Daimler AG has reported results for the second quarter ended June 30, 2019. The group’s total unit sales declined by 1% to 822,000 passenger cars and commercial vehicles (Q2 2018: 833,000). Revenue was €42.7 billion (Q2 2018: €40.8 billion), an increase of 5%. Also adjusted for positive exchange-rate changes, revenue was slightly higher than the prior-year level. The Daimler Group posted second-quarter EBIT of minus €1.6 (Q2 2018: plus €2.6) billion.
“Our second quarter results were mainly impacted by exceptional items of 4.2 billion euros. Therefore, our focus for the second half of this year is on improving our operating performance and cash-flow generation. In general, we are intensifying the group-wide performance programs and reviewing our product portfolio in order to safeguard future success. At the same time, we are continuing consistently our company transformation,” says Ola Källenius, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
In the second quarter, earnings weakened to a net loss of €1.2 billion (Q2 2018: net profit of €1.8 billion). Net loss attributable to the shareholders of Daimler AG amounted to €1.3 billion (Q2 2018: net profit of €1.7 billion), leading to a decline in earnings per share to minus €1.24 (Q2 2018: plus €1.61).
Free cash flow and liquidity
In the first 6 months of 2019, the free cash flow of the industrial business was minus €3.3 billion (Q1-2 2018: plus €1.8 billion). The sharp decrease resulted in particular from higher working capital, as well as a continued high level of investment in future products.
At the group, investments in property, plant and equipment increased to €3.4 billion (Q1-Q2 2018: €2.9 billion). Expenses for research and development also increased to €4.7 billion (Q1-Q2 2018: €4.6 billion). Compared with December 31, 2018, net liquidity of the industrial business decreased from €16.3 billion to €6.6 billion. The dividend payment of €3.5 billion (2018: €3.9 billion) to shareholders of Daimler AG as well as the negative free cash flow of the industrial business led to the decrease in net liquidity.
Mercedes-Benz Cars sold 575,639 vehicles in the second quarter, which is 3% fewer than in Q2 2018 (Q2 2018: 590,690). Mercedes-Benz Cars’ revenue decreased by 1% to €22.3 billion (Q2 2018: €22.6 billion) and its EBIT slipped to minus €672 million (Q2 2018: plus €1,901 million). Return on sales was minus 3.0% (Q2 2018: plus 8.4%).
Daimler Trucks showed an increase in unit sales of 2% to 126,474 vehicles in the second quarter (Q2 2018: 123,910). Revenue increased by 14% to €10.5 billion (Q2 2018: €9.2 billion). EBIT was up 33% to €725 million (Q2 2018: €546 million) and return on sales was 6.9% (Q2 2018: 5.9%).
Mercedes-Benz Vans’ unit sales were flat at 111,118 (Q2 2018: 110,883) vehicles. Revenue was 4% higher at €3.7 billion (Q2 2018: €3.5 billion). EBIT decreased to minus €2,050 million (Q2 2018: plus €152 million) while return on sales fell to minus 56.1% (Q2 2018: plus 4.3%).
Daimler Buses’ sales grew by 12% to 8,435 units in the second quarter (Q2 2018: 7,522). Revenue increased by 18% to €1.3 billion (Q2 2018: €1.1 billion). EBIT amounted to €106 million (Q2 2018: €66 million), an increase of 61%. Return on sales improved to 8.4% (Q2 2018: 6.1%).
At Daimler Financial Services, new business was almost flat at €18.4 billion in the second quarter (Q2 2018: €18.3 billion). Revenue was 9% higher at €7.1 billion (Q2 2018: €6.6 billion). The division’s EBIT amounted to €431 million (Q2 2018: €66 million), an increase of 553% compared to the prior year. At 12.5%, return on equity was above the figure of 2.1% in the prior-year period.
At the end of the second quarter, the Daimler Group employed 304,065 people worldwide (year-end 2018: 298,683, end of Q2 2018: 300,777). Of that total, 177,480 people worked in Germany (year-end 2018: 174,663, end of Q2 2018: 177,082), and 27,220 in the United States (year-end 2018: 26,310, end of Q2 2018: 25,959). The consolidated subsidiaries in China employed 4,503 people at the end of June (year-end 2018: 4,424, end of Q2 2018: 4,332).
Outlook for Daimler and divisions
At group level, Daimler expects unit sales in 2019 at the previous year number and revenue slightly above the prior year. Mercedes-Benz Cars estimates revenue at the previous year’s level. Mercedes-Benz Vans and Daimler Trucks aim to achieve slightly higher revenue than in 2018. Daimler Buses expects significant revenue growth. Daimler Financial Services anticipates a slight increase in revenue.
Daimler expects Group EBIT in 2019 to be significantly below the prior-year level. The individual divisions expect the following returns in 2019:
- Mercedes-Benz Cars: a return on sales of 3% to 5%,
- Daimler Trucks: a return on sales of 7% to 9%,
- Mercedes-Benz Vans: a return on sales of minus 15% to minus 17%,
- Daimler Buses: a return on sales of 5% to 7%,
- Daimler Financial Services: a return on equity of 17% to 19%.
Based on the measures taken, Daimler expects EBIT and free cash flow of the industrial business to improve significantly by the end of the fiscal year compared with the first half. Nevertheless, the anticipated development of earnings in the automotive business as described above will partially have a negative impact. The ongoing high upfront expenditures for new products and technologies as well as the costs for »Project Future« to implement the new group structure will be a burden. Under these conditions, Daimler expects the free cash flow of the industrial business in financial year 2019 to be significantly lower than in the previous year.