DaimlerChrysler Increases Group Operating Profit in Second Quarter
-- Operating profit improves from $0.8 to $2.5 billion (+225%)
-- Revenues rise by 9% to $45.2 billion
-- Operating profit at Mercedes Car Group below prior-year level, as expected
-- Chrysler Group makes a significant profit
-- Very positive earnings trend continues at Commercial Vehicles
-- Further increase in operating profit at Services
-- Significant improvement in Group operating profit expected for full- year 2004
STUTTGART, Germany and AUBURN HILLS, Mich., July 29 -- DaimlerChrysler has substantially increased its second quarter operating profit from $0.8 billion to $2.5 billion. The Chrysler Group, Commercial Vehicles and Services divisions significantly improved their earnings, though the operating profits of the Mercedes Car Group and the Other Activities segment were lower than in the same period of last year. Net income for the second quarter amounted to $675 million (Q2 2003: $133 million). The generally positive development of the Group's operative business was partially offset by a negative impact of Mitsubishi Motors Corporation's net loss in its 2003/04 financial year. Earnings per share rose from $0.13 to $0.67.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020212/DCXLOGO ) Significant increases in unit sales and revenues
Against the backdrop of a generally improving world economy but still sluggish economic recovery in the euro zone, DaimlerChrysler achieved second quarter unit sales of 1.3 million vehicles, 10% more than Q2 2003. The DaimlerChrysler Group's total revenues increased in the second quarter by 9% to $45.2 billion, primarily as a result of the higher unit sales by the Chrysler Group and Commercial Vehicles. However, there was an opposing effect from the appreciation of the euro against the US dollar. Adjusted for currency-translation effects, revenues increased by 13%.
At the end of the second quarter of 2004, DaimlerChrysler employed a total workforce of 383,724 people worldwide (Q2 2003: 372,073). The increase compared with the number at the end of Q2 2003 was primarily a result of the inclusion of consolidating Mitsubishi Fuso Truck and Bus Corporation (MFTBC) with its 18,300 employees in the Commercial Vehicles division. This was partly offset by a reduction resulting from the sale of MTU Aero Engines with 8,400 employees at the end of 2003.
Details of the divisions in Q2 2004
The Mercedes Car Group sold 319,400 vehicles in the second quarter, slightly more than in the same period of last year. Its revenues amounted to $15.8 billion (Q2 2003: $16.1 billion).
The division's operating profit of $856 million was lower than in Q2 2003. This is mainly the result of the lifecycle-related decrease in unit sales by Mercedes-Benz, high launch costs and start-up costs for new products, as well as the continuation of the quality offensive.
In the second quarter of 2004, Mercedes-Benz passenger cars sold 274,200 vehicles worldwide in a difficult market environment (Q2 2003: 281,600). Unit sales of 180,400 vehicles in Western Europe did not quite equal the figure for the same quarter in the previous year (-2%). Deliveries to dealers in the United States fell by 4% to 53,000 vehicles. US retail sales of 54,100 were at the same level as in Q2 2003. While unit sales in Japan also decreased, Mercedes-Benz achieved a significant increase in vehicles sold in China.
At the end of June, the new A-Class was presented to the public. The first test reports are extremely positive. In addition to the well-established and versatile five-door model, a three-door version of the A-Class will also be available for the first time. In May, the McLaren Technology Centre was inaugurated in Woking, United Kingdom. At the same time, the first Mercedes- Benz SLR McLaren super sports cars were handed over to customers. Reflecting the exclusiveness of this car, the total number of cars produced will be limited. Over a model lifecycle of seven years, a total of 3,500 Mercedes-Benz SLR McLaren cars will be built.
The new smart model series, the smart forfour, has made a good start. Of these, 17,800 were sold in the second quarter, contributing to the smart brand's 24% increase in unit sales to 45,100 vehicles.
Worldwide retail sales for the Chrysler Group increased by 3% to 759,800 vehicles in the second quarter of 2004. The growth was primarily due to the success of new products such as the Chrysler 300 and 300C, the Dodge Magnum, the Dodge Durango and the new minivans. Factory shipments in the second quarter rose by 8% to 781,400 vehicles. Dealers' inventories in the US at June 30 totaled 605,600 vehicles (June 30, 2003: 518,600), equivalent to 72 days' supply (June 30, 2003: 63). Dealers increased their inventories primarily as a result of the introduction of numerous new models introduced in the first half of 2004.
As a consequence of the higher shipments and a higher-value model mix, the Chrysler Group's revenues increased by 12% to euro 13.2 billion. Measured in US dollars, revenues increased by 18%.
With an operating profit of $628 million, the Chrysler Group posted a positive operating result for the fourth consecutive quarter. This strong improvement is mainly due to the market success of the new products, higher unit sales and further cost reductions.
The Commercial Vehicles division boosted its second quarter unit sales by 47% to 184,900 vehicles, while revenues increased by 36% to $10.9 billion. Excluding MFTBC, which has been consolidated with a one-month time lag since March 31, 2004, unit sales would have risen by 24% and revenues by 22%. Operating profit increased significantly, from $270 million to $570 million, due to the higher unit sales and the successful implementation of efficiency- enhancing programs.
The positive development of the trucks business continued in the second quarter of 2004. The Trucks NAFTA (Freightliner, Sterling, Thomas Built Buses) business unit boosted its unit sales by 24% to 40,200 vehicles. The Trucks Europe/Latin America (Mercedes-Benz) business unit sold 35,100 vehicles, also surpassing the figure for the prior-year second quarter by a large margin (+34%). MFTBC sold 44,800 vehicles in the months of April through June (April- June 2003: 41,300). Fuso's market share in Japan was 26.5% compared to 28.4% in the same period of last year. The Mercedes-Benz Vans business unit increased its unit sales by 21% to 73,200 vehicles due in particular to positive developments in Eastern Europe and South America. The DaimlerChrysler Buses business unit achieved a 30% sales increase in unit sales to 8,500 buses and chassis.
With a second quarter operating profit of $575 million, Services significantly surpassed last year's good result (+41%). The key factors behind the increase were the improved profitability of the division's entire portfolio and the reduced need for risk provisioning.
DaimlerChrysler Bank once again significantly increased its new business with automotive financial services by 11% to $2.6 billion. At the end of the second quarter, DaimlerChrysler Bank had a base of more than 890,000 customers (+19%).
The Other Activities segment posted an operating profit of $104 million (Q2 2003: $264 million). The decrease is primarily due to the negative contribution from Mitsubishi Motors Corporation (positive in the prior-year's second quarter) and the fact that there was no contribution from the former business unit MTU Aero Engines, which was sold as of December 31, 2003.
Second quarter revenues generated by the DaimlerChrysler Off-Highway business unit increased by 10% to $508 million, while incoming orders rose sharply from $449 million to $515 million. The European Aeronautic Defence and Space Company (EADS), the world's second-largest aerospace and defense company, again performed well in the first half of this year. EADS also published its half year results today.
On May 21, 2004, Mitsubishi Motors Corporation (MMC) published its financial statements for the financial year ending March 31, 2004. The company incurred an operating loss for that period of JPY 96.9 billion ($907 million) mainly due to the sharp drop in demand in the United States caused by intense competition and a more restrictive credit policy. Its net loss of JPY 215.4 billion ($2.1 billion) was also affected by impairment charges on deferred tax assets. The impact on the net income of DaimlerChrysler totaled $0.6 billion.
On April 22, 2004, the Board of Management and the Supervisory Board of DaimlerChrysler took the decision not to participate in a planned capital increase. The terms of the capital increase were decided on June 29 and carried out by July 14, 2004. The capital increase resulted in DaimlerChrysler's stake in MMC being reduced to below 25% from its former level of 37%. As a result of the mandatory convertible bonds the stake of DaimlerChrysler will continue to decrease in the future.
With its decision not to participate in the capital increase for MMC, DaimlerChrysler has given up its significant influence. As of June 30, 2004, DaimlerChrysler's stake in MMC is therefore included in the Group's consolidated financial statements as an investment measured at fair value, and as such in the future MMC's operative business will have no effect on DaimlerChrysler's earnings.
Outlook for full-year 2004
In the further course of the year, DaimlerChrysler anticipates only moderate growth for the major automobile markets of the triad. There are signs of a continuing recovery of the North American truck market, and the European market for trucks and vans is expected to expand slightly compared with the prior year, while the bus market is likely to stabilize at last year's level. DaimlerChrysler assumes that the strong competitive pressure will continue unchanged in all segments.
For full-year 2004, the Mercedes Car Group expects the models launched in the first half of the year (new generation C-Class, SLK roadster and smart forfour) and the models to come in the second half of the year (A-Class and CLS coupe) to more than offset the slight decrease in unit sales of the first half year. Earnings for the full year are anticipated to be lower than in 2003 due to a changed model mix, exchange-rate effects, and increased start-up costs for new products and expenses for the quality offensive. To ensure the successful implementation of the second product offensive, the Mercedes Car Group has decided to invest additional funds to prepare vehicles for product maturity.
On July 23, 2004, the Management and the Employee Representatives reached an "Employment Pact" in Germany, which will allow cost savings starting in 2006 of up to $609 million per year.
The Chrysler Group expects a continuation of high price incentives in its markets. Based on customers' positive response to the products introduced so far this year, as well as the ongoing cost-cutting program, the Chrysler Group is also confident of achieving considerable positive earnings in full-year 2004.
The Commercial Vehicles division anticipates a further improvement in its operating profit for full-year 2004, due to continuous improvements in its internal processes, the utilization of economies of scale and its attractive product range. However, the effects of the announced recalls by Mitsubishi Fuso Truck and Bus Corporation cannot be fully quantified yet.
For the second half of 2004, the Services division expects a continued positive earnings trend in the financial services business. However, interest- rate rises could have an impact on refinancing costs. Operating profit for the full year might be lower than in 2003 due to charges from Toll Collect.
EADS assumes that the recovery of the air-transport industry will continue during the rest of this year. Revenues are expected to increase slightly over prior year level and profitability should continue to improve. DaimlerChrysler therefore assumes that the EADS contribution to Group operating profit will be higher than in 2003.
Based on the above assessments, DaimlerChrysler expects to achieve a significant improvement in operating profit for the full year compared with 2003 (excluding restructuring expenditures at the Chrysler Group and excluding the capital gain realized on the sale of MTU Aero Engines).
This document contains forward-looking statements that reflect management's current views with respect to future events. The words "anticipate," "assume," "believe," "estimate," "expect," "intend," "may," "plan," "project" and "should" and similar expressions identify forward- looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: an economic downturn in Europe or North America; changes in currency exchange rates and interest rates; introduction of competing products; increased sales incentives; and decline in resale prices of used vehicles. If any of these or other risks and uncertainties occur (some of which are described under the heading "Risk Factors" in DaimlerChrysler's most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission), or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made.
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Figures for the 2nd Quarter 2004/First Half-Year 2004
U.S. dollar figures - convenience translation
All values, including the 2003 figures, are converted from euro figures with
the exchange rate of
1 euro = US-$ 1.2179 (based on the noon buying rate on June 30, 2004)
DaimlerChrysler Group Q2 Q2 Change YTD YTD Change
values in US-$ 2004 2003 4:03 2004 2003 4:03
Revenues, in
millions a) 45,150 41,238 +9% b) 84,550 81,736 +3% c)
Operating profit,
in millions 2,541 781 +225% 4,417 2,489 +77%
Net income (loss),
in millions 675 133 +408% 1,153 849 +36%
Per Share (EPS) 0.67 0.13 +400% 1.14 0.84 +36%
Employees
(June 30) 383,724 372,073 +3% 383,724 372,073 +3%
Operating profit
(loss) by Divisions Q2 Q2 Change YTD YTD Change
in millions of $ 2004 2003 4:03 2004 2003 4:03
Mercedes Car Group 856 1,049 -18% 1,634 1,887 -13%
Chrysler Group 628 (1,155) -- 991 (969) --
Commercial Vehicles d) 570 270 +111% 896 328 +174%
Services 575 407 +41% 844 917 -8%
Other Activities d) 104 264 -61% 267 352 -24%
Revenues by Divisions Q2 Q2 Change YTD YTD Change
in millions of $ 2004 2003 4:03 2004 2003 4:03
Mercedes Car Group 15,805 16,102 -2% 30,022 31,233 -4%
Chrysler Group 16,084 14,413 +12% 30,771 29,854 +3%
Commercial
Vehicles d) 10,916 8,014 +36% 18,969 15,046 +26%
Services 4,218 4,272 -1% 8,324 8,667 -4%
Other
Activities a) d) 574 583 -2% 1,045 1,097 -5%
Unit Sales Q2 Q2 Change YTD YTD Change
2004 2003 4:03 2004 2003 4:03
DaimlerChrysler
Group 1,281,200 1,162,400 +10% 2,354,200 2,205,200 +7%
Mercedes Car
Group 319,400 318,000 +0% 585,300 609,100 -4%
Chrysler Group 781,400 721,900 +8% 1,466,200 1,369,300 +7%
Commercial
Vehicles 184,900 125,700 +47% 310,700 232,700 +34%
a) Figures for previous year have been adjusted to exclude discontinued
operations (MTU Aero Engines).
b) A 13% increase after adjusting for effects of currency translation.
c) A 10% increase after adjusting for effects of currency translation.
d) Figures for previous year have been adjusted to reflect the
reallocation of the DaimlerChrysler Off-Highway business unit from the
Commercial Vehicles division to the segment Other Activities. Since
April 1, 2004 Mitsubishi Fuso Truck and Bus Corporation (MFTBC)
included with a time lag of one month in the Commercial Vehicles
Division.
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