Second-Quarter Operating Result Better Than In The First Quarter Despite Worldwide Recession
- EBIT of minus euro 1,005 million (Q1 2009: minus euro 1,426 million) - EBIT includes special factors of minus euro 604 million for Chrysler and Daimler Trucks - EBIT from continuing operations of minus euro 401 million (Q1 2009: minus euro 1,421 million) - Industrial free cash flow increases to plus euro 1.4 billion due to active inventory reductions - Net loss of euro 1,062 million (Q1 2009: net loss of euro 1,286 million) - Operating profitability expected to improve gradually in the course of the year
STUTTGART, Germany, July 29 -- Despite the ongoing worldwide recession, Daimler (stock-exchange abbreviation DAI) succeeded in improving its EBIT from continuing operations compared with the first quarter of 2009 to minus euro 401 million in the second quarter (Q1 2009: minus euro 1,421 million). This demonstrates the effects of the programs of measures that have been taken.
Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars: "Above all at Mercedes-Benz Cars, but also at Mercedes-Benz Vans and Daimler Financial Services, we succeeded in improving earnings in the second quarter compared with the first quarter of 2009. This demonstrates that we are on the right track and that the measures we have taken are having positive effects. However, a comparison with the very good second quarter of last year shows that there is still a lot of work to be done."
Second quarter of 2009 compared with Q2 2008
Daimler posted EBIT of minus euro 1,005 million for the second quarter of 2009 (Q2 2008: plus euro 2,053 million).
The earnings decline in the second quarter of 2009 compared with the second quarter of last year was primarily the result of lower unit sales by Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans and Daimler Buses. An additional factor was the expenditure related to optimizing and repositioning the business operations of the subsidiaries Mitsubishi Fuso Truck and Bus Corporation (euro 204 million) and Daimler Trucks North America (euro 13 million). Daimler Financial Services posted lower earnings due to the increased cost of risk.
Earnings were also reduced by lower interest rates for discounting non-current provisions as well as by currency effects (in total euro 214 million). Due to the significant increase in corporate insolvencies in Germany, annual contributions to the German Pension Protection Association can be expected to rise in 2009. The Group recognized proportionate provisions of euro 78 million for this purpose in the second quarter of 2009.
The fall in earnings was mitigated by the measures taken by the Group to reduce costs and improve efficiency following the onset of the global economic crisis.
In the context of agreements entered into with Chrysler, Cerberus and the US Pension Benefit Guaranty Corporation (PBGC) concerning issues still open with regard to Chrysler, Daimler relinquished its 19.9% equity interest in Chrysler effective June 3, 2009 and undertook, as already reported at the end of April, to make three payments of US $200 million into Chrysler's pension plans, one upon the signing of the agreements and one in each of the next two years. Those agreements resulted in a total expense of euro 387 million in the second quarter of 2009.
Earnings in the second quarter of 2008 were positively affected by the transfer of shares in EADS (euro 35 million). There was an opposing effect from charges of euro 373 million relating to Daimler's equity interest in Chrysler
The Group posted a net loss of euro 1,062 million (Q2 2008: net profit of euro 1,395 million) and earnings per share amounted to minus euro 0.99 (Q2 2008: plus euro 1.40).
Unit sales down by 31% in second quarter
In the second quarter of 2009, Daimler sold 391,500 cars and commercial vehicles worldwide, which was 31% fewer than in the same period of last year.
The Daimler Group's second-quarter revenue decreased significantly from euro 26.0 billion in 2008 to euro 19.6 billion this year. Adjusted for the exchange rate effects, revenue fell by 27%.
At the end of the second quarter of 2009, Daimler employed 257,400 people worldwide (Q2 2008: 275,000). Of that total, 162,800 were employed in Germany (Q2 2008: 168,300).
The free cash flow from the industrial business amounted to plus euro 1.4 billion in the second quarter of 2009, and was affected by the progress made with the reduction of working capital. At Mercedes-Benz Cars for example, vehicle inventories were reduced by about 44,000 vehicles in the second quarter, thus achieving the target that had been set. All the other divisions also reduced their stocks of vehicles.
The Group's industrial net liquidity increased, also after taking account of the dividend distribution of euro 556 million in April, from euro 3.7 billion (end of Q1 2009) to euro 4.6 billion. This was primarily the result of the positive free cash flow in the industrial business in the second quarter of 2009.
Details of the divisions in the second quarter
In a still-difficult market environment worldwide, Mercedes-Benz Cars sold 287,200 vehicles in the second quarter of this year (Q2 2008: 354,000). So although unit sales were 19% below the very good prior-year figure, the car division posted a significant 24% increase compared with the first quarter of 2009, due in part to the full availability of the GLK compact sport-utility vehicle and the launch of the new E-Class. Revenue fell by 18% compared with the second quarter of last year to euro 10.6 billion.
The division's EBIT amounted to minus euro 340 million and was thus significantly lower than in the prior-year period (plus euro 1,212 million), but substantially better than the result for the first quarter of 2009. The decline in earnings was mainly caused by the significant decrease in demand for automobiles and the resulting falls in unit sales in the NAFTA region, Germany and the other key European markets. Earnings were additionally reduced by ongoing price pressure and an unfavorable model mix.
There were positive effects on earnings from the measures implemented to optimize operations as well as from the actions taken to adjust personnel expenses.
As a result of the ongoing worldwide market weakness, Daimler Trucks' second-quarter unit sales decreased by 56% to 54,100 units. However, the division's market share increased in nearly all its major markets. Revenue fell from euro 7.4 billion to euro 4.2 billion.
The division's EBIT was significantly less than the very high prior-year level at minus euro 508 million (Q2 2008: plus 608 million). The continuing decline in vehicle shipments was the main reason for the earnings trend in the second quarter of 2009. Other negative factors included the plan approved in May 2009 for the comprehensive realignment of the business operations of Mitsubishi Fuso Truck and Bus Corporation and the actions initiated last year for the repositioning of Daimler Trucks North America, which reduced second-quarter EBIT by euro 204 million and euro 13 million respectively. Currency effects also had a negative impact on earnings. There were positive effects from adjusting personnel costs and from other measures that were taken.
Mercedes-Benz Vans significantly increased its unit sales compared with the first quarter to 41,900 vehicles, but was not able to approach the record figure for the prior-year period (Q2 2008: 78,600). Revenue of euro 1.5 billion was also significantly lower than in the second quarter of last year (euro 2.6 billion).
The division was also unable to escape the general market development and posted EBIT of minus euro 10 million for the second quarter (Q2 2008: plus euro 262 million). Positive effects resulted from efficiency improvements and the development of some currencies.
Daimler Buses sold 8,300 buses and chassis in the period under review (Q2 2008: 11,100). As a result of the recession, demand for chassis was particularly weak in Latin America. In addition to the ongoing contraction of markets in South America, Daimler encountered a sharp drop in demand also in Mexico in the second quarter, whereas unit sales in the United States increased compared with the prior-year period. In Europe, the division's city-bus business remained stable, while demand for coaches weakened. Due to positive structural effects, revenue fell at a lower rate (-17%) than unit sales to euro 1.1 billion.
The division achieved EBIT of euro 49 million and was thus unable to match the excellent earnings of the prior-year period (euro 170 million). The decrease in earnings was primarily due to the substantial drop in demand.
At the end of the second quarter, Daimler Financial Services' contract volume amounted to euro 60.3 billion, close to the level of a year earlier but 5% lower than at December 31, 2008. Adjusted for exchange-rate effects, there was a decrease of 6% from the level at the end of 2008. Compared to the second quarter of 2008, new business decreased by 16% to euro 6.5 billion.
The division posted second-quarter EBIT of euro 79 million (Q2 2008: euro 183 million). The decline in earnings was primarily due to higher expenses for credit risks as well as lower interest-rate margins. Expenditure was also incurred for the expansion of the direct banking business at Mercedes-Benz Bank, which is designed to enhance sales support for the automotive divisions.
Other business activities - in particular the investments in EADS and Tognum, which are accounted for using the equity method - have been included under the item "Reconciliation" since the beginning of 2009.
In the second quarter of 2009, Daimler's share in the net profit of EADS amounted to euro 15 million (Q2 2008: euro 32 million). As a result of the agreements reached between Daimler, Chrysler, Cerberus and the Pension Benefit Guaranty Corporation (PBGC), and the valuation of Chrysler-related assets expenses of together euro 387 million were incurred.
Outlook
Based on the divisions' planning, Daimler expects its total unit sales to decrease significantly in the year 2009 (2008: 2.1 million vehicles).
Mercedes-Benz Cars anticipates a revival of business in the second half of the year. Sales impetus will be provided not only by the full availability of the new E-Class sedan and E-Class coupe, but also by the new generation of the S-Class, which was launched at the end of June 2009. With the S 400 HYBRID and additional high-volume BlueEFFICIENCY models, the entire model range will be supplemented with particularly environmentally friendly and fuel-efficient drive systems. Furthermore, the GLK compact sport-utility vehicle has been available with the new four-cylinder diesel engine as an entry model since the end of March 2009, and the E-Class station wagon will be launched this autumn. With the smart fortwo, new sales potential will be utilized this year with launches in important growth markets such as China and Brazil.
However, Mercedes-Benz Cars will not be able to fully compensate for the weakness in the first half of this year of some major sales markets and market segments. Overall, the division's unit sales will therefore be lower in 2009 than in the prior year. Lower volumes are anticipated above all in the markets of the United States, Western Europe and Japan. Unit sales should be partially stabilized by growth in the emerging markets, however, particularly in China. The division expects its total unit sales in the second half of the year to be higher than in the first half.
Based on the expected development of unit sales, Mercedes-Benz Cars anticipates a gradual improvement in profitability so that a positive operating result should be achieved in the second half of the year.
As a result of the continuing global economic crisis, Daimler Trucks expects its unit sales to fall significantly in full-year 2009. From today's perspective, the division assumes that unit sales in the second half of the year will be at the same level as in the first half and that its market shares will at least remain stable. The decline in unit sales will also have an impact on the division's earnings. The measures taken to reduce costs will only partially offset that negative effect. The expenses of the measures initiated to reposition and restructure Daimler Trucks North America and Mitsubishi Fuso will reduce EBIT in full-year 2009.
Due to the ongoing recession in major economies, the Mercedes-Benz Vans division expects unit sales in the second half of the year to be only slightly higher than in the first half. Based on the countermeasures that have been taken, the earnings situation is expected to improve slightly in the coming quarters.
Daimler Buses assumes that demand in its core markets will stabilize at current levels. EBIT is expected to be positive in the second half of the year, despite higher research and development spending for new products.
Daimler Financial Services anticipates rising credit defaults and continued high refinancing expenses in full-year 2009. The division strives to compensate for the increased costs at least partially through its efficiency programs. The operating result for the second half of the year is expected to be slightly positive. Full-year contract volume is likely to be lower than in 2008.
The Daimler Group assumes that its total revenue will decrease significantly in full-year 2009 (2008: euro 95.9 billion).
As a result of reduced production volumes and the targeted productivity advances, the Group assumes that the number of employees at the end of 2009 will be lower than a year earlier.
At the Group level, measures have been taken with the aim of reducing costs and avoiding additional expenditure in a total amount of euro 4 billion. As well as reducing labor costs, these actions include reducing fixed costs and further streamlining the Group's organizational structures. The measures taken will supplement the existing efficiency-enhancing programs. In addition, projects are being examined and those that are not directly relevant to competitiveness are being postponed.
Based on these measures, which will have a full impact in the second half of the year, and due to the launch of the new E-Class, the Daimler Group anticipates a gradual improvement in its operating profitability in the course of the year.
The special items shown in the following table affected EBIT in the second quarters of the years 2009 and 2008:
Special items affecting EBIT Amounts in millions of euro Q2 2009 Q2 2008 Daimler Trucks Realignment of Mitsubishi Fuso Truck and Bus Corporation (204) - Repositioning of Daimler Trucks North America (13) - --------------------------------------------- --- --- Reconciliation Gains related to the transfer of shares in EADS - 35 Equity-method result Chrysler - (356) Other expenses related to Chrysler (387) (17) --------------------------------------------- --- --- New management model - (63)
Further information on Daimler is available on the Internet: www.media.daimler.com
This document contains forward-looking statements that reflect our current views about future events. The words "anticipate," "assume," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should" and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including a lack of improvement or a further deterioration of global economic conditions; a continuation or worsening of the turmoil in the credit and financial markets, which could result in ongoing high borrowing costs or limit our funding flexibility; changes in currency exchange rates and interest rates; the introduction of competing, fuel efficient products and the possible lack of acceptance of our products or services which may limit our ability to adequately utilize our production capacities or raise prices; price increases in fuel, raw materials, and precious metals; disruption of production due to shortages of materials, labor strikes, or supplier insolvencies; a further decline in resale prices of used vehicles; the effective implementation of cost reduction and efficiency optimization programs at all of our segments, including the repositioning of our truck activities in the NAFTA region and in Asia; the business outlook of companies in which we hold an equity interest, most notably EADS; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety; the resolution of pending governmental investigations and the outcome of pending or threatened future legal proceedings; and other risks and uncertainties, some of which we describe under the heading "Risk Report" in Daimler's most recent Annual Report and under the headings "Risk Factors" and "Legal Proceedings" in Daimler's most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. If any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made.
About Daimler
Daimler AG, Stuttgart, with its businesses Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services, Mercedes-Benz Vans and Daimler Buses, is a globally leading producer of premium passenger cars and the global market leader of heavy- and medium-duty trucks as well as buses. The Daimler Financial Services division has a broad offering of financial services, including vehicle financing, leasing, insurance and fleet management. Daimler sells its products in nearly all the countries of the world and has production facilities on five continents. The company's founders, Gottlieb Daimler and Carl Benz, continued to make automotive history following their invention of the automobile in 1886. As an automotive pioneer, Daimler and its employees willingly accept an obligation to act responsibly towards society and the environment and to shape the future of safe and sustainable mobility with groundbreaking technologies and high-quality products. The current brand portfolio includes the world's most valuable automobile brand, Mercedes-Benz, as well as smart, AMG, Maybach, Freightliner, Western Star, Mitsubishi Fuso, Setra, Orion and Thomas Built Buses. The company is listed on the stock exchanges in Frankfurt, New York and Stuttgart (stock exchange abbreviation DAI). In 2008, the Group sold 2.1 million vehicles and employed a workforce of over 270,000 people; revenue totaled euro 95.9 billion and EBIT amounted to euro 2.7 billion. Daimler is an automotive Group with a commitment to excellence, and aims to achieve sustainable growth and industry-leading profitability.
Figures for the 2nd Quarter 2009/First Half-Year 2009
Daimler Group Q2 Q2 Change YTD YTD Change
amounts in euro 2009 2008 09/08 2009 2008 09/08
-------------------- ----- ----- ----- ----- ----- -----
Revenue, in
millions 19,612 26,005 -25% 38,291 50,003 -23%
EBIT, in millions (1,005) 2,053 - (2,431) 4,029 -
Special items, in
millions (604) (401) - (609) (386) -
EBIT from ongoing
business, in
millions (401) 2,454 - (1,822) 4,415 -
Net profit, in
millions (1,062) 1,395 - (2,348) 2,727 -
Net profit from
continuing
operations, in
millions (1,062) 1,412 - (2,348) 2,747 -
Earnings per
share (EPS) (0.99) 1.40 - (2.37) 2.70 -
Employees (June 30) 257,427 274,999 -6% 257,427 274,999 -6%
------------------- ------- ------- -------- -------- -------- -------
EBIT by Divisions/
Segments Q2 Q2 Change YTD YTD Change
in millions of euro 2009 2008 09/08 2009 2008 09/08
-------------------- ----- ----- ----- ----- ----- -----
Mercedes-Benz Cars (340) 1,212 - (1,463) 2,364 -
Daimler Trucks (508) 608 - (650) 1,011 -
Mercedes-Benz Vans (10) 262 - (101) 448 -
Daimler Buses 49 170 -71% 114 245 -53%
Daimler Financial
Services 79 183 -57% (88) 351 -
Reconciliation (275) (382) +28% (243) (390) +38%
------------------- ------- ------- -------- -------- -------- -------
Revenue by
Divisions/Segments Q2 Q2 Change YTD YTD Change
in millions of euro 2009 2008 09/08 2009 2008 09/08
-------------------- ----- ----- ----- ----- ----- -----
Mercedes-Benz Cars 10,568 12,921 -18% 19,635 25,418 -23%
Daimler Trucks 4,217 7,385 -43% 9,135 13,712 -33%
Mercedes-Benz Vans 1,481 2,557 -42% 2,772 4,892 -43%
Daimler Buses 1,103 1,321 -17% 2,007 2,240 -10%
Daimler Financial
Services 3,108 2,877 +8% 6,258 5,691 +10%
Reconciliation (865) (1,056) +18% (1,516) (1,950) +22%
------------------- ------- ------- -------- -------- -------- -------
Unit Sales Q2 Q2 Change YTD YTD Change
in units 2009 2008 09/08 2009 2008 09/08
-------------------- ----- ----- ----- ----- ----- -----
Daimler Group 391,540 566,480 -31% 723,792 1,070,296 -32%
Mercedes-Benz Cars 287,243 353,976 -19% 518,436 672,261 -23%
Daimler Trucks 54,134 122,809 -56% 119,539 230,537 -48%
Mercedes-Benz Vans 41,871 78,629 -47% 70,705 147,255 -52%
Daimler Buses 8,292 11,066 -25% 15,112 20,243 -25%
------------------- ------- ------- -------- -------- -------- -------
Figures for the 2nd Quarter 2009/1st Quarter 2009
Daimler Group Q2 Q1 Change
amounts in euro 2009 2009 Q2/Q1
---------------- ---- ---- ------
Revenue, in millions 19,612 18,679 +5%
EBIT, in millions (1,005) (1,426) +30%
Special items, in millions (604) (5) -
EBIT from ongoing business, in millions (401) (1,421) +72%
Net profit, in millions (1,062) (1,286) +17%
Net profit from continuing operations, in
millions (1,062) (1,286) +17%
Earnings per share (EPS) (0.99) (1.40) +29%
Employees (June 30) 257,427 263,819 -2%
--------------------- ------- ------- -------
EBIT by Divisions/Segments Q2 Q1 Change
in millions of euro 2009 2009 Q2/Q1
--------------------- ---- ---- ------
Mercedes-Benz Cars (340) (1,123) +70%
Daimler Trucks (508) (142) -258%
Mercedes-Benz Vans (10) (91) +89%
Daimler Buses 49 65 -25%
Daimler Financial Services 79 (167) -
Reconciliation (275) 32 -
--------------------- ------- ------- -------
Revenue by Divisions/Segments Q2 Q1 Change
in millions of euro 2009 2009 Q2/Q1
--------------------- ---- ---- ------
Mercedes-Benz Cars 10,568 9,067 +17%
Daimler Trucks 4,217 4,918 -14%
Mercedes-Benz Vans 1,481 1,291 +15%
Daimler Buses 1,103 904 +22%
Daimler Financial Services 3,108 3,150 -1%
Reconciliation (865) (651) -33%
--------------------- ------- ------- -------
Unit Sales Q2 Q1 Change
in units 2009 2009 Q2/Q1
--------------------- ---- ---- ------
Daimler Group 391,540 332,252 +18%
Mercedes-Benz Cars 287,243 231,193 +24%
Daimler Trucks 54,134 65,405 -17%
Mercedes-Benz Vans 41,871 28,834 +45%
Daimler Buses 8,292 6,820 +22%
--------------------- ------- ------- -------