: Slight decrease in unit sales to 794,700 vehicles (-4%) Revenue close to prior-year level at €40.2 billion (Q3 2017: €40.7 billion)

 

 

   Slight decrease in unit sales to 794,700 vehicles (-4%)


    Revenue close to prior-year level at €40.2 billion (Q3 2017: €40.7 billion)


    Group EBIT of €2.5 billion (Q3 2017: €3.4 billion)


    Net profit of €1.8 billion (Q3 2017: €2.2 billion)


    Free cash flow of the industrial business in the period of January through September of minus €60 million (Q3 2017: plus €5.8 billion)


    Slight increase in unit sales and revenue and significant decrease in Group EBIT expected for full-year 2018



    Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars: “The automotive industry and thus also Daimler are still in a very challenging environment. The continued high demand from our customers makes us confident for the fourth quarter.”



    Bodo Uebber, Member of the Board of Management of Daimler AG for Finance & Controlling and Daimler Financial Services: “Despite the volatile environment, it is important and right for Daimler to invest in the future. In doing so, we profit from our strong balance sheet and from our global and diverse refinancing possibilities.”







Daimler AG (ticker symbol DAI) systematically continued to set the strategic course for the Group’s future in the third quarter of 2018.



As expected, the Group’s financial development was strongly influenced by external factors. From July through September, Daimler sold 794,700 cars and commercial vehicles worldwide, which is 4% fewer than in the third quarter of last year (Q3 2017: 824,100), whereby Daimler Trucks and Daimler Buses were both able to increase their unit sales.



Group revenue amounted to €40.2 billion in the reporting period (Q3 2017: €40.7 billion). Adjusted for exchange-rate effects, revenue was at the prior-year level.



The Daimler Group achieved third-quarter EBIT of €2,488 million in 2018, which is significantly below its prior-year earnings of €3,409 million. Net profit of €1,761 million was significantly below the prior-year figure of €2,237 million.




 Net profit attributable to the shareholders of Daimler AG amounted to €1,689 million (Q3 2017: €2,146 million); this led to a decrease in earnings per share to €1.58 (Q3 2017: €2.01).




EBIT at the Mercedes-Benz Cars division was significantly lower than in the third quarter of last year, due in particular to a decrease in sales volume and expenses in connection with governmental proceedings and measures for diesel vehicles.



Daimler Trucks achieved significantly higher earnings than in the prior-year period, primarily as a result of increased unit sales in the NAFTA region. Mercedes-Benz Vans did not achieve EBIT of the third quarter of 2017.



 Daimler Buses’ earnings in the third quarter of 2018 were slightly lower than in the prior-year period. The increased level of interest rates was the main reason for a decrease in earnings at Daimler Financial Services. Exchange-rate effects had an overall negative impact on the Group’s operating profit.



“The automotive industry and thus also Daimler are still in a very challenging environment. The continued high demand from our customers makes us confident for the fourth quarter,” stated Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.





Free cash flow and liquidity




In the first nine months of 2018, the free cash flow of the industrial business led to a cash outflow of €60 million (Q1-3 2017: cash inflow of €5.8 billion). The substantial decrease was primarily due to the general business performance and the development of working capital, reflecting in particular the stronger increase in inventories because of restrictions in the availability of vehicles caused by the delay of certification processes at Mercedes-Benz Cars.



In addition, Mercedes-Benz Vans experienced delivery delays caused by certain measures for diesel vehicles. Furthermore, there was an impact from increased investments in property, plant and equipment. However, lower income-tax payments had a positive impact on the free cash flow of the industrial business.



Compared with December 31, 2017, the net liquidity of the industrial business decreased by €3.1 billion to €13.5 billion. The dividend payment to shareholders of Daimler AG led to a decrease in net liquidity that was only partially offset by positive exchange-rate effects.



“In the past quarter, there were various negative factors that had a significant impact on our earnings. Nonetheless, we achieved EBIT of €2.5 billion,” said Bodo Uebber, Member of the Board of Management of Daimler AG responsible for Finance & Controlling and Daimler Financial Services.



“Despite the volatile environment, it is important and right for Daimler to invest in the future. In doing so, we profit from our strong balance sheet and from our global and diverse refinancing possibilities. At the same time, we are repositioning the Group with PROJECT FUTURE to make Daimler even more agile and flexible and to better utilize market opportunities.”




Refinancing



The Daimler Group once again utilized attractive conditions in the international money and capital markets for refinancing in the third quarter of 2018. In the third quarter of this year, the Group had a cash inflow of €5.8 billion from the issuance of bonds (Q3 2017: €6.1 billion). The redemption of bonds resulted in a cash outflow of €3.5 billion (Q3 2017: €3.2 billion).



A large proportion of the issuance volume was carried out in the form of so-called benchmark bonds (bonds with high nominal values). Furthermore, five asset-backed securities (ABS) transactions were conducted. In the United States, a total volume of $3.5 billion was generated with two transactions. In China, bonds in a volume of RMB 8.0 billion were successfully placed on the market. Further transactions were carried out in Germany (€0.75 billion) and the United Kingdom (GBP 0.4 billion).



In July 2018, Daimler successfully concluded negotiations with a consortium of international banks for a new credit line with a volume of €11 billion. With a term of five years, it grants Daimler additional financial flexibility until 2023.




If the agreed extension options are exercised and confirmed by the banks, the term would be extended into the year 2025. Daimler does not intend to utilize the credit line.




Workforce



At the end of the reporting period, the Daimler Group had 300,367 employees worldwide (end of 2017: 289,321; end of Q3 2017: 292,121).



Of that total, 176,287 were employed in Germany (end of 2017: 172,089) and 26,079 in the United States (end of 2017: 23,513). At the consolidated subsidiaries in China, 4,410 people were employed at the end of September (end of 2017: 4,099).





Details of the divisions



Unit sales of 559,500 vehicles by Mercedes-Benz Cars in the third quarter of 2018 were significantly below the high level of the prior-year period.



In Europe, 223,600 vehicles of the Mercedes-Benz and smart brands were sold in the months of July through September (-12%), of which 72,100 were sold in Germany (-13%).




 In China, the division’s biggest market, a new record was set of more than 170,400 units sold, surpassing the previous record in the third quarter of last year by 11%. Sales in the United States decreased to 76,000 units (-8%).





Revenue decreased by 7% to €21.7 billion.



The division’s EBIT of €1,372 million was significantly lower than the prior-year figure of €2,105 million and its return on sales was 6.3% (Q3 2017: 9.0%). In the third quarter of the year 2018, the decline in sales volume due to restricted vehicle availability caused by delays in certification and temporarily weaker pricing had a negative impact on EBIT.



Furthermore, expenses in connection with ongoing governmental proceedings and measures taken for diesel vehicles affected EBIT negatively. In addition, advance expenditure for new technologies and future products as well as unfavorable exchange-rate effects affected earnings negatively.



Expenses in connection with the possible need to take action on certain vehicles still operating with the previously used refrigerant R134a also reduced earnings. A gain of €185 million from the remeasurement of the investment in Aston Martin Lagonda Global Holdings plc had a positive effect on EBIT.




In the prior-year period, earnings were negatively affected by expenses for a specific vehicle recall (€230 million) and expenses for voluntary service activities in connection with a comprehensive plan for diesel engines (€223 million).



Daimler Trucks achieved unit sales of 136,100 vehicles in the third quarter of 2018, surpassing the prior-year number by 8%. In the NAFTA region, truck sales increased significantly to 52,700 units (Q3 2017: 45,300).



In Latin America, sales of 9,800 units surpassed the prior-year level (Q3 2017: 8,000). 6,000 vehicles were sold in the Brazilian market (+63%). Sales in the EU30 region (European Union, Switzerland and Norway) increased to 21,900 units (Q3 2017: 20,900). Unit sales in Germany rose to 8,700 trucks (Q3 2017: 8,100).



The weakening of the Turkish market was clearly reflected by third-quarter sales, which were substantially lower than in the prior-year quarter at 900 trucks (Q3 2017: 3,400). Deliveries of trucks in Asia increased to 42,300 units (Q3 2017: 40,000).




 Sales of 17,800 units in Indonesia were about 50% above the prior-year level. Also in India, sales of 5,300 trucks were significantly higher than in the third quarter of last year (Q3 2017: 4,900). Sales in Japan decreased to 10.700 units due to the general market development there (Q3 2017: 11,900). Sales of Auman Trucks by the joint venture in China decreased to 23,000 units (Q3 2017: 30,000).



Revenue of €10.0 billion was significantly higher than in the same period of last year (Q3 2017: €9.2 billion). The division’s EBIT of €850 million was significantly above the prior-year level (Q3 2017: €614 million). Its return on sales was 8.5% (Q3 2017: 6.7%).



In the third quarter of the year 2018, growth in unit sales especially in the NAFTA region as well as further efficiency enhancements had a positive effect on earnings. In the prior-year period, expenses for fixed-cost optimization (€70 million) affected EBIT negatively. Earnings were reduced by higher expenses for raw materials and other additional costs, mainly resulting from supply-chain constraints.




Unit sales by Mercedes-Benz Vans of 91,400 vehicles in the third quarter of 2018 were 2% lower than in the same period of last year. This was due, among other things, to delays in the delivery of Vito, V-Class and Sprinter models. In the EU30 region, Mercedes-Benz Vans’ unit sales decreased by 3% to 57,000 vehicles.



Sales of 22,400 units in Germany were 5% below the prior-year level. The development was positive in the NAFTA region, where sales reached the new record of 13,000 units in the third quarter (Q3 2017: 12,600). Unit sales in the United States rose by 1% to 9,600 vehicles. In Latin America, sales increased by a significant 13% to 4,700 units, primarily driven by the significant market recovery in Brazil.




In China, Mercedes-Benz Vans further improved its position and posted its strongest-selling third quarter so far, with sales of 7,400 units (+9%). This was mainly due to the great success of the V-Class and Vito models.




Revenue decreased by 2% to €3.0 billion. The division’s EBIT amounted to minus €93 million and was thus significantly below its prior-year result (Q3 2017: EBIT of €214 million). The division’s return on sales decreased to -3.1% (Q3 2017: 6.9%). Earnings were impacted by advance expenditure for new technologies and future products and by expenses for the Sprinter model change.



EBIT was also reduced by expenses in connection with ongoing governmental proceedings and measures taken for diesel vehicles as well as lower unit sales caused by delivery delays.



Unit sales by Daimler Buses in the third quarter of 2018 increased by 7% to 7,700 buses and bus chassis. In the EU30 region, Daimler Buses’ sales of complete buses and bus chassis of the Mercedes-Benz and Setra brands increased significantly to 2,100 units (+15%).



 In Latin America (excluding Mexico), sales of 3,400 units were below the prior-year level (Q3 2017: 3,600), despite stronger demand in Brazil. In Mexico, 900 units were sold (+4%). In India, the bus division achieved significant sales growth to 420 units (Q3 2017: 280).



Revenue of €1.1 billion was slightly higher than in the prior-year period (Q3 2017: €1.0 billion). The division’ s EBIT of €30 million was slightly below its prior-year earnings of €32 million; its return on sales was 2.8% (Q3 2017: 3.1%). Further efficiency enhancements only partially offset the decrease in earnings caused by a changed product mix and higher inflation-related cost increases.



Daimler Financial Services’ new business decreased slightly in the third quarter of 2018 against the backdrop of lower unit sales by the automotive divisions. Worldwide, 458,000 new leasing and financing contracts worth €16.6 billion were concluded, which is 5% less than in the prior-year period.



Contract volume at the end of September amounted to €148.8 billion and was thus significantly above the level at the end of 2017 (+6%). In the insurance business, Daimler Financial Services brokered 566,000 contracts in the third quarter of this year (+3%). At September 30, 2018, Daimler had approximately 26 million customers for mobility services.




This means that the number of users of car2go, moovel and the ride-hailing group including mytaxi, Beat, Clever Taxi and Chauffeur Privé increased by 64% compared with the previous year. More than 46 million transactions were conducted in 130 cities worldwide in the third quarter.



The division’s EBIT of €392 million was significantly lower than its earnings in the prior-year quarter of €508 million. The determining factors were the increasing interest-rate level and the cost-of-risk situation in Turkey. Increasing contract volume only partially offset these effects.



The reconciliation of the divisions’ operating profit to Group EBIT comprises gains at the corporate level and the effects on earnings of eliminating intra-group transactions between the divisions. Items at the corporate level resulted in expenses of €62 million in the third quarter of 2018 (Q3 2017: €72 million).




The elimination of intra-group transactions resulted in expenses of €1 million in the third quarter of this year (Q3 2017: income of €8 million).





    Jörg Howe,    Hendrik Sackmann- photos Mercedes

Permanent-URL: http://www.automobilsport.com/daimler-third-quarter-ebit-volatile-environment---182603.html

25.10.2018 / MaP

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