DaimlerChrysler Increases First-Quarter 2004 Operating Profit by 10%
-- Group operating profit of $1.9 billion higher than prior-year level
-- Mercedes Car Group as expected posts operating profit lower than high level of prior-year
-- Chrysler Group records significant operating profit improvement
-- Commercial Vehicles division increases unit sales, revenues and earnings
-- Services achieves good result despite charge from Toll Collect
-- Increase in Group operating profit anticipated for full-year 2004 as compared to 2003 results
STUTTGART, Germany and AUBURN HILLS, Mich., April 29 -- DaimlerChrysler (stock-exchange abbreviation DCX) has improved its first-quarter 2004 operating profit from $1.7 billion to $1.9 billion. Operating Profit increased by 10%, despite the negative impact on earnings from Toll Collect amounting to $343 million and further restructuring expenses of $93 million at the Chrysler Group.
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Net income amounted to $483 million in the first quarter (Q1 2003: $723 million). Earnings per share amounted to $0.48 (Q1 2003: $0.71). This was largely caused by a lower financial result and higher taxes.
Unit sales up 3% in first quarter
Despite the continuation of generally difficult market conditions, DaimlerChrysler sold 1.1 million vehicles worldwide in the first quarter of this year, surpassing by 3% the figure sold in the same period of last year.
The Group generated first-quarter total revenues of $39.8 billion (Q1 2003: $40.9 billion). The main reason for the decrease was the appreciation of the euro against the US dollar. After adjusting for currency-translation effects, there was an increase of 7%.
At the end of the first quarter of 2004, DaimlerChrysler's global workforce totaled 362,907 people (Q1 2003: 367,962). Compared with the end of the first quarter of the prior year the reduction is primarily due to the sale of the MTU Aero Engines business unit with some 8,400 employees. The number of employees in the shared sales organization of the Mercedes Car Group and Mercedes-Benz commercial vehicles rose by 5% to 45,600. The number of people employed by Services also increased by 5%. The Chrysler Group's workforce decreased by 3% to 91,100.
Details of the divisions in Q1 2004
Unit sales by the Mercedes Car Group of 266,000 vehicles were 9% lower than in the prior-year period due to weak demand in major markets, the upcoming market launch of the C-Class and the lifecycle-related decrease in unit sales for the M-Class. However, as a result of a higher-value model-mix, revenues decreased by only 6% to $14.4 billion.
Operating profit of $785 million was lower than in the first quarter of 2003 ($846 million) as a result of the lower unit sales, expenditures on the market launch of the SLK and the smart forfour, as well as costs related to the preparation of additional vehicles in the second product offensive.
The Mercedes-Benz brand sold 246,000 vehicles worldwide (Q1 2003: 266,900) in an extremely competitive market environment. While unit sales decreased in Western Europe and the United States, Mercedes-Benz made progress in important Asian markets.
During the first quarter, the new generation of the C-Class and the new SLK Roadster were presented. Both cars were given an excellent reception. Following the extremely positive response to the "Vision CLS" study of a four- door coupe presented at the Frankfurt International Motor Show in September 2003, the series version of the CLS was shown at the International Geneva Autoshow. Deliveries to customers are to begin in this fall.
The smart brand further improved its position in a sharply declining market segment. Deliveries to dealers of 20,000 vehicles did not equal the level of the prior-year quarter (-17%) which is primarily the effect of a structural change in the sales organization. However, retail sales rose by 11% to 24,500 units. Orders received for the new, third model series of the smart brand, the smart forfour, are developing positively.
The Chrysler Group increased its first-quarter retail sales by 3% to 631,600 vehicles. There was growth for, among others, the new Chrysler Pacifica and Chrysler Crossfire models, which were launched in 2003. Shipments to dealers increased by 6% to 684,800 vehicles. At the end of the first quarter, dealers' vehicle inventories in the United States rose to 585,100 vehicles (end of Q1 2003: 535,800), equivalent to 77 days' supply (end of Q1 2003: 69 days). The increase in vehicle inventories is a result of the build- up for the market launch of the Chrysler Group's new products this year.
Revenues in euro decreased by 5% to 12.1 billion, primarily reflecting the appreciation of the euro against the US dollar. Measured in dollars, however, revenues increased by 11%.
Operating profit improved from $187 million to $366 million as a result of the higher shipments, an improved model-mix and further significant cost reductions. On the other hand, there were negative effects on profits from the higher level of price incentives in the United States compared with the first quarter of 2003. In addition, restructuring charges of $93 million were included in the operating profit of the first quarter of 2004, which primarily relate to further workforce reductions in connection with planned divestitures. In the period under review, production of six new Chrysler Group models has started: the Chrysler 300C sedan, the Chrysler PT Cruiser convertible, the Chrysler Town & Country and Dodge Grand Caravan, the Dodge Magnum sport wagon, the Dodge Ram SRT-10 pickup truck and the Jeep Wrangler Unlimited. Three more new models will be launched during the balance of 2004: the Dodge Dakota, the Jeep Grand Cherokee and the Chrysler Crossfire roadster.
The Commercial Vehicles division significantly increased its first-quarter unit sales by 18% to 125,800 vehicles. Revenues also rose sharply to $8.1 billion from $7.1 billion in the first quarter of last year. The higher unit sales and the successful and continuous implementation of the efficiency- enhancing programs in all of the division's business units led to a significant increase in operating profit from $58 million to $329 million.
The development of unit sales in the trucks business was very positive in the first quarter of 2004. Unit sales by the Trucks NAFTA business unit (Freightliner, Sterling, Thomas Built Buses) rose by 38% to 36,700 vehicles. The Trucks Europe/South America (Mercedes-Benz) business unit increased its unit sales by 23% to 26,800 vehicles. The Mercedes-Benz Vans business unit increased its unit sales to 54,800 vehicles (Q1 2003: 52,400). Unit sales by the DaimlerChrysler Buses and Coaches business unit of 6,700 vehicles were 24% higher than in the prior-year period. The Mitsubishi Fuso Truck and Bus Corporation (MFTBC), which was accounted for the period in the Commercial Vehicles division according to the equity method, in line with our former holding of 43%, increased its unit sales in the period of January through March 2004 by 21% to 56,200 trucks and buses.
In January 2004, DaimlerChrysler agreed with its partners of the Mitsubishi Group to increase its stake in MFTBC by a further 22%. Following the approval of the antitrust authorities in March 2004, DaimlerChrysler now holds 65% of the shares in MFTBC and has fully consolidated the company as of March 31.
The Services division achieved a first-quarter operating profit of $272 million (Q1 2003: $515 million). This includes a charge on earnings of $343 million resulting from the new contractual agreement of Toll Collect with the Federal Republic of Germany of February 29, 2004 and the associated adjustments of the estimates for future expenses. In the financial services business, operating profit surpassed the high level of the previous year's quarter due to a continuation of good margins and favorable refinancing conditions.
The DaimlerChrysler Bank made further progress in its core business of leasing and financing and in the deposit/investment business during the first quarter of this year. Within one year, the DaimlerChrysler Bank's customer base expanded by more than 25% to 870,000 customers.
The segment of Other Activities posted an operating profit of $165 million (Q1 2003: $89 million). The MTU Aero Engines GmbH business unit was sold on December 31, 2003 to Kohlberg, Kravis and Roberts & Co. Ltd., a financial investor. Since January 1, 2004, the Off-Highway business unit, which was previously a part of the Commercial Vehicles division, has also been included in the Other Activities segment. The figures for the prior year have been adjusted for comparability. This change reflects the fact that the business model of the off-highway activities has more in common with the capital equipment production than with the volume series production of the on-highway activities.
The first-quarter revenues of $377 million generated by DaimlerChrysler Off-Highway were 7% below the level of the prior-year quarter. Incoming orders of $627 million were close to the figure reported for Q1 2003. The European Aeronautic Defence and Space Company (EADS) will publish its figures for the first quarter of 2004 on May 12, 2004.
In the financial year ending March 31, 2004, Mitsubishi Motors Corporation (MMC) sold 1,526,900 vehicles (-3%). In an extraordinary meeting held on April 22, 2004, the Board of Management and the Supervisory Board of DaimlerChrysler decided not to participate in the capital increase planned by MMC, and thus to cease providing MMC with financial support. DaimlerChrysler, however, will continue to be a shareholder in MMC. The alliance projects previously agreed upon with MMC will be continued in accordance with the relevant contracts and in agreement with all partners.
Outlook for full-year 2004
As the year progresses, gradual improvements in economic conditions should also have a positive effect on the international demand for automobiles. For the United States, Western Europe and Japan, little growth in sales of passenger cars is expected. DaimlerChrysler sees signs of continuing improvements in the North American truck market, and also expects slightly higher sales of trucks in Europe compared with last year.
For full-year 2004, the Mercedes Car Group expects that unit sales, revenues and earnings will be similar to the high levels of 2003. It assumes that the decrease in unit sales during the first quarter can be offset over the rest of the year by the model change for the SLK and the A-Class, the new generation of the C-Class, and the market launch of the smart forfour and the CLS.
The Chrysler Group expects its markets to remain highly competitive in the year 2004, with a continuation of high price incentives in the United States. Despite the expenditure for the launch of nine new products, the Chrysler Group is expected to end the year with considerable positive earnings as a result of the efficiency improvements that it has achieved.
The Commercial Vehicles division will profit in 2004 from the continuous improvement of its internal processes, economies of scale and its attractive product range. For the full year, Commercial Vehicles anticipates a further improvement in its operating profit.
The Services division should benefit from the stable underlying business trend and continued favorable refinancing conditions in 2004. DaimlerChrysler Services anticipates another good result for the full year, which might however be lower than in the prior year due to the charge from Toll Collect.
EADS assumes stable revenues and an increase in its profitability. Its contribution to the group's operating profit should therefore be higher than in the previous year.
The effects on earnings of the Group's investment in Mitsubishi Motors could not be conclusively assessed at this point in time. However, the impact will be significantly lower than if DaimlerChrysler had participated in a capital increase for MMC.
On the basis of the above mentioned assessments, DaimlerChrysler expects to achieve an improvement in operating profit for the full year compared with 2003 results (excluding restructuring expenditures at the Chrysler Group and excluding the capital gain realized on the disposal of MTU Aero Engines).
DaimlerChrysler - Figures for the 1st Quarter 2004
DaimlerChrysler Group Q1 2004 Q1 2003 04:03
U.S. - $ (Euro) (Euro) Change
Revenues 1), in million 39,766 32,351 33,252 -3%
Operating Profit, in million 1,894 1,541 1,403 +10%
Net Income, in million 483 393 588 -33%
Per Share (EPS) 0.48 0.39 0.58 -33%
Employees (March 31) 362,907 367,962 -1%
Operating Profit by Divisions Q1 2004 Q1 2003 04:03
in million U.S. - $ (Euro) (Euro) Change
Mercedes Car Group 785 639 688 -7%
Chrysler Group 366 298 152 +96%
Commercial Vehicles 2) 329 268 47 +470%
Services 272 221 419 -47%
Other Activities 2) 3) 165 134 72 +86%
Revenues by Divisions Q1 2004 Q1 2003 04:03
in million U.S. - $ (Euro) (Euro) Change
Mercedes Car Group 14,350 11,674 12,424 -6%
Chrysler Group 14,824 12,060 12,679 -5%
Commercial Vehicles 2) 8,127 6,612 5,774 +15%
Services 4,145 3,372 3,608 -7%
Other Activities 2) 3) 476 387 422 -8%
Unit Sales Q1 2004 Q1 2003 04:03
Change
Mercedes Car Group 266,000 291,200 -9%
Chrysler Group 684,800 647,400 +6%
Commercial Vehicles 125,800 107,000 +18%
Rate of exchange: 1 Euro = U.S.-$ 1.2292 (based on the noon buying rate on March 31, 2004).
1) Figures for previous quarter have been adjusted to exclude
discontinued operations (MTU Aero Engines Group).
2) Figures for previous quarter have been adjusted to reflect the
reallocation of the DaimlerChrysler Off-Highway business unit from the
Commercial Vehicles division to the segment Other Activities.
3) The Other Activities segment consists of DaimlerChrysler's holdings in
EADS and Mitsubishi Motors Corporation, along with Corporate
Research, our real-estate activities and our holding and financing
companies. Since January 1, 2004, the segment also includes the
DaimlerChrysler Off-Highway business unit. On December 31, 2003,
DaimlerChrysler completed the sale of its 100% ownership interest in
MTU Aero Engines Group. Revenues are adjusted to exclude these
discontinued operations accordingly.