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Daimler posts growth in unit sales and revenue in first quarter of 2018

  27.04.2018    

Daimler AG (ticker symbol DAI) made a good start to the year 2018 and again increased sales and revenue. Daimler has sold 806,900 cars and commercial vehicles worldwide in the first three months of 2018, surpassing the number sold in the prior-year period by 7%. All of the automotive divisions contributed to the best-ever unit sales in a first quarter, especially Mercedes-Benz Cars with its most successful first quarter of all time (594,300 units; +5%) and Daimler Trucks with a significant sales increase of 21% to 113,800 units. The Group’s first-quarter revenue amounted to €39.8 billion, which is 3% above the prior-year level. Adjusted for exchange-rate effects, revenue grew by 8%.
The Daimler Group achieved first-quarter EBIT of €3,335 million in 2018, which is significantly below its prior-year earnings of €3,771 million. Net profit for the first quarter of 2018 of €2,354 million was significantly below the prior-year figure of €2,652 million. Net profit attributable to the shareholders of Daimler AG amounts to €2,273 million (Q1 2017: €2,557 million), representing a decrease in earnings per share to €2.12 (Q1 2017: €2.39).
The Mercedes-Benz Cars division slightly improved upon its prior-year earnings, mainly due to the very positive development of unit sales of the S-Class and SUV models. Daimler Trucks’ earnings were at the prior-year level. In the first quarter of the previous year, the gain of €267 million on the sale of real estate by Mitsubishi Fuso Truck and Bus Corporation in Japan had a positive effect on earnings. Mercedes-Benz Vans and Daimler Buses each posted an EBIT significantly lower than in the first quarter of last year. At Daimler Financial Services, growth in contract volume led to a slight increase in earnings. Exchange-rate effects had an overall slightly negative impact on operating profit. The reconciliation of segment earnings to Group EBIT also had a negative impact on earnings in the first quarter of 2018. The positive effect in the prior-year quarter was primarily due to the reversal of an impairment of Daimler’s equity investment in BAIC Motor Corporation Ltd. (BAIC Motor).
“We are sustainably continuing along our profitable growth course and sold more vehicles in a first quarter than ever before. We aim to continue building on this and to further consolidate our leading position in the premium segment, because we have big plans for the future,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars. “With the five pillars of our strategy – CORE, CASE, CULTURE, COMPANY and CUSTOMER – we are ideally prepared for the transformation of the industry and of our company.” The five strategic areas comprise the expansion of the core business, pushing forward with the CASE topics, further developing the corporate culture, optimizing the company’s structure, and above all, focusing on the customers.

Free cash flow and liquidity
In the first quarter of 2018, the free cash flow of the industrial business amounted to €1.8 billion (Q1 2017: €1.9 billion). This slight decrease resulted primarily from the development of working capital. In the first quarter of 2018, the dividend received from BBAC led to a cash inflow of €0.3 billion, whereas the prior year period was influenced by the sale of real estate in Japan.
Compared with December 31, 2017, the net liquidity of the industrial business increased by €2.1 billion to €18.7 billion. The increase was mainly due to the positive free cash flow.
“We made a good start to the year and have continued investing in the future. With our strong balance sheet and good earnings, we are setting the course for a successful future for the company and for mobility,” stated Bodo Uebber, Member of the Board of Management of Daimler AG responsible for Finance & Controlling and Daimler Financial Services. “With Project Future, we are working on a new positioning of the company in order to make the divisions even more agile and thus more competitive. And with the planned joint venture with BMW, we want to create a comprehensive ecosystem for mobility services for our customers, providing individual mobility at the touch of a button.”
The Daimler Group once again utilized attractive conditions in the international money and capital markets for refinancing in the quarter under review. In the period of January through March 2018, Daimler had a cash inflow of €4.7 billion from the issuance of bonds (Q1 2017: €6.7 billion). The redemption of bonds resulted in cash outflows of €4.4 billion (Q1 2017: €4.8 billion). A large proportion of the issuance volume was carried out in the form of so-called benchmark bonds (bonds with high nominal values). In January, Daimler AG issued a so-called panda bond with a volume of RMB3.0 billion in the Chinese capital market. Furthermore, two asset-backed securities (ABS) transactions were conducted in the United States, generating a refinancing volume of $2.3 billion.

Workforce
At the end of the first quarter of 2018, the Daimler Group employed 294,029 people worldwide (end of 2017: 289,321; end of Q1 2017: 285,810). Of that total, 173,882 people were employed in Germany (end of 2017: 172,089) and 24,426 in the United States (end of 2017: 23,513). The consolidated companies in China had 4,150 employees at the end of March (end of 2017: 4,099).

Details of the divisions
Mercedes-Benz Cars’ unit sales increased by 5% to the new high of 594,300 vehicles in the first quarter of 2018. In Europe, a new record was set with sales of 244,200 Mercedes-Benz and smart cars (+1%). Unit sales were higher than in the prior-year period in Germany (+6%), France (+7%) and Spain (+4%). Best-ever unit sales were achieved also in China (+16%). The successful development was additionally supported by new sales records in South Korea (+18%), India (+26%) and Malaysia (+29%). Unit sales in the United States were 10% lower than in the first quarter of last year, while more vehicles were sold than ever before in a first quarter in Canada (+2%) and Mexico (+7%).
Revenue at Mercedes-Benz Cars increased by 2% to €23.0 billion. The division’s first-quarter EBIT of €2,060 million was slightly higher than the figure of €1,998 million posted in the prior-year period. Its return on sales was 9.0% (Q1 2017: 8.9%). In particular, the very positive development of unit sales of the S-Class and the SUVs made a significant contribution to the increase in earnings in the first quarter of 2018. However, there were negative effects on earnings from advance expenditure for new technologies and future products and higher expenses for raw materials. Earnings were also impacted by increased expenses arising from the valuation of the leasing portfolio in Germany. Earnings in the prior-year quarter were significantly reduced by a non-recurring effect connected with the changeover to IFRS 15 (€236 million). On the other hand, income of €183 million in connection with a new investor in HERE boosted EBIT in the first quarter of the previous year.
Daimler Trucks increased its first-quarter unit sales by 21% to 113,800 vehicles. In a positive market environment in the NAFTA region, sales increased significantly to 40,800 vehicles (Q1 2017: 32,900). Significant growth was achieved also in Latin America, with 9,400 trucks sold (Q1 2017: 6,300). A key contribution came from the positive development in Brazil with sales of 4,000 units (Q1 2017: 2,400). In the EU30 region (European Union, Switzerland and Norway), sales of 17,300 trucks were close to the number sold in the prior-year period (Q1 2017: 17,400). In Germany, 6,100 trucks were sold (Q1 2017: 6,500). Sales in Turkey increased to 1,800 vehicles (Q1 2017: 1,300). In Asia, 37,700 trucks were sold, which is significantly more than in the prior-year period (Q1 2017: 30,000). Sales in Indonesia rose significantly to 12,500 units (Q1 2017: 7,200). In Japan, sales of 12,000 vehicles were slightly higher than in the same period of last year (Q1 2017: 11,600). Sales in India increased significantly to 6,200 trucks. Sales of trucks of the Auman brand by the joint venture BFDA in China decreased to 24,000 units (Q1 2017: 26,400).
Daimler Trucks’ revenue increased to €8.6 billion (Q1 2017: €8.0 billion). The division’s EBIT of €647 million was at the prior-year level (Q1 2017: €662 million). Its return on sales was 7.5% (Q1 2017: 8.3%). In the first quarter of the year 2018, earnings increased due to higher unit sales especially in the NAFTA region and efficiency enhancements. EBIT was reduced by exchange-rate effects and higher expenses for raw materials. In the first quarter of the previous year, the gain of €267 million on the sale of real estate by Mitsubishi Fuso Truck and Bus Corporation in Japan had a positive effect on earnings.
Mercedes-Benz Vans increased its unit sales by 7% and achieved its best-ever first quarter with sales of 93,000 vehicles. In the EU30 region, sales of 60,400 units were at the prior-year level (Q1 2017: 60,500). Growth was achieved for example in Spain (+9%), France (+3%) and Switzerland (+16%). In the important German market, the van division’s sales grew by 7% to the new high of 22,300 units. The development in the NAFTA region was very positive, with unit sales in the United States increasing by a significant 40%. In Latin America, first-quarter sales of 3,800 units were close to the prior-year level (Q1 2017: 3,900). In China, Mercedes-Benz Vans further improved its position and also set a new record with an increase of 49% in the first quarter. Sales developed very positively also in Turkey (+60%) and Russia (+13%).
Mercedes-Benz Vans increased its revenue compared with the first quarter of last year by 4% to €3.1 billion. The division’s EBIT of €172 million was significantly below the prior-year level (Q1 2017: €337 million) and its return on sales decreased to 5.6% (Q1 2017: 11.3%) The positive development of unit sales, especially in the NAFTA region and China, did not offset expenses for the Sprinter model change, advance expenditure for new technologies and products, and higher expenses for raw materials.
Unit sales by Daimler Buses increased in the first quarter by 6% to 5,700 buses and bus chassis. The sales growth was primarily driven by the stronger business with bus chassis in Latin America (excluding Mexico). In the EU30 region, Daimler Buses sold 1,400 buses of the brands Mercedes-Benz and Setra in the first quarter, representing a slight decrease compared with the same period of last year (-2%). Despite Daimler Buses’ clear market leadership, unit sales in Germany, the domestic market, did not reach the prior-year level and decreased by 17% to 400 units. The Brazilian market continued its recovery and unit sales there were 33% above the prior-year level. Brazil thus made a significant contribution to the positive sales development in Latin America in the first quarter of this year. Daimler Buses’ overall unit sales in Latin America (excluding Mexico) increased by 30% to 3,100 bus chassis. First-quarter sales of 500 units in Mexico were significantly lower than in the previous year (Q1 2017: 700). However, strong growth was achieved in India with sales of 340 units (Q1 2017: 190).
Daimler Buses’ revenue decreased compared with the prior-year quarter by 8% to €850 million. The division’s EBIT of €37 million was significantly below the very strong prior-year period (Q1 2017: €72 million). Its return on sales was 4.4% (Q1 2017: 7.8%). Earnings were reduced by an unfavorable product mix and higher expenses for raw materials. These effects were only partially offset by further efficiency enhancements.
Daimler Financial Services increased its new business once again in the first quarter of 2018. Worldwide, 494,000 new leasing and financing contracts were concluded with a total volume of €17.9 billion, which is 6% more than in the prior-year period. Contract volume reached €141.7 billion at the end of March and was thus at the level of year-end 2017. Adjusted for exchange-rate effects, contract volume grew by 2%. In the insurance business, Daimler Financial Services brokered 523,000 contracts, and thus 12% more than in the first quarter of 2017. The mobility services of Daimler Financial Services alone – with car2go, moovel and mytaxi – had 21.4 million customers and 37.5 million transactions in more than 100 cities in the first quarter of this year.
Daimler Financial Services’ first quarter EBIT of €548 million was slightly higher than the prior-year figure of €524 million. This positive development was mainly the result of increased contract volume. On the other hand, the higher level of interest rates and negative exchange-rate effects had a negative impact on earnings.
The reconciliation of the divisions’ EBIT 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 €119 million in the first quarter of 2018 (Q1 2017: income of €187 million). This primarily reflects the reversal of an impairment of Daimler’s equity investment in BAIC Motor by an amount of €240 million in the first quarter of 2017. The elimination of intra-group transactions resulted in expenses of €10 million in the first quarter of 2018 (Q1 2017: €9 million).

Investment in the future
In the first quarter of 2018, €1.3 billion was invested worldwide, primarily at the production and assembly sites for new products and technologies and for the expansion and modernization of the production facilities. The sites in Germany accounted for €1.1 billion of capital expenditure (Q1 2017: €0.9 billion). Research and development expenditures increased to €2.3 billion (Q1 2017: €2.1 billion).



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