As is becoming the norm among automakers, growth in China led the way to improved profits.
Daimler AG (DAI) today in Stuttgart announced Q1 earnings of €2,031 million, 71% higher than the prior-year period (Q1 2010 €1,190 million). Net profit rose to €1,180 million (Q1 2010 €612 million). Earnings per share increased to €0.99 (Q1 2010€ 0.65).
Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz Vans increased their unit sales compared with the Q1 2010 in all major regions, especially China. Trucks benefitted from recoveries in most major markets. Daimler Financial Services earnings were essentially flat, and the subsidiary took a €29 million write down due to anticipate losses from the Japan earthquake. Daimler trucks also wrote down €49 million in earthquake related losses.
“We achieved excellent earnings in the first quarter. This puts us well ahead of our planning and confirms our positive outlook for the year 2011,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars. Zetsche did not provide specifics, though.
Mercedes-Benz Cars increased its unit sales compared with the prior-year period by 12% to 310,700 vehicles (Q1 2010 277,100). First-quarter revenue increased by 20% to € 13.9 billion. With EBIT of € 1,288 million in the first quarter, the Mercedes-Benz Cars division – core to Daimler’s success – improved its earnings compared with the prior-year period by 60%. Its return on sales was 9.3% (Q1 2010 7.0%).
The main factor contributing to this earnings improvement was further growth in unit sales, especially in the premium and luxury segments and with SUVs. Especially in China, the Mercedes-Benz Cars division was able to significantly increase its unit sales. There were negative impacts on earnings from increased prices of raw materials, increased use of resources in connection with the ramp-up of new vehicles, as well as from higher research and development expenditure.
Daimler Trucks increased sales by 27% to 89,300 units. Revenue of € 6.2 billion was 28% higher than in the first three months of last year.
The division’s EBIT of €415 million was also significantly better than the prior-year earnings of €130 million. The return on sales was 6.6% (Q1 2010 2.7%).
This earnings improvement is primarily due to the markets of Western Europe and the United States. There was an opposing, negative impact on first-quarter earnings from high advance expenditure for the current product development.
Mercedes-Benz Vans increased its unit sales compared with the first quarter of last year by 16% to 54,000 vehicles of the Sprinter, Vito/Viano and Vario models. Revenue of €2.0 billion was also significantly higher than the prior-year figure of € 1.7 billion.
The division achieved an operating profit (EBIT) of € 173 million (Q1 2010 € 64 million). Its return on sales improved to 8.8%, compared with 3.8% in the first quarter of last year. The positive earnings were mainly the result of the ongoing market recovery and significantly higher unit sales, especially in Germany, China and Turkey.
Worldwide unit sales by Daimler Buses of 7,700 buses and bus chassis were below the prior-year figure of 8,400 units. Revenue amounted to € 831 million (Q1 2010 € ,011 million). The division’s EBIT amounted to negative -€ 33 million (Q1 2010 € 41 million) and its return on sales was minus -4% (Q1 2010 4.1%). Due to lower unit sales (-8%), the division was unable to match the earnings achieved in the prior-year period. The business with complete buses in Western Europe and North America was particularly affected, as the development of the city-bus segment was significantly weaker than in the prior year for market reasons. In Latin America, the prior-year quarter had been positively affected by deliveries on major orders. Negative currency effects also contributed to the drop in earnings.
At Daimler Financial Services, worldwide contract volume decreased compared with the end of 2010 by 3% to € 61.7 billion. Adjusted for exchange-rate effects, contract volume was almost unchanged. New business grew compared with the first quarter of 2010 by 11% to € 6.9 billion, or by 8% after adjusting for currency effects.
With EBIT of € 321 million, the division significantly surpassed its earnings of the prior-year period (Q1 2010 € 119 million). The improvement in earnings was mainly caused by lower risk provisions and higher interest margins.
Outlook for 2011 affirmed
Based on current estimates, the Daimler Group expects to post significantly higher EBIT from its ongoing business in 2011 than in 2010. Daimler expects its total revenue to continue to grow in 2011. That growth will probably be driven by all the automotive divisions. On the basis of the divisions’ planning, Daimler anticipates a significant increase in total unit sales (2010 1.9 million vehicles).
Mercedes-Benz Cars assumes that the Mercedes-Benz brand will increase its unit sales to a new record of more than 1.2 million cars in 2011. Unit sales in the remaining quarters of 2011 will continue to be above the volumes of the prior-year periods. In November, the division will launch the new B-Class – the first of four new models in the compact-car segment. For the smart brand, unit sales are anticipated at roughly the same level as in 2010 due to the full availability of the new generation of the Smart For Two.
Daimler Trucks assumes it will increase its unit sales substantially in 2011. Aided by the general economic recovery and the expected related growth in demand for transport services and vehicles, most of its major markets will grow at significant rates.
The Mercedes-Benz Vans division also expects to achieve further growth in unit sales in full-year 2011, on the basis of the ongoing recovery of its most important markets. The launch of the Sprinter in China and the adjustment of production capacities in Argentina will additionally contribute to that growth.
Daimler Buses expects to sell more than 40,000 complete buses and bus chassis in the year 2011. However, the increase will be due solely to the positive development of chassis sales in Latin America. The business with complete buses in Europe and North America is likely to remain weak.
Daimler Financial Services anticipates a further increase in its worldwide contract volume and new business in full-year 2011. Credit-risk costs are expected to stabilize this year, also interest rates are likely to increase.
Due to the strong demand for its products, the Daimler Group assumes that the worldwide number of employees will increase compared with the number at the end of 2010.
(See also Porsche Posts 13% Sales Increase in Q1, €496 million Profit, Volkswagen Group Sets Q1 and March Sales Records, BMW Says Record Sales and Earnings Coming in 2011, BMW on Record 2010 Earnings Proposes Record Dividends)
