Daimler tells shareholders automaker on course and continuing investment

Daimler's annual shareholders meeting on Wednesday (8 July) heard the automaker was "maintaining its course in the midst of challenging economic conditions and continuing to invest in the key technologies of the future to successfully shape the transformation".

Manfred Bischoff, chairman of the supervisory board, said: "Despite all the challenges presented by the corona pandemic, we must not neglect the key tasks of the transformation.

"Electrification and digitisation in all their forms are the main technological tasks and continue to require high funding.

"Not least, COVID-19 has once again made it clear that we must be more careful with our environment if we want to avoid causing enormous damage to ourselves in the long term.

"Daimler's goal continues to be emission-free mobility."

"Daimler's future will be sustainably fascinating, sustainably climate neutral and last but not least, sustainably profitable," management board chairman Ola Kaellenius told the meeting.

"In view of an ever faster changing world, we must change at a faster pace. We need a lane change towards decarbonisation. That's the direction we're headed in and we're following insistently."

The next generation S-Class, which would be launched this coming autumn, represents the future of Mercedes-Benz, the automaker said, combining Daimler's two strategic focuses of electrification and digitisation.

Forty-eight volt technology will be standard with all engines while, Daimler claimed, the plug in hybrid version "sets new standards in this segment in terms of electric range".

The S-Class will be followed in 2021 by the EQS, the first fully electric Mercedes-Benz luxury sedan.

These new models will have an updated version of the MBUX navigation and infotainment system.

"The S-Class is the world's best-selling luxury sedan, and with the latest generation, we want to offer our customers innovation, safety, comfort and quality like never before," added Kaellenius.

"We are above all a luxury brand and there is great potential for further growth, especially at the upper end of the segments in which we are operating.

"So we will systematically strengthen our brand portfolio and make it more attractive to a broader target group.

"We are focused on building the most desirable cars in the world.

"That is our promise and the best path towards more profitable growth."

Daimler said it had countered the drop in demand caused by the COVID-19 pandemic by suspending production in March, April and May, and by introducing short time working.

At the same time, expenditure was reduced and investments were focused on future-oriented projects – this had safeguarded the company's financial strength.

At the end of the first quarter, net liquidity was at a "robust level" of EUR9.3bn.

Daimler also increased its financial flexibility at the beginning of April with an additional syndicated credit facility of EUR12bn.

"The measures we took were aimed at dealing with the situation in the short term but were also designed to support our long term course," said Kaellenius.

Earnings declined in the last financial year, due mainly to "substantial extraordinary expenses" while unit sales were flat.

Daimler sold 3.34m cars and commercial vehicles in 2019 versus 3.35m in 2018.

Revenue increased 3% to EUR172.7bn (2018: EUR167.4bn) and EBIT fell to EUR4.3bn from EUR11.1bn.

Net profit fell to EUR2.7bn from EUR7.6bn and net profit fell to EUR2.4bn from EUR7.2bn.

Dividend was set at EUR0.90 per share compared with EUR3.25 in 2018.

In the first half of 2020, Mercedes-Benz unit sales fell 19% to about 870,000 cars.

"Mercedes-Benz has already made up some ground in the second quarter," Kaellenius told the meeting.

"In China [we] achieved [our] best second quarter ever in terms of unit sales.

"We are cautiously optimistic that other markets will follow this development step by step.

"As soon as demand picks up again, we can increase production quickly and efficiently."

Truck sales fell by 38% to around 150,000 vehicles in the first six months of 2020 as a result of the pandemic and the already weaker market environment, especially in Europe and North America.

Order intake "shows positive signs in recent weeks in almost all key markets", the meeting heard.

"Daimler Mobility contract volume on 30 June was 2% lower at about EUR155bn compared to June 2019.

"Also in China, things are already looking up again.

"The negative effects of the first quarter were offset in the second quarter."

Daimler expects negative adjusted group EBIT and a negative free cash flow in the second quarter just ended on 30 June.

Also, as forecast in the first quarter, revenue was expected to decrease significantly although the "development of revenue in recent weeks, particularly in the passenger car business, gives cause for cautious optimism", Daimler said.

"The early adjustment of production and the measures introduced to limit costs and expenses had a positive effect on cash flow and liquidity," Kaellenius said.

"The necessary investments in the future can no longer be generated through increased revenue and 'normal' efficiency gains," said said Bischoff.

"The management board has therefore adopted a programme to improve the cost structure. Cost discipline covers all areas of the company and is an essential prerequisite for a financially successful future."

Daimler launched a comprehensive initiative across all divisions and the group at the end of 2019 and positive effects were already being felt.

"Our previous efficiency goals covered the upcoming transformation, but not a global recession. That is why we are further refining our course," he added.

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