DaimlerChrysler in Q3 2004: Operating Profit Increases to $1.7 Billion
-- Revenues rise from $42.4 billion to $43.3 billion (+2%)
-- Group operating profit increases from $1.5 billion to $1.7 billion despite high exceptional charges
-- Net income of $1.2 billion (Q3 2003: net loss of $2.1 billion)
-- Earnings per share of $1.17 (Q3 2003: loss per share of $2.02)
-- Operating profit for the first nine months up by 51% to $6.2 billion
-- Net income in the first nine months of $2.4 billion (Q1-Q3 2003: net loss of $1.2 billion)
-- Significant improvement in Group operating profit still anticipated for full-year
STUTTGART, Germany and NEW YORK, Oct. 28 -- DaimlerChrysler achieved a third-quarter operating profit of $1.7 billion, surpassing the prior-year result of $1.5 billion by 7%.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020212/DCXLOGO )
The operating profit for the period under review includes exceptional charges from Mitsubishi Fuso Truck and Bus Corporation (MFTBC; $503 million), Toll Collect ($148 million) and the Chrysler Group ($129 million). On the other hand, there was exceptional income from the settlement DaimlerChrysler reached with Bombardier in respect of the sale of Adtranz ($149 million) and from the ending of the truck-engine joint venture with Hyundai ($75 million). The impact on the operating profit from these special effects amounted to $556 million.
Net income for the third quarter amounted to $1.2 billion (Q3 2003: net loss of $2.1 billion, including a $2.5 billion impairment on investment in EADS). Earnings per share improved to $1.17 (Q3 2003: a loss per share of $2.02).
The Industrial Business' net liquidity increased by $1.1 billion to $3.2 billion since the end of 2003.
Operating profit for the first nine months of the year increased compared with the prior-year period by 51% to $6.2 billion, while the nine-month net result improved from a net loss of $1.2 billion to net income of $2.4 billion. Earnings per share for the first nine months amounted to $2.38, after a loss per share of $1.17 in the prior year. Revenues rose by 3% to $129.5 billion in the first nine months.
Growth in unit sales and revenues
Against the backdrop of slightly weaker growth in the worldwide automobile economy, DaimlerChrysler sold a total of 1.1 million vehicles in the third quarter, surpassing the figure for the same quarter last year by 2%. Total revenues increased by 2% to $43.3 billion, despite the appreciation of the Euro against the US dollar, mainly due to the higher unit sales. Adjusted for changes in the consolidated Group and currency-translation effects, there was growth of 4%.
At the end of the third quarter of 2004, DaimlerChrysler employed a total workforce of 386,200 people worldwide (+3%). The increase was particularly strong in Commercial Vehicles division. Contributory factors were new recruitment in Europe and North America, but most significantly the consolidation of MFTBC with its 18,300 employees. Adjusted for changes in the consolidated Group, the workforce expanded by 2%.
Details of the divisional performance in Q3 2004
Unit sales by the Mercedes Car Group of 293,200 vehicles in the third quarter were below the prior-year level (-4%). As a result of the lower unit sales revenues also decreased to $15.1 billion.
The operating profit achieved by the Mercedes Car Group of $377 million was lower than in the prior-year quarter, due to the predominantly lifecycle- related change in the model mix at Mercedes-Benz Passenger Cars, high launch and startup costs for the second product offensive, and the costs of the ongoing comprehensive quality offensive. There was also a negative impact on earnings from the strength of the Euro against the US dollar. At smart, operating profit was significantly affected by higher marketing costs and lower unit sales of some models.
The Mercedes-Benz brand sold 256,600 vehicles worldwide (Q3 2003: 273,900). Whereas weak demand in Western Europe, especially in Germany, caused unit sales to decrease by 13% to 155,800 vehicles, in the United States unit sales increased significantly by 12% to 56,400 vehicles.
At the Paris International Motor Show in September, Mercedes-Benz presented two studies for a new vehicle category: the "Vision B", a compact sports tourer, and the "Vision R", the European version of a grand sports tourer. Both sports tourers, which will be launched next year, were extremely well received by customers and the press.
The smart brand sold 36,500 vehicles in the third quarter. The 16% increase in overall sales reflects sales of the newly launched smart forfour which amounted to 16,700 units. There will be additional sales potential now a diesel model and a right-hand-drive version are available since September respective the beginning of October this year. With the market launch of the smart fortwo cdi in Canada, the cars of the smart brand are now on sale in North America for the first time. The first vehicles were delivered to customers at the beginning of October.
The Chrysler Group increased worldwide retail sales by 3% to 651,900 units in the third quarter of 2004. The increase was primarily due to the great success of the new products, such as the Chrysler 300 and 300C, the Dodge Magnum, and the new minivans Dodge Grand Caravan and Chrysler Town & Country. Factory shipments decreased to 594,900 vehicles (Q3 2003: 629,000), primarily due to the model changeover of the Jeep(R) Grand Cherokee in September. At the end of the period under review, dealers' inventories in the United States totaled 563,100 vehicles (Q3 2003: 528,300). However, in terms of days' supply, inventories decreased from 86 to 83 days.
The Chrysler Group's third-quarter revenues decreased by 8% to euros 11.5 billion; measured in US dollars, they were at the same level as in Q3 2003.
With an operating profit of $269 million in the third quarter the Chrysler Group exceeded its prior-year earnings ($183 million) yet again. Operating profit for Q3 2004 includes restructuring charges of $129 million for the closure and disposal of manufacturing facilities. The increased earnings are primarily a result of an improved model mix and lower sales incentives, due to the market success of the new products.
The Commercial Vehicles division increased its third-quarter unit sales by 56% to 192,800 vehicles. Revenues rose accordingly by 36% to $11.4 billion. Even without MFTBC, which has been consolidated since March 31, 2004, with a time lag of one month, unit sales and revenues would have increased significantly by 20% and 16% respectively.
Due to expenses of $503 million, in the third quarter, as a result of recall campaigns and quality-improving measures at MFTBC, Commercial Vehicles' operating profit of $197 million did not reach the result of the prior-year quarter ($246 million). On the other hand, there was exceptional income of $75 million from the ending of the truck-engine joint venture with Hyundai Motor. Without these exceptional items, the division's operating profit would have been $626 million, significantly higher than the prior-year result (+155%) due to higher unit sales, the efficiency-enhancement programs and the attractive product range.
The positive sales trend in the truck business continued in the quarter under review. Unit sales by the business unit Trucks NAFTA (Freightliner, Sterling, Thomas Built Buses) rose by 29% to 43,100 vehicles. The business unit Trucks Europe/Latin America (Mercedes-Benz) achieved growth of 25% with sales of 36,000 vehicles. MFTBC's unit sales increased from 43,900 to 45,900 vehicles. Outside Japan, unit sales increased by 29% to 29,700 vehicles. The Mercedes-Benz Vans business unit increased its unit sales by 16% to 60,000 vehicles. The DaimlerChrysler Buses business unit achieved an 8% increase in unit sales to 8,400 vehicles.
The Services division improved its third-quarter operating profit from $353 million to $512 million, despite a charge of $148 million in respect of Toll Collect. The increase in earnings is primarily a result of the improved portfolio quality and reduced need for risk provisioning.
DaimlerChrysler Bank has further strengthened its position with new business of $2.4 billion in the third quarter. Contract volume rose to $17.3 billion (+10%).
The Other Activities segment increased its operating profit to $320 million (Q3 2003: operating loss of $129 million). The result includes a positive contribution from the settlement reached with Bombardier to end the arbitration proceedings regarding the disposal of Adtranz ($149 million).
Outlook for full-year 2004
For the automobile business, demand in the forth quarter seems likely to weaken. DaimlerChrysler expects only moderate aggregate growth for the passenger car markets of the triad. While the global market for passenger cars is likely to grow by some 4% in 2004, the company expects only about 1.5% growth for the Western Europe market. Sales volumes in the market for commercial vehicles should continue at similar levels in the coming months. For North America, South America and especially for the Near and Middle East, DaimlerChrysler expects strong demand for commercial vehicles during the rest of the year.
For full-year 2004, the Mercedes Car Group anticipates a slight increase in unit sales over the prior year's volume of 1.2 million passenger vehicles. Operating profit will be substantially lower than last year as a result of a changed model mix, higher marketing expenditure and lower unit sales of some models at smart, exchange-rate effects, increased advance expenditure for new products, and the comprehensive quality offensive.
The Chrysler Group is convinced that the positive developments of the first three quarters will continue, due in particular to the success of its new products. Despite the difficult market environment with a continuation of high sales incentives, the Chrysler Group expects to achieve considerable positive earnings in full-year 2004.
Despite charges relating to MFTBC's recall campaigns and quality measures, the Commercial Vehicles division expects a significant improvement in operating profit for the year 2004. The main reasons for this positive development are the increased unit sales, together with the division's attractive product range and its cost-cutting programs.
The positive business trend in the field of automobile related financial services should continue for the Services division, although the latest interest-rate rises could have a negative impact on refinancing costs. Toll Collect's preparations to introduce its toll system for trucks in Germany on January 1, 2005 are running according to plan. Operating profit for full-year 2004 might be lower than the very high level of 2003, however, due to charges related to the division's shareholding in Toll Collect.
EADS assumes that the recovery of the civil-aircraft sector industry will continue further. Revenues are expected to increase and the operating profit should also improve. DaimlerChrysler therefore assumes that the contribution to Group operating profit from EADS will be higher than in 2003.
For full-year 2004, DaimlerChrysler anticipates an increase in unit sales from 4.3 million to around 4.8 million passenger cars, trucks, vans and buses. At the same time, the Group expects a significant increase in revenues from $169.4 billion to some $180 billion. The key factors behind this are the positive business developments at the Chrysler Group and Commercial Vehicles.
The size of the workforce should increase from 362,100 at the end of 2003 to around 386,000 at the end of this year. This is a result of creating about 9,600 new jobs worldwide, as well as a net addition of 14,600 due to changes in the consolidated group. The biggest contribution comes from the initial consolidation of MFTBC with its 18,300 employees. Investment in property, plant and equipment should rise from last year's $8.2 billion to about $8.7 billion in 2004. DaimlerChrysler expects research and development expenditure to be around the same as last year (2003: $7.0 billion).
Based on the above assessments, DaimlerChrysler continues to expect a significant improvement in operating profit for the full year compared with 2003 ($6.3 billion excluding restructuring expenditures at the Chrysler Group and excluding the capital gain realized on the sale of MTU Aero Engines).
For the reader's convenience, the financial information has been translated from euros into U.S. dollars at an assumed rate of euro 1 = $1.2417 (noon buying rate on September 30, 2004). The convenience translation does not mean that the euro amounts actually represent the corresponding dollar amount stated or could be converted into dollars at the assumed rate.)
Figures for the 3rd Quarter 2004/Nine Months Ended September 30, 2004
U.S. dollar figures -- convenience translation
All values, including the 2003 figures, are converted from euro figures with
the exchange rate of
1 euro = US-$ 1.2417 (based on the noon buying rate on September 30, 2004).
DaimlerChrysler Group Q3 Q3 Change 01-09 01-09 Change
values in US-$ 2004 2003 04:03 2004 2003 04:03
Revenues, in millions a) 43,324 42,359 +2%b) 129,527 125,692 +3%c)
Operating Profit,
in millions 1,654 1,547 +7% 6,170 4,085 +51%
Net Income,
in millions 1,181 (2,053) -- 2,409 (1,187) --
Per Share (EPS) 1.17 (2.02) -- 2.38 (1.17) --
Employees
(September 30) 386,195 375,213 +3% 386,195 375,213 +3%
Operating Profit
(Loss) by Divisions Q3 Q3 Change 01-09 01-09 Change
in millions of $ 2004 2003 04:03 2004 2003 04:03
Mercedes Car Group 377 985 -62% 2,044 2,908 -30%
Chrysler Group 269 183 +48% 1,293 (806) --
Commercial Vehicles d) 197 246 -20% 1,111 580 +92%
Services 512 353 +45% 1,372 1,288 +7%
Other Activities d) 320 (129) -- 592 230 +158%
Revenues by Divisions Q3 Q3 Change 01-09 01-09 Change
in millions of $ 2004 2003 04:03 2004 2003 04:03
Mercedes Car Group 15,051 15,822 -5% 45,660 47,665 -4%
Chrysler Group 14,304 15,516 -8% 45,677 45,954 -1%
Commercial Vehicles d) 11,420 8,389 +36% 30,759 23,729 +30%
Services 4,276 4,309 -1% 12,763 13,145 -3%
Other Activities a) d) 652 649 +0% 1,717 1,768 -3%
Unit Sales Q3 Q3 Change 01-09 01-09 Change
2004 2003 04:03 2004 2003 04:03
DaimlerChrysler
Group 1,077,000 1,055,700 +2% 3,431,200 3,260,900 +5%
Mercedes Car Group 293,200 305,400 -4% 878,500 914,600 -4%
Chrysler Group 594,900 629,000 -5% 2,061,100 1,998,200 +3%
Commercial Vehicles 192,800 123,200 +56% 503,500 356,000 +41%
a) Figures for previous year have been adjusted to exclude discontinued
operations (MTU Aero Engines).
b) A 4% increase after adjusting for the effects of currency
translation and changes in the consolidated Group.
c) A 7% increase after adjusting for the effects of currency
translation and changes in the consolidated Group.
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.
Photo: http://www.newscom.com/cgi-bin/prnh/20020212/DCXLOGO