Daimler has reported continuing year-on-year unit sales and revenue growth in Q3 2012, but also further reported declines in EBIT and net income for the quarter, resulting in falling margins in all the key divisions. The Q3 year-on-year fall of 11.4% in net profit meant that in the year-to-date period [January-September 2012 (9M 2012)] earnings fell below the January-September 2011 level by 2.5%, while the EBIT decline of 2.4% in Q3 2012, although well below the Q2 decline of 13.1%, resulted in a 4.3% deficit for the nine-month period.
As acknowledged previously by Daimler management, the weakening of earnings through Q2 and Q3 has meant that the company’s previous target of exceeding 2011 earnings in 2012 will not now be achieved. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, has now stated: “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.” With regard to the company’s targets, Zetsche added: “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.”
Daimler now expects group EBIT from the ongoing business of approximately €8bn (US$10.37bn) in 2012. Specific 2012 EBIT forecasts by division are now as follows: Mercedes-Benz Cars, approximately €4.4bn (previously, at the prior-year level of €5,192m); Daimler Trucks, approximately €1.7bn (at least at the prior-year level of €1,876m); Mercedes-Benz Vans, approximately €650m (in the magnitude of the prior year, which was €835m); Daimler Buses, approximate loss of €80m (below the prior-year level of +€162m); and Daimler Financial Services, approximately €1.3bn (slightly below the prior-year level of €1,312m).
The company still expects its total unit sales to be higher than the result in 2011 – 2,111,106 vehicles – and also assumes the group’s revenue will continue to grow in 2012 and will be “significantly higher” than €110bn.
The company has also noted: “Daimler has defined return targets as of 2013 for the automotive business and all the divisions over the respective business cycles. The achievement of those targets has become much more challenging due to the significantly more difficult market conditions prevailing at present. The group assumes that the targets will be not met until a later date, but continues to pursue them vigorously, with the support of measures taken and programmes initiated in all divisions.”
Daimler’s unit sales in Q3 2012 totalled 528,559 vehicles, a year-on-year rise of 3,042 units or 0.6% from the Q3 2011 total of 525,517. The 9M 2012 total was 1,600,988, versus 1,514,903 in 9M 2011, a gain of 5.7%.
Mercedes-Benz Cars unit sales increased 2.4% to 345,418 (Q3 2011; 337,163), with respective 9M totals of 1,054,105 and 1,005,516 (+4.8%) and Daimler Trucks sales rose 3.0% to 119,142 (115,634), with respective half-year totals of 349,023 and 296,352 (+17.8%). In contrast, Mercedes-Benz Vans sales fell 12.2% to 55,742 (63,518), taking the 9M total to 176,289 (185,525), a fall of 5.0%. Daimler Buses unit sales fell 10.3% to 8,257 (9,202), leaving the 9M total at 21,571, down 21.6% from 9M 2011’s 27,510.
Group revenue in the third quarter of 2012 was €28,572m, versus €26,407m in Q3 2011, a rise of 8.2%. Adjusted for exchange-rate effects, revenue grew by 3%. The 9M 2012 revenue total was €84,467m, against €77,474m in 9M 2011, a rise of just over 9.0%.
Group EBIT in the latest quarter was €1,921m (margin of 6.7%), down 2.4% from the prior-year’s €1,968m (7.5%), the margin decline reflecting a number of particular negative factors at the individual divisions, as outlined below. Exchange-rate effects made a positive contribution to earnings but EBIT included higher charges for the compounding of non-current provisions as well as effects relating to lower discount factors of an aggregate €194m (Q3 2011: €41m).
EBIT in the January-September 2012 period was €6,294m (7.5%), down 4.3% from the previous year’s €6,580m (8.5%).
Reported net profit in the Q3 2012 period was €1,205m, versus €1,360m, a fall of 11.4%, while net earnings attributable to Daimler shareholders fell 14.2% to €1,103m (€1,286m). 9M 2012 net profit was €4,136m, against €4,244m in 9M 2012, while net earnings attributable were €3,868m, versus €3,952m.
Mercedes-Benz Cars reported revenue (before reconciliations) of €15,238m in Q3 2012, a rise of 10.2% from Q3 2011’s €13,826m, helped by the increase in unit sales. Nevertheless, despite this top-line growth, Q3 2012 EBIT declined 12.0% year-on-year to €975m from €1,108m, the margin dropping to 6.4% from 8.0%. Growth in unit sales, especially in the US, 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. However, 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.
9M 2012 revenue at Mercedes-Benz Cars was €45,539m, up 7.6% from the 9M 2011 total of €42,333m. EBIT at the division in the first nine months of 2012 was €3,541m (margin of 7.8%), against €3,962m (9.4%) in 9M 2011, a fall of 10.6%.
With regard to the short-term outlook, in the current quarter, Mercedes-Benz Cars expects to post higher unit sales than in the prior-year quarter despite a weaker market development in Europe. The increase will be driven by the new models in the compact-car segment. On the earnings side, charges are anticipated from measures taken to support the dealer network in China.
Daimler Trucks saw year-on-year revenue growth of 6.2%, the Q3 2012 total being €8,095m, versus Q3 2011’s €7,619m, helped by the rise in unit sales. However, EBIT fell 8.6% to €507m (€555m) and the margin declined to 6.3% from 7.3%.
The company noted that Daimler Trucks had positive growth in 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. However, 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.
9M 2012 revenue at Daimler Trucks was €23,607m, up 15.1% from the 9M 2011 total of €20,509m. EBIT at the division in the first nine months of 2012 was €1,414m (margin of 6.0%), against €1,454m (7.1%) in 9M 2011, a fall of 2.8%.
In its outlook, Daimler Trucks has cautioned that the development of unit sales in the fourth quarter will be impacted by weaker demand than had previously been expected in major markets. This applies above all to western Europe and Brazil, but demand in the NAFTA region is also likely to level off in the medium duty segment. Expenses will result from market entry in India and the start of business by the joint venture in China.
Mercedes-Benz Vans saw Q3 2012 revenue fall 6.2% year-on-year to €2,084m (€2,222m), EBIT fell 62.5% to €75m (€200m) and the margin declined to 3.6% from 9.0%. 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.
9M 2012 revenue at Mercedes-Benz Vans was €6,592m, still up 2.3% from the 9M 2011 total of €6,442m. EBIT at the division in the first nine months of 2012 was €440m (margin of 6.7%), against €579m (9.0%) in 9M 2011, a fall of 24.0%.
Daimler Buses continued to experience a dismal period in the third quarter of the current year, the continuing fall in unit sales helping drive revenue down to €951m from €1,041m in the previous year, a fall of 8.6%. Q3 2011 EBIT of €25m fell to a loss of €45m in Q3 2012. As in the previous two quarters, the fall in earnings was primarily due to lower unit sales of bus chassis caused by the difficult business situation in Latin America. Furthermore, expenses of €16m for the repositioning of the European and North American business and negative exchange-rate effects reduced the division’s earnings.
9M 2012 revenue at Daimler Buses was €2,697m, down 11.2% from the 9M 2011 total of €3,038m. The EBIT loss at the division in the first nine months of 2012 was €205m (margin of -7.6%), against a profit of €53m (1.7%) in 9M 2011.
Added Zetsche: “Considering the significantly more difficult market conditions, Daimler achieved good earnings in the third quarter.” He also noted: “At Mercedes-Benz Cars, we are adding an important element to our Mercedes-Benz 2020 growth strategy: ‘Fit for Leadership’. With this programme, 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.”
