OREANDA-NEWS. October 25, 2012. Daimler AG (stock-exchange symbol DAI) achieved Group EBIT of EUR 1,921 million in the third quarter of 2012 (Q3 2011: EUR 1,968 million). Net profit for the period was EUR 1,205 million (Q3 2011: EUR 1,360 million), leading to earnings per share of EUR 1.03 (Q3 2011: EUR 1.21).

“Considering the significantly more difficult market conditions, Daimler achieved good earnings in the third quarter,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
“Due to the economic challenges, Daimler will not match the high prior-year EBIT in full-year 2012, but will still post good earnings once again,” emphasized Zetsche. With regard to the company’s ambitious targets, the CEO stated: “But we are not yet at the level that we aim to reach in the medium to long term. We have therefore initiated appropriate measures for all divisions and are thus prepared for a difficult market environment. At Mercedes-Benz Cars, we are adding an important element to our Mercedes-Benz 2020 growth strategy: ‘Fit for Leadership.’ With this program, we are combining existing and additional efficiency measures in order to secure our short-term targets and to give our business system an optimal and sustainable positioning.”
The development of earnings at the Daimler Group in the third quarter of 2012 reflects further increases in unit sales at Mercedes-Benz Cars and Daimler Trucks, which were achieved despite more difficult conditions in some markets. Mercedes-Benz Vans and Daimler Buses posted lower unit sales. Group EBIT was reduced by higher expenses in connection with the expansion of Mercedes-Benz Cars’ product portfolio and the current product offensive at Daimler Trucks. Daimler Financial Services did not quite reach the level of earnings achieved in the prior-year quarter due to increased cost of risk. Exchange-rate effects made a positive contribution to earnings. EBIT once again included higher charges for the compounding of non-current provisions as well as effects relating to lower discount factors of an aggregate EUR 194 million (Q3 2011: EUR 41 million).

The special items shown in the table on page 10 affected EBIT in the third quarters of the years 2012 and 2011.
Group revenue up by 8%
In the third quarter of 2012, Daimler sold 528,600 cars and commercial vehicles worldwide, surpassing the prior-year total
by 1%.

Revenue of EUR 28.6 billion was 8% above the prior-year level. Adjusted for changes in currency exchange rates, the increase amounted to 3%.
The free cash flow of the industrial business amounted to minus EUR 200 million in the third quarter, including an increase in working capital of EUR 800 million. This increase is partially related to growth in inventories in preparation for the market launch of the new A-Class, for which more than 70,000 orders have already been received.

At the end of the third quarter of 2012, Daimler employed 275,451 people worldwide (end of Q3 2011: 269,887). Of that total, 166,888 were employed in Germany (end of Q3 2011: 167,948).

Details of the divisions

Mercedes-Benz Cars set a new record for unit sales in the third quarter of 2012: The division’s total sales increased by 2% to 345,400 units. Revenue amounted to EUR 15.2 billion (Q3 2011: EUR 13.8 billion). In a significantly more difficult economic environment, Mercedes-Benz Cars achieved EBIT of EUR 975 million in the third quarter (Q3 2011: EUR 1,108 million). The division’s return on sales was 6.4% (Q3 2011: 8.0%).

Growth in unit sales, especially in the United States, had a positive impact on earnings. High growth rates were achieved in particular with SUVs. Better pricing also helped the division to achieve increased earnings. In addition, exchange-rate effects had a positive effect on earnings. Earnings were reduced by expenses for the enhancement of the products’ attractiveness. Other factors were expenses connected with the expansion of production facilities and higher advance expenditure for new technologies and vehicles. The compounding of non-current provisions and effects from changes in interest rates also led to higher charges. 

Daimler Trucks increased its unit sales by 3% to 119,100 vehicles in the third quarter. Revenue amounted to EUR 8.1 billion (plus 6%). The division posted EBIT of EUR 507 million and a return on sales of 6.3% (Q3 2011: EUR 555 million and 7.3%).
Daimler Trucks had a good development of unit sales and revenue in the NAFTA region and Asia in the third quarter. In addition, lower warranty costs and exchange-rate effects also contributed positively to earnings. There was an opposing, negative effect on earnings from the continuation of falling demand in Brazil and Western Europe; this was related to the weaker economy and in Brazil additionally to the introduction of new emission standards. The division’s EBIT was additionally impacted in the third quarter by expenditure for the current product offensive. Additional expenses resulted from the compounding of non-current provisions and changes in interest rates.

Unit sales by Mercedes-Benz Vans decreased to 55,700 vehicles due to the market decline in Western Europe (Q3 2011: 63,500). Revenue of EUR 2.1 billion was also lower than in the prior-year quarter (Q3 2011: EUR 2.2 billion). The division posted EBIT of EUR 75 million for the third quarter (Q3 2011: EUR 200 million). Return on sales amounted to 3.6%, compared with 9.0% in the third quarter of last year.

The main negative effects on earnings were from a market-related drop in unit sales, particularly in Western Europe. Expenses in connection with the market launch of the Citan were an additional factor. There was an opposing, positive impact on earnings from exchange-rate effects.

Daimler Buses sold 8,300 buses and bus chassis worldwide

(Q3 2011: 9,200). Revenue decreased by EUR 90 million to EUR 951 million. The division’s EBIT amounted to minus EUR 45 million and was thus below the prior-year figure of plus EUR 25 million. Return on sales decreased accordingly from plus 2.4% in the third quarter of 2011 to minus 4.7% in the period under review.

As in the previous two quarters, the fall in earnings is primarily due to lower unit sales of bus chassis caused by the difficult business situation in Latin America. Furthermore, expenses of EUR 16 million for the repositioning of the European and North American business and negative exchange-rate effects reduced the division’s earnings. The cost situation improved, however.

Daimler Financial Services’ positive business development continued in the third quarter. Worldwide, approximately 268,000 new leasing and financing contracts were concluded in a total volume of EUR 10.0 billion, or 16% more than in the prior-year quarter. Growth was achieved in all regions. By the end of September, contract volume had reached EUR 77.5 billion, which is 8% higher than at the end of 2011. Adjusted for exchange-rate effects, the increase was 7%.

With EBIT of EUR 322 million for the third quarter, Daimler Financial Services did not quite reach the level of earnings it achieved in the prior-year period (Q3 2011: EUR 337 million). The main reason for this earnings development was normalization of the cost of risk, which had been unusually low in 2011 as well as lower net interest income. However, a higher contract volume and positive exchange-rate effects had a positive effect on EBIT.

The reconciliation of the divisions’ EBIT to Group EBIT primarily reflects the proportionate share of the results of the equity-method investment in EADS, as well as other gains and losses at the corporate level.
Daimler’s proportionate share of the net result of EADS in the third quarter of 2012 amounted to EUR 104 million (Q3 2011: EUR 15 million). At the corporate level, there were expenses of EUR 7 million (Q3 2011: expenses of EUR 250 million). The expenses in the prior-year period primarily reflected the impairment of the carrying value of the investment in Renault.