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 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.
At the Annual General Meeting of Daimler AG held in Berlin on Wednesday, the company’s shareholders approved the system of remuneration for the members of the Board of Management. The German Act on the Appropriateness of Management Board Remuneration, which came into effect on August 5, 2009, allows for the Annual Meeting to vote on the system of remuneration for the members of the Board of Management. Due to this new legislation, the Supervisory Board of Daimler AG placed the system of remuneration for the members of the Board of Management on the agenda of the Annual Meeting for the shareholders’ approval. The shareholders voted in favor of the remuneration of the Board of Management for the year 2010 with 95.97% of the votes cast.
Furthermore, the Annual Meeting elected Dr. Paul Achleitner to the Supervisory Board as successor to Arnaud Lagardère, who is leaving this Board. Achleitner, a member of the Board of Management of Allianz SE, is a member of the Daimler Supervisory Board until the end of the 2015 Annual Meeting.
The actions of the members of the Board of Management in 2009 were ratified with 98.32% of the votes cast; the actions of the members of the Supervisory Board were ratified with 98.05%.
The Annual Meeting also authorized the Board of Management to issue convertible bonds and/or bonds with warrants with a total face value of up to €10 billion and to create a new Conditional Capital 2010 of €500 million arising from those convertible bonds and/or bonds with warrants. The previous authorization to issue convertible bonds and/or bonds with warrants had expired on April 5, 2010.
This year’s Annual Meeting at the Berliner Messe exhibition center was attended by approximately 4,700 shareholders (2009: 7,000). 40.28% of the shareholders’ voting rights were represented at the Annual Meeting.
In the past twelve months, Daimler AG (stock-exchange symbol DAI) has taken some important strategic actions in an extremely difficult environment and has thus created the right conditions for a successful future. “We did not limit ourselves to simply trying to somehow keep our head above water in the crisis,” said Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, according to the advance text of his speech to approximately 5,000 shareholders this Wednesday at the ICC in Berlin. “We continued to do our strategic homework. Daimler is extremely well positioned in the race to shape the future of the automobile,” he stated.
The decisions that have been made since the last Annual Meeting add up to a coherent picture of Daimler’s strategy: “We are sharpening our brand profiles, spearheading technological transformation, growing in key markets, satisfying changed customer requirements and boosting our efficiency,” explained Zetsche.
The fact that Daimler can look to the future with confidence is shown by the figures for unit sales of Mercedes-Benz Cars in the first quarter of 2010. Worldwide, Group sales of the Mercedes-Benz brand rose by nearly 27 percent. Thanks to the increasing success of the new E-Class and S-Class, the model mix has also improved with a higher percentage of larger cars. In the biggest export market, the USA, Mercedes-Benz sells more cars than any other German premium brand. In China, which is currently regarded as the most important market of the future, unit sales actually increased by 136 percent. Zetsche: “In view of these numbers, our global sales target for the year is ambitious, but it’s also realistic: We plan to grow at around double the rate of the global passenger car market in full-year 2010.”
The Chairman of the Board of Management once again affirmed the outlook given at the annual press conference in February for the development of business in 2010. The Daimler Group assumes that unit sales and revenue will increase this year, but that they will still be significantly lower than the good levels of 2008. In total, Daimler anticipates Group EBIT from ongoing business operations of more than €2.3 billion, with all divisions making a positive EBIT contribution.
Zetsche sees the latest cooperation agreed upon with Renault-Nissan last week as an important step for the Group on the way to establish a “highly efficient business system.” The agreement covers cooperation in four areas: Smart will offer a four-seat model based on a vehicle architecture developed jointly with its partner for the Twingo and the smart, thereby enhancing smart’s position as a young brand offering practical and attractive urban vehicles. In addition, new small three and four-cylinder engines will be jointly developed. Cooperation will also take place in the area of small commercial vehicles. Mercedes-Benz Vans will supplement its portfolio with a completely new entry-level model. And Nissan will be supplied with large Mercedes-Benz gasoline and diesel engines for its luxury brand, Infiniti.
In terms of environmentally friendly products, Daimler aims to be the technological leader, a role it has had for a long time in the field of safety. To help achieve this goal, the internal combustion engine will be further optimized and supplemented with hybrid modules, and fully electric vehicles with battery-powered drive systems or fuel cells will be developed and produced for emission-free driving. In 2009, the CO2 emissions of the cars sold by Daimler in the European Union fell by 13 grams to 160 g/km. Daimler’s goal is to reduce the CO2 emissions of its new-car fleet in the European Union to less than 140 g/km by the year 2012.
Daimler places priority on strong partnerships also in the field of sustainable mobility. This includes its equity interest in Tesla, the cooperation with Evonik on lithium-ion technology, and the collaboration with RWE, Enel and Linde on the development of the required infrastructure for emission free driving.
The world is moving towards “Automobile 2.0.” “Many things that seemed to be permanently defined for almost a century are likely to change in the coming 10 or 20 years,” Zetsche pointed out. This applies above all to drive technology. “Oil is becoming scarcer and more expensive – and its combustion is contributing to global warming. Government regulations regarding emissions are therefore becoming stricter; customers are becoming more environment conscious and the cars are becoming more electric,” stated Zetsche.
The Chairman of the Board of Management welcomes the fact that the German government wants to make Germany into the leading market for electric mobility: “This is good policy.” The “electric automobile summit meeting” planned for early May could be a first step in that direction. But it’s equally clear that it has to be followed by additional steps. The need for political action ranges from promoting research and creating the necessary infrastructure to the introduction of international standards and providing the right incentives for market launch. Zetsche: “In general, we need the support of political decision-makers in order to complete the transition to electric driving. Working together will make us strong!”
Daimler presented its figures for the year 2009 in February. Unit sales decreased in all vehicle segments due to the global economic crisis, leading to a 20 percent fall in revenue to €78.9 billion. As a result of the measures taken at the Group at an early stage to reduce costs by €5.3 billion and the additional efficiency enhancements in the context of the ongoing optimization programs, effective action has been taken to counter falling earnings. The Group posted an operating loss of €1.5 billion and a significant net loss of €2.6 billion.
In view of this unusual earnings situation, the Board of Management and the Supervisory Board decided that Daimler will, by way of exception, not pay a dividend for 2009, whereby that decision solely reflects last year’s business situation. Zetsche: “We would have decided differently had we not been firmly convinced that our course of action was necessary. It is also in the long-term interest of our shareholders, because it raises the dividend payment potential from our retained income in the years to come.” Daimler intends to resume paying a dividend for the current year. The goal remains to achieve a payout ratio in the magnitude of 40 percent of net profit.
The Supervisory Boardof Daimler AG has nominated Dr. Paul Achleitner as a candidate for membership of the Supervisory Boardrepresenting the shareholders. Achleitner will be available for election at Daimler’s Annual Meeting to be held in Berlin on April 14, 2010. Arnaud Lagardère, a member of the Supervisory Board since 2005, has decided not to stand for reelection.
Dr. Paul Achleitner (born in 1956) has been Member of the Board of Management for Finance of Allianz SE since 2000. Before that, he was a strategic business consultant at Bain & Co. and held various positions at Goldman Sachs in the Mergers & Acquisitions and Investment Banking departments. He became head of Goldman Sachs Germany in 1994.
Dr. Joachim Schmidt (61), currently Head of Sales Central/Eastern Europe, Africa & Asia, will take over the position of Head of Sales and Marketing at Mercedes-Benz Cars, including responsibility for sales companies around the world, as of October 1, 2009. He will replace Dr. Klaus Maier, who has decided not to extend his contract for personal reasons.
Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Chief Executive of Mercedes-Benz Cars: “As Head of Sales at Mercedes-Benz, Klaus Maier has made his mark in many ways. This applies to brand positioning as well as the realignment of the product portfolio towards a younger target group. In addition, Klaus Maier has initiated the reorganization of worldwide sales. I very much regret that Klaus Maier would now like to leave his position for personal reasons.”
The successor to Dr. Klaus Maier has more than 20 years of experience in the field of sales. Dr. Dieter Zetsche: “In Joachim Schmidt, we have a professional taking over sales at Mercedes-Benz Cars – an executive who knows the company better than most. It is largely thanks to him that the Mercedes-Benz brand grew at double-digit rates and extended its market leadership in the regions for which he was responsible in 2007 and 2008. I am delighted that we have gained him for this position.”