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      Daimler Group registers 24% increase in consolidated EBIT in centenary year

      CarTrade Editorial Team

      CarTrade Editorial Team

      In 2011, Daimler marked its 100th anniversary with the group’s EBIT reaching €9 billion, an increase of 24%. The unaudited and preliminary earning figures of Daimler was revealed by Daimler AG (stock-exchange symbol DAI) for the year 2011. Compared to €7,212 million of 2010, group EBIT of Daimler increased to €8,977 million in 2011 from the ongoing business.

       

      Daimler Group
       

      A 20% rise has been registered in group EBIT to €8,755 million against €7,274 million of the year 2010 including special factors. A record net profit of €6,029 million has been achieved, a remarkable increase over €4,674 million in 2010. Compared to €4.28 of 2010, €5.32 has been the earnings per share in 2011.  In the centenary year, the group was able to set several records. It marked 125 years of successful automobile manufacturing.

      The Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, Dr. Dieter Zetsche said “The Group achieved its best-ever results in 2011 for unit sales, revenue, EBIT and net profit. All of our divisions contributed to this success.”

      For EBIT, revenue, and sales, new records have been set by Mercedes-Benz Cars. Performance of the car division has been remarkable in the year 2011, which is better than its previous years.

      “In total, we made the anniversary year also into a year of success for Daimler. This performance shows that with its strong portfolio of cars, trucks, vans, buses and financial services, the Group is strategically very well positioned. We are now putting all of our efforts into continuing this success and achieving our targeted rates of return on a sustained basis as of the year 2013.” emphasised Zetsche.

      Financial Year 2011

      Due to the record sales, the group received high earnings in year 2011.  Compared to previous years, unit sales of Mercedes-Benz Vans, Daimler Trucks and Mercedes-Benz Cars significantly increased in the year 2011 in major regions.

      Managing lower cost of risk, Daimler Financial Services maintained its profit levels. With the natural disaster in Japan, the special factors were related, which resulted in €80 million total charges of the group. While calculating this figure, compensation from the insurance department has been considered.

      Daimler also faced loss of equity interest in Kamaz of €32 million and Renault of €110 million, resulting in charges.

      A total of 2.1 million vehicles were sold by Daimler in 2011, which was 11% more than the previous year. This sales figure was a combined effort of every division of the group. Reaching €106.5 billion, revenue of the group was increased to 9%. At December 31, 2011, €12.0 billion net liquidity of the industrial business has been recorded as against €11.9 billion of 2010.

      Due to the extensive business development of the group, global employment has been registered to around 2,71,370. The 2011 figure was around 11,270 units more than the end of the previous year. Employment figures of Germany were around 1,64,026, which increased to 1,67,684 in the end of December 2011.

      The General Works Council and Board of Management of Daimler were impressed by the success and decided to reward the performance of the team with a high performance participation bonus. As per the decision, an amount of €4,100 (2011: €3,150) will be provided to each eligible employee of Daimler AG at the end of April 2012.

      Once again, shareholders will also participate in the financial success of the group. Approximately 40% of the net profit attributable will be distributed by Daimler in setting the dividend.

      At the Annual Meeting to be held on April 4, 2012, the Supervisory Board and the Board of Management due to the progress in the business will ask the shareholders to approve a dividend of €2.20 per share to be paid out, while the figure was around €1.85 in 2010. As against total dividend of €1,971 million in 2010, it would be €2,346 million.

      “In this way, we want our shareholders to participate appropriately once again in our financial success, and we anticipate a continuation of this dividend development in the coming years.” stated Bodo Uebber, Member of the Board of Management of Daimler AG for Finance & Controlling and Financial Services.

      Investments for the future

      In all automotive divisions of the group, the focus is on environmentally friendly and fuel-efficient drive technologies on the basis of the “Road to Emission-free Mobility” initiative. In order to design electric vehicles with battery power and fuel-cell drive and increase their efficiency through hybridisation, the main aim of the group is to optimise conventional drive technologies.

      In order to avoid accidents, focus would be laid on new safety technologies. For minimum impact of the accident, technology would be refined.  Tremendous focus is on new safety technologies with the goal of avoiding accidents as far as possible and of alleviating the consequences of any accidents that might still occur.

      Hence, the €5.6 billion R&D expenditure of the company was increased in 2011 as against €4.8 billion of 2010. The R&D expenditure of Daimler Trucks amounted to €1.3 billion as against €1.3 billion of the previous year. It was €3.7 billion for Mercedes-Benz Cars against €3.1 billion of 2010.

      In 2010, the investment in plant, property and equipment was €3.7 billion but for 2011 it was €4.2 billion. In Germany, €2.7 billion was invested for this purpose as against €2.1 billion of 2010. On new products, production facilities and new technologies, focus was laid on substantial capital expenditure.

      Focus was also laid to increase the production capacities of the Mercedes-Benz Cars new plant in Kecskemét, Hungary and A-/B-Class at the Rastatt plant in Germany.

      In the launch of the new Actros heavy truck, substantial investments were made by Daimler Trucks in 2011.

      The divisions in detail:

      Mercedes-Benz Cars

      With the sales of 13,81,400 vehicles, a new record was set by Mercedes-Benz Cars in 2011, which comprises Maybach, smart and Mercedes-Benz. The figure was 12,76,800 in 2010. Touching a record of €57.4 billion, division’s revenue rose to around 7% as against €53.4 billion of 2010. Compared to EBIT of €4,656 million posted by the group in 2010, the figure was €5,192 million posted this year. Further, the sales return was 9.0% (2010: 8.7%).

      Due to the worldwide growth of mid-sized and SUV segments, there has been tremendous growth in earnings. The group attained high sales figure in China and the United States due to its stylish range of vehicles. Other factors which contributed towards the earnings of the group include lower warranty and improved pricing.

      Owing to increased research and development costs, higher expenses related to the launch of new models, increases in prices of materials and negative exchange-rate effects, a strong negative effect was registered on the earnings.

      Daimler Trucks

      Worldwide revenue of Daimler Trucks increased 20% to €28.8 billion against €24.0 billion of 2010. The worldwide unit sales also registered 20% Increase to 425,800 vehicles. EBIT of the division was €1,876 million compared the figure of 2010, which was €1,332 million. In the year 2010, the return on sales was 5.5%, which increased to 6.5% in 2011.

      Due to the strong sales in Europe, Asia, Latin America, and NAFTA region, the company recorded positive earnings. In 2011, efficiently implemented optimisation and relocation of business operations of Daimler Trucks North America and subsidiaries Mitsubishi Fuso Truck led to the increase in earning of the division.

      Owing to the high expenditure on new Actros and higher material costs, negative effects were registered on the earnings. There were €70 million charges due to the natural disaster in Japan. A return on sales would have been 6.9% for Daimler Trucks, if there were no charges and low investment in Kamaz.

      Mercedes-Benz Vans

      The unit sales of Mercedes-Benz Vans Vario, Vito, Sprinter, and Viano model series increased by 18% to 2,64,200 vans. In 2010, the revenue was €7.8 billion, though it increased to €9.2 billion in 2011.

      From 5.8% in 2010, return sales improved to 9.1% in 2011; however, €835 million growth was registered in EBIT as against €451 million of the previous year. The increase in earning was due to the high sales of units in Eastern Europe, Germany and NAFTA region. Another factor which led to the increase in earnings was the high demand of the Vaino and the Vito models. Fair pricing and sustained efficiency improvements balanced the high material costs.

      Daimler Buses

      Despite difficult conditions, sales of buses and bus chassis of Daimler Buses increased to 39,700 units as against 39,100 units for the year 2010. The revenue of €4.6 billion of 2010 was higher than €4.4 billion of 2011. However, the EBIT of 2011 is €162 million, which is much lower than €215 million of 2010. 3.7% return on sales recorded this year is also less than 4.7% of 2010.

      These figures resulted due to the lower unit sales of complete buses in North America and Western Europe. The demand for vehicles decreased mainly in the city-bus segment.

      Negative impact on EBIT was caused due to the higher prices as a result of inflation in Latin America. By exchange-rate effects and greater shipments of bus chassis in Mexico and Latin America, the earnings of the division showed growth.

      Daimler Financial Services

      In all regions, Daimler Financial Services developed positively. The contract volume increased to €71.7 billion, which was 13% higher than €63.7 billion of 2010. Contract volume also increased to 12%. The higher volume of sales resulted in the increase of the new business to around €33.5 billion, which is 15% higher.

      With EBIT of €1,312 million in 2011, the division increased its earnings as against €831 million for 2010. Return on equity was 25.5%, which was 16.1% of 2010. Due to increased contract volume, improved refinancing conditions, and lower provisions for risks, earnings improved to a great extent.

      Due to the realignment business expenditure in Germany, the earnings were affected negatively. In connection with the natural disaster in Japan, extra allowances for bad debts had to be recognised and it was another negative factor.

      The resolution of the divisions’ EBIT to Group EBIT includes the effects on earnings of removing intra-group transactions between the divisions, other gains and/or losses at the corporate level, and Daimler’s proportionate share of the results of its equity-method investment in EADS.

      Of the net profit of EADS, Daimler’s proportionate share registered income of €143 million (2010: expense of €261 million). €588 million expense at corporate level has been considered (2010: income of €21 million). It was related to the impairment of €110 million equity holding of Daimler in Renault. The shareholding of the company had to be reduced to fair value at the end of the third quarter due to the reduction of stock-exchange price of Renault shares.

      Outlook

      Global market for motor vehicles will show positive growth in 2012 as per the current market estimates. However, it cannot be said for the Western European markets, which are affected by debt crisis.

      There would be 4% increase in the Global registrations of new cars and US market, Asian Market, and Japanese market will contribute towards it. In 2012, the demand for medium and heavy trucks would be like the previous year. However, 15 to 20% expansion would result in the North American market.

      Due to the economic weakness and sovereign-debt crisis, the demand for trucks in Europe will be impacted. Compared to the prior year, heavy and medium-duty trucks for the Japanese market should expand once again by 5 to 10%. This is due to the positive economic growth because of reconstruction efforts. However, in 2012, overall demand for the trucks should increase moderately.

      Mercedes-Benz Cars

      Mercedes-Benz Cars has positive hopes for this year as it aims for higher sales. Even under less favourable conditions, growth will result due to the competitive range of the models of the company.

      Due to the heavy demand of the models of the decision in the C-Class segment, the division will register higher profits. However, SL Class will boost the sales of the company in the luxury segment till late March.

      The new M-Class of the SUV segment will be available by September 2012 and it will increase the growth further.  As per reports, and the new-generation G-Class and new GLK (a compact SUV) will be launched in June. The growth in unit sales will be boosted by the launch of new models in the high-volume compact-car segment. November 2011 has already seen the launch of new B-Class and the new A-Class will be launched in September 2012.

      In additional models, ECO start-stop technology and four-, six- and eight-cylinder engines would be introduced. Hence, unit sales are expected to grow targeting the commercial customers. In cars that were sold in 2011, the average CO2 emissions were reduced to 150 grams per kilometre with help of particularly economical BlueEFFICIENCY models and new engines. The figure was 158 g/km in 2010.

      In the years ahead, the product range would increase as per the framework of the “Mercedes-Benz 2020” growth policy. Five models would be introduced with three-pointed star in the compact-car segment, which would attract the younger customer.

      There would be parallel expansion of the top end models of Mercedes-Benz Cars. Three additional versions of next S-Class and SUV version will be introduced in 2012. Further, in September 2012, CLS Shooting Break model, which is a new concept, will be launched.

      For smart this year, positive impetus is expected from two highlights. In more than 30 markets across the globe, the new smart fortwo electric drives would be introduced. The company will also introduce the ebike.

      In 2012, there would be further growth opportunities of Mercedes-Benz Cars. The growth would take place in Russia, India, China, and North America. However, prospects are limited in Western Europe. Due to expansion of the model portfolio, Mercedes-Benz Cars will be able to strengthen its foothold in the market. The company anticipates smart brand for the fairly stable unit sales.

      Daimler Trucks

      For the year 2012, Daimler Trucks expects increase in the unit sales. The division expects rapid growth than the total market in Europe following the noteworthy growth in 2011. As strict emission standards have been introduced in the Brazilian market, there would be slowdown in the demand following the record year 2011.

      In the NAFTA region, there would be continuation in the recovery of the truck market. Requirement of investment in replacements is more due to the high average age of vehicle fleets in the region.

      The division expects to profit above the average level due to the progress on the basis of well-filled order books.  It is also expected that the unit sales will increase in Japan. After the natural disaster, reconstruction needs have boosted the demand for trucks. Appropriate condition for future growth was created by the division with its operations in India, China, and Russia.

      For the joint venture in China, final approval of the authorities was received last year. First truck with components from Daimler was introduced due to the joint venture in Russia with Kamaz. In April, 2012, the first plant would be started. The division hopes to improve its worldwide market in the year ahead. Various models of Daimler Trucks would be introduced in the market and the division will also benefit by the global production network.

      Mercedes-Benz Vans endeavours to increase its sales with its new city van Citan. The company will penetrate new market in 2012 by making judicious use of the growth potential created by this van. At the start of 2012, Argentina witnessed a large scale production of sprinters over van production. Due to this, all the products are being extensively upgraded in Latin America. Local production is going to play a major role in augmenting unit sales in China. Expecting this development, Fujian Daimler Automotive started engineering Sprinter along with Vito and Viano models since December 2011. 

      With innovative techniques and high quality standards, Daimler Buses is expected to maintain its lead in selling buses weighing more than 8 tonnes. The division, however, can face a small decrease in 2012 due to the implementation of Euro V emission regulations in Brazil. On the other hand, sales are expected to rise a bit in Western Europe (division’s core market) as Mercedes is planning to launch new Mercedes-Benz Citaro in this region.

      Apart from increase in contract volume, Daimler Financial Services expects new clients in automobile financial and leasing, which is its main business. This will be supported by various factors, especially increase in BRIC markets and demand for financing of new compact cars. Targeting vehicle insurance, the division is expecting further growth in selling policies and in its market share. The new Mobility Services business unit, which witnessed the integration of the car2go mobility concept in 2011, is also expected to rise.

      The Daimler Group is positive about its increase in sales as well as revenue this year as well. The reason behind it is the unique strategies of divisions and prediction made on the rise of major sales market.

      In the tune of the previous year, Daimler is planning to record EBIT from its ongoing business. This is based on the predicted currency exchange rates that are close to their present level.

      The following EBIT targets have been set for the divisions:

      •    Mercedes-Benz Cars: at the prior-year level
      •    Daimler Trucks: at least at the prior-year level
      •    Mercedes-Benz Vans: at least at the prior-year level
      •    Daimler Buses: at least at the prior-year level
      •    Daimler Financial Services: slightly below the prior-year level

      For its automotive business, Daimler is aiming to achieve 9% of annual average return on its sales across market and all the product cycles. For each of the individual divisions, the annual average return is based on their target returns on sales. The target returns are expected to be attained continuously until 2013. Target returns for Mercedes-Benz Cars is 10%, for Mercedes-Benz Vans is 9%, for Daimler Trucks is 8% and Daimler Buses is 6%. The target for Daimler Financial Services is 17% return on equity.

      In the period of 2012 through 2013, €10.9 billion will be invested by the group in the R&D activities and €10.6 billion in property, plant, and equipment. Compared to 2010 and 2011, it is €3.2 billion more. The group will require more employees to achieve its growth targets. In Asia, Hungary, and North America, new jobs will be created along with expansion in production capacities. Long term job security has been made in Germany by increasing production capacities abroad.

      Table: In both years earnings were affected by special factors, which are listed in the following table:

       

       

      In millions of euros

       

       

      2011

      2010

       

       

      Daimler Trucks

      Impairment of investment in Kamaz

       

      Natural disaster in Japan

       

      Adjustment of health-care and pension benefit plans

       

      Repositioning of Daimler Trucks North America

       

      Repositioning of Mitsubishi Fuso Truck and Bus Corporation

       

      -32

       

      -70

       

      -

       

      -

       

       

      -

       

       

       

      -

       

      -

       

      160

       

      -37

       

       

      -3

       

       

      Daimler Financial Services

      Natural disaster in Japan

       

      Repositioning of business activities in Germany

       

      Sale of non-automotive assets

       

       

       

      -10

       

      -

       

      -

       

       

       

      -

       

      -82

       

      -9

       

       

      Reconciliation

      Impairment of investment in Renault