Daimler reports third-quarter 2019 results
Stuttgart (Germany) – Daimler AG (ticker symbol: DAI) today reported results for the third quarter ended September 30, 2019. The Group’s total unit sales rose by 6% to 839,300 passenger cars and commercial vehicles (Q3 2018: 794,700). Revenue climbed by 8% to €43.3 billion (Q3 2018: €40.2 billion). Also adjusted for positive exchange-rate changes, revenue was slightly higher than the prior-year level. The Daimler Group posted third-quarter EBIT of €2.7 billion (Q3 2018: €2.5 billion), an increase of 8%.
"Strong sales at Cars and Vans supported our Q3 financial performance. However, in order to master the transformation in the next few years, we need to increase our efforts considerably: We have to significantly reduce our costs and consistently strengthen our cash flow,” said Ola Källenius, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
In the third quarter, Group net profit rose by 3% to €1,813 million (Q3 2018: €1,761 million). Net profit attributable to the shareholders of Daimler AG amounted to €1,719 million (Q3 2018: €1,689 million), leading to an increase in earnings per share to €1.61 (Q3 2018: €1.58).
Free cash flow and liquidity
In the first nine months of 2019, the free cash flow of the industrial business was minus €0.5 billion (Q1-3 2018: minus €0.06 billion), still affected by working capital and a continued high level of investment in future products. At the Group, investments in property, plant and equipment in the third quarter decreased to €1.8 billion (Q3 2018: €2.1 billion). Expenditure for research and development rose to €2.5 billion (Q3 2018: €2.4 billion).
The net liquidity of the industrial business decreased from €16.3 billion at December 31, 2018, to €9.6 billion at the end of the third quarter. The dividend payment of €3.5 billion (2018: €3.9 billion) to shareholders of Daimler AG, the effects from initial application of IFRS 16 (€3.2 billion) as well as the free cash flow of the industrial business led to the decrease in net liquidity.
Mercedes-Benz Cars sold 604,700 vehicles in the third quarter, which is 8% more compared to third quarter of last year (Q3 2018: 559,500). Mercedes-Benz Cars’ revenue increased by 9% to €23.5 billion (Q3 2018: €21.7 billion) and its EBIT improved by 4% to €1,423 million (Q3 2018: €1,372 million). Return on sales was 6.0% (Q3 2018: 6.3%).
Daimler Trucks showed a decrease in unit sales of 8% to 125,400 vehicles in the third quarter (Q3 2018: 136,100). Revenue grew by 3% to €10.3 billion (Q3 2018: €10.0 billion). EBIT decreased by 9% to €774 million (Q3 2018: €850 million) and return on sales was 7.5% (Q3 2018: 8.5%).
Mercedes-Benz Vans’ unit sales increased by 10% to 100,300 vehicles (Q3 2018: 91,400). Revenue was 15% higher at €3.5 billion (Q3 2018: €3.0 billion). EBIT rose to €113 million (Q3 2018: minus €93 million) while return on sales was 3.2% (Q3 2018: minus 3.1%).
Daimler Buses’ sales grew by 16% to 9,000 units in the third quarter (Q3 2018: 7,700). Revenue also rose by 16% to €1.2 billion (Q3 2018: €1.1 billion). EBIT more than doubled to €79 million (Q3 2018: €30 million). Return on sales improved to 6.4% (Q3 2018: 2.8%).
At Daimler Mobility AG (previously Daimler Financial Services), new business totaled €18.3 billion in the third quarter (Q3 2018: €16.6 billion), which is an increase of 10%. Revenue was 11% higher at €7.1 billion (Q3 2018: €6.4 billion). The division’s EBIT amounted to €413 million (Q3 2018: €392 million), an increase of 5% compared to third quarter of last year. At 11.9%, return on equity was slightly below the figure of 12.5% in the prior-year period.
At the end of the third quarter, the Daimler Group employed 304,680 people worldwide (year-end 2018: 298,683, end of Q3 2018: 300,367). Of that total, 178,097 people were employed in Germany (year-end 2018: 174,663, end of Q3 2018: 176,287) and 27,029 in the United States (year-end 2018: 26,310, end of Q3 2018: 26,079). The consolidated subsidiaries in China employed 4,427 people at the end of September (year-end 2018: 4,424, end of Q3 2018: 4,410).
Outlook for Daimler and divisions
At Group level, Daimler continues to expect unit sales in 2019 at the previous year’s number and revenue slightly above the prior year. Mercedes-Benz Cars assumes that revenue will be at the previous year’s level. Daimler Trucks now expects revenue in the magnitude of the prior year. The divisions Mercedes-Benz Vans and Daimler Mobility anticipate slight revenue growth. Daimler Buses expects a significant increase in revenue.
As reported in the risk and opportunity report, Daimler is subject to governmental information requests, inquiries, investigations, administrative orders and proceedings as well as court proceedings in connection with diesel exhaust emissions. As legal proceedings are fraught with a large degree of uncertainty, it is possible that in the context of their final resolution some of the provisions we have recognized for them could prove to be insufficient. As a result, additional expenditures may arise, which may negatively affect the profitability expectations mentioned below, in particular of the divisions Mercedes-Benz Cars and Mercedes-Benz Vans. The detailed risk and opportunity report containing more detailed information regarding risks from legal proceedings in connection with diesel exhaust gas emissions is published on pages 20 ff. of the interim report for the third quarter 2019.
Based on the expected market development and the current assessments of the divisions, Daimler assumes that Group EBIT in 2019 will be significantly below the previous year's level. The divisions mentioned below continue to expect these returns in 2019:
- Mercedes-Benz Cars: a return on sales of 3% to 5%,
- Mercedes-Benz Vans: a return on sales of minus 15% to minus 17%,
- Daimler Buses: a return on sales of 5% to 7%,
- Daimler Mobility: a return on equity of 17% to 19%.
Due to a faster than expected economic downturn in the commercial-vehicle core markets of Europe and North America in the third quarter, earnings of Daimler Trucks will be adversely affected already in the fourth quarter of this year. Against this backdrop, Daimler Trucks now anticipates a return on sales of 6% to 8% as well as slightly lower unit sales.
The free cash flow of the industrial business is burdened by ongoing high upfront expenditures for new products and technologies as well as the costs for »Project Future« to implement the new Group structure. Daimler therefore expects the free cash flow of the industrial business in financial year 2019 to be significantly lower than in the previous year.
Further information on third-quarter results at: www.daimler.com//press/q3/19/