It wasn't a good Q1 – in results terms – for Daimler
Daimler has posted first-quarter profit down 16% on last year and warned that its financial targets have become harder to achieve.
The Daimler Group achieved first-quarter EBIT of EUR2,802m, well below the prior-year figure of EUR3,335m. Net profit w as down 9% to EUR2,149m.
CEO Dieter Zetsche said the results fell short of the company's expectations as it was hit by higher costs and lower sales. He said 'great efforts' would be needed to hit the year's targets.
"We cannot and will not be satisfied with this – as expected – moderate start to the year. We now have to work hard to achieve our targets for 2019. Based on our sales planning and the countermeasures we have already initiated, we are confident that we will achieve those targets," he said. "In the first few months of this year, we have consistently implemented further elements of our strategy and initiated several important projects: our cooperation at smart with Geely, the development of a joint platform for autonomous driving, and the merger of the mobility services with those of the BMW Group."
Bodo Uebber, Member of the Board of Management of Daimler AG responsible for Finance & Controlling and Daimler Financial Services said: "We had a comparatively weak start to the year and face numerous challenges along the entire value chain in all our automotive divisions. This had a negative impact on unit sales and earnings. Above all, high inventories and bottlenecks in the supply chain had a substantial negative impact on the cash flow. Nonetheless, we will continue to invest in our future – sensibly and with a clear focus."
Daimler Group's total unit sales decreased by 4% to 773,800 passenger cars and commercial vehicles in Q1. Revenue amounted to EUR39.7bn (Q1 2018: EUR39.8bn).
Earnings at all the automotive divisions decreased significantly compared with the first quarter of last year. Earnings at Mercedes-Benz Cars were lower than in the prior-year quarter, due in particular to lower unit sales and changes in the sales structure. There was a negative impact on earnings at Daimler Trucks from additional costs, mainly resulting from higher raw-material prices and supply-chain bottlenecks.
Mercedes-Benz Cars sold 555,300 vehicles in the first quarter, which is 7% less than the same quarter last year. In Europe, unit sales were down by 4% to 235,300 Mercedes-Benz and Smart brand vehicles. Of that total, 78,100 units were sold in the German domestic market, representing a decrease of 1%. In China, Mercedes-Benz Cars' largest market, unit sales decreased by 3% to 173,200 units. Sales in the United States fell by 9% to 64,300 units.
Mercedes-Benz Cars' revenue fell by 8% to EUR21,200m (Q1 2018: €22,998 million) and its EBIT amounted to EUR1,298m (Q1 2018: EUR2,060m). At 6.1%, return on sales was below the figure of 9.0% in the prior-year quarter. EBIT was also reduced by weaker pricing, exchange-rate effects and upfront expenditure for new technologies and vehicles.
In the first quarter of 2019, EUR1.7bn was invested worldwide in new products and technologies, capacity expansion and modernization, primarily at the production and assembly plants (Q1 2018: EUR1.3bn). The plants in Germany accounted for EUR1.2bn of the investment in property, plant and equipment (Q1 2018: EUR1.1bn). Research and development spending increased to EUR2.4bn (Q1 2018: EUR2.3bn).
Daimler said it anticipates a slight increase in group total unit sales in 2019.
Mercedes-Benz Cars expects a slight increase in unit sales in full-year 2019. The sales development will be significantly influenced by lifecycle effects of certain model series, Mercedes said. Mercedes-Benz intends to launch more than a dozen new and upgraded vehicles in 2019. The new compact cars in particular, including the new B-Class, the A-Class sedan and the new GLB, the eighth model in the compact-car segment, should have a positive impact on unit sales, the company said. Sales are expected to be boosted also by the high-growth SUV segment, especially in the second half of the year.
Outlook for Daimler
On the basis of the expected growth in unit sales, Daimler said its group's revenue is still expected to increase slightly in 2019. Mercedes-Benz Cars, Daimler Trucks and Daimler Financial Services anticipate slight increases in revenue, while the Mercedes-Benz Vans and Daimler Buses divisions expect significant revenue growth.
Based on the expected market development and the current assessments of the divisions, Daimler expects Group EBIT in 2019 to be slightly higher than in the previous year.
The individual divisions expect the following returns in 2019:
- Mercedes-Benz Cars: a return on sales of 6% to 8%,
- Daimler Trucks: a return on sales of 7% to 9%,
- Mercedes-Benz Vans: a return on sales of 0% to 2%,
- Daimler Buses: a return on sales of 5% to 7%,
- Daimler Financial Services: a return on equity of 17% to 19%.
- Against the backdrop of expenses for the adjustment of production capacities in Argentina and Russia in connection with the start of production of the Sprinter in Charleston, USA, as well as ongoing governmental proceedings and measures taken for diesel vehicles, the Mercedes-Benz Vans division has adjusted its expected return on sales for the current financial year.
"Achieving the financial targets for 2019 has not become easier since the first quarter. In order to fulfill them and our strategic return targets again at all the divisions, great efforts and the focused deployment of resources are essential this year and in the years to come. We must therefore increase availability to deliver, reduce costs and strengthen measures to increase efficiency and flexibility throughout the company. Because in view of the major changes taking place in the automotive industry and in individual mobility, there is no way around short-term cost-cutting measures and long-term strategic decisions. With the new group structure, we are already creating the basis to give the new entities greater entrepreneurial scope to utilise further earnings and business potential. We will align the group even more strongly towards sustainability in all dimensions," said Zetsche.
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