Overall, Daimler was able to set several records simultaneously in the anniversary year, “125! years inventor of the automobile.” “The Group achieved its best-ever results in 2011 for unit sales, revenue, EBIT and net profit. All of our divisions contributed to this success,” stated Dr. Dieter Zetsche, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars. Above all, Mercedes-Benz Cars also set new records for sales, revenue and EBIT. In its long corporate history, the car division has never performed better than in 2011.
“In total, we made the anniversary year also into a year of success for Daimler. This performance shows that with its strong portfolio of cars, trucks, vans, buses and financial services, the Group is strategically very well positioned. We are now putting all of our efforts into continuing this success and achieving our targeted rates of return on a sustained basis as of the year 2013,” emphasized Zetsche.
Financial year 2011
The excellent earnings for the year 2011 primarily reflect the very good situation of unit sales in the divisions. In 2011, Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz Vans significantly increased their unit sales compared with the prior year in the major regions. Daimler Financial Services profited in particular from the lower cost of risk.
Special factors connected with the natural disaster in Japan resulted in total charges for the Group of €80 million. Insurance compensation has been taken into consideration in calculating this figure. Charges were also recognized from the impairment of Daimler’s equity interests in Renault (€110 million) and Kamaz (€32 million).
The special items affecting earnings in the years 2011 and 2010 are listed in the table on page 13 and in the individual divisions.
Daimler sold a total of 2.1 million vehicles in 2011, surpassing the prior-year figure by 11%. All of the automotive divisions contributed to the increase. Group revenue increased by 9% to €106.5 billion; adjusted for exchange-rate effects, there was an increase of 10%.
The net liquidity of the industrial business amounted to €12.0 billion at December 31, 2011 (2010: €11.9 billion).
The generally positive business development led to an increase in the number of persons employed worldwide to 271,370 as of December 31. This was 11,270 more than at the end of 2010. In Germany, the number of employees increased to 167,684 (2010: 164,026).
Due to Daimler’s success in 2011, the Board of Management and the General Works Council have agreed that the workforce’s performance will again be rewarded with a high performance participation bonus: In Germany, each eligible employee of Daimler AG will receive an amount of €4,100 (2011: €3,150) at the end of April 2012.
The shareholders will also participate appropriately once again in the Group’s financial success. In setting the dividend, Daimler aims to distribute approximately 40% of the net profit attributable to Daimler shareholders. In view of the good business development, the Board of Management and the Supervisory Board will therefore propose to the shareholders for their approval at the Annual Meeting to be held on April 4, 2012 that a dividend of €2.20 per share be paid out (2010: €1.85). This represents a total dividend of €2,346 million (2010: €1,971 million).
“In this way, we want our shareholders to participate appropriately once again in our financial success, and we anticipate a continuation of this dividend development in the coming years,” stated Bodo Uebber, Member of the Board of Management of Daimler AG for Finance & Controlling and Financial Services.
Investments for the future
On the basis of the “Road to Emission-free Mobility” initiative, one focus will be on new, extremely fuel-efficient and environmentally friendly drive technologies in all the Group’s automotive divisions. The objectives are to optimize conventional drive technologies, to enhance their efficiency through hybridization, and to develop electric vehicles with fuel-cell drive and battery power. Another focus is on new safety technologies with the goal of avoiding accidents as far as possible and of alleviating the consequences of any accidents that might still occur.
In this context, Daimler therefore increased its research and development expenditure to €5.6 billion in 2011 (2010: €4.8 billion). R&D spending amounted to €3.7 billion at Mercedes-Benz Cars (2010: €3.1 billion) and €1.3 billion at Daimler Trucks (2010: €1.3 billion).
Investment in property, plant and equipment amounted to €4.2 billion (2010: €3.7 billion), of which €2.7 billion was invested in Germany (2010: €2.1 billion). The focus was on substantial capital expenditure on local production facilities, new products and new technologies. One of the main areas at Mercedes-Benz Cars was the expansion of production capacities for the successor to the A-/B-Class at the Rastatt plant in Germany and at the new plant in Kecskemét, Hungary. Daimler Trucks made substantial investments in 2011 in the launch of the new Actros heavy truck.
The divisions in detail
Mercedes-Benz Cars, comprising the brands Mercedes-Benz, Maybach and smart, set a new record in 2011 with sales of 1,381,400 vehicles (2010: 1,276,800). The division’s revenue rose by 7% to a record of €57.4 billion (2010: €53.4 billion).
The division posted EBIT of €5,192 million, a significant improvement compared with the prior-year result (2010: €4,656 million). Its return on sales was 9.0% (2010: 8.7%).
The increase in earnings resulted primarily from the worldwide growth in unit sales, especially in the mid-sized and SUV segments. Above all in China and the United States, the division was able to boost its unit sales due to its attractive product range. Improved pricing for new vehicles and lower warranty expenses also made positive contributions to earnings. There were negative effects on earnings from increases in prices of materials and higher expenses related to the launch of new models, increased research and development costs and negative exchange-rate effects.
Daimler Trucks increased its worldwide unit sales by 20% to 425,800 vehicles and revenue also rose by 20% to €28.8 billion (2010: €24.0 billion).
The division’s EBIT of €1,876 million was also significantly higher than in the prior year (2010: €1,332 million). Return on sales amounted to 6.5% (2010: 5.5%). The positive earnings development is mainly based on strong growth in unit sales with contributions from all the major regions (the NAFTA region, Europe, Asia and
Latin America). The successfully implemented optimization and repositioning of the business operations of the subsidiaries Mitsubishi Fuso Truck and Bus Corporation and Daimler Trucks North America had sustained positive effects also in 2011, contributing to significant efficiency improvements and thus also to higher earnings. Negative effects on earnings resulted from higher material costs and the advance expenditure for the new Actros. In connection with the natural disaster in Japan, charges of €70 million were recognized. Without these charges and the impairment of the investment in Kamaz, Daimler Trucks would have achieved a return on sales of 6.9%.
Mercedes-Benz Vansincreased its unit sales by 18% to 264,200 vans of the Sprinter, Vario, Vito and Viano model series. Revenue of €9.2 billion was also significantly higher than in the prior year (2010: €7.8 billion).
The division posted a significant improvement in earnings. EBIT increased to €835 million (2010: €451 million) and return on sales improved from 5.8% in 2010 to 9.1% last year. The positive development of earnings resulted from significantly higher unit sales, above all in Germany, the NAFTA region and Eastern Europe. One of the main factors was the excellent market response to the new-generation Vito and Viano models. Higher material costs were more than offset by sustained efficiency improvements and better pricing.
Daimler Buses once again increased its sales of buses and bus chassis, despite difficult conditions for complete buses, to a total of 39,700 units (2010: 39,100). Revenue of €4.4 billion was slightly lower than in the prior year (2010: €4.6 billion).
With EBIT of €162 million, the division did not match the high level of earnings it achieved in the prior year (2010: €215 million). Its return on sales was 3.7% (2010: 4.7%). This earnings development is due to lower unit sales of complete buses in Western Europe and North America, especially in the city-bus segment, in which demand decreased. Higher prices due to the influence of inflation in Latin America also had a negative impact on EBIT. The division’s earnings were positively affected by higher shipments of bus chassis in Latin America (including Mexico) and by exchange-rate effects.
Daimler Financial Services developed very positively in all regions. Worldwide contract volume grew by 13% to the record level of €71.7 billion (2010: €63.7 billion). Adjusted for exchange-rate effects, contract volume grew by 12%. New business increased by 15% to €33.5 billion due to the higher volumes of unit sales by the automotive divisions.
The division significantly surpassed its earnings of the prior year with EBIT of €1,312 million in 2011 (2010: €831 million). Its return on equity was 25.5% (2010: 16.1%). The improvement in earnings was mainly caused by lower provisions for risks, improved refinancing conditions and an increased contract volume. On the other hand, earnings were negatively affected by expenditure related to the realignment of business activities in Germany. Another factor was that additional allowances for bad debts had to be recognized in connection with the natural disaster in Japan.
The reconciliation of the divisions’ EBIT to Group EBIT comprises Daimler’s proportionate share of the results of its equity-method investment in EADS, other gains and/or losses at the corporate level, and the effects on earnings of eliminating intra-group transactions between the divisions.
Daimler’s proportionate share of the net profit of EADS amounted to income of €143 million (2010: expense of €261 million). In addition, an expense at corporate level of €588 million has been taken into consideration (2010: income of €21 million). In 2011, this was primarily related to litigation and the impairment of Daimler’s equity holding in Renault (€110 million). Due to the sharp drop in the stock-exchange price of Renault shares at the end of the third quarter, the shareholding had to be impaired to its fair value.
Outlook
According to current estimates, worldwide markets for motor vehicles should continue to grow this year, with the exception of the Western European markets, which are increasingly affected by the debt crisis. Global registrations of new cars are likely to increase by approximately 4%, whereby the growth will primarily be driven by the Asian emerging markets, the US market and the Japanese market, which will benefit from catch-up effects.
Worldwide demand for medium and heavy trucks in 2012 is expected to be at least at the level of last year. Despite a perceptible growth slowdown, the North American market should prove to be the world’s most important driver of demand, expanding by 15 to 20%. Demand for trucks in Europe will be impacted by the ongoing sovereign-debt crisis and the resulting economic weakness. So at best, demand in that market can only be expected to be about as strong as last year. The Japanese market for heavy and medium-duty trucks should expand once again by 5 to 10% compared with the prior year, thanks to the country’s economic growth, which is benefiting from the reconstruction efforts. Overall demand for trucks in the emerging markets should grow only moderately this year.
Mercedes-Benz Cars assumes that it will be able to further increase its unit sales this year and will grow faster than the total market. Its competitive model range will facilitate growth in traditional markets also under less favorable conditions. The division will also profit from the continuation of very strong demand for its models in the C-Class segment. In the luxury segment, the new generation of the SL will boost unit sales as of late March. With sport-utility vehicles, further growth is anticipated primarily due to the full availability of the new M-Class and as of September 2012 from the new GL. Furthermore, both the new GLK (a compact SUV) and the new-generation G-Class will be launched in June. The new models in the high-volume compact-car segment will also boost growth in unit sales. The new B-Class was already launched in November 2011 and the new A-Class will follow in September 2012.
On the engine side, the new and particularly efficient four-, six- and eight-cylinder engines and the ECO start-stop technology will be introduced in additional models. This will boost unit sales above all with commercial customers. With the help of the new engines and the particularly economical BlueEFFICIENCY models, Daimler was able to reduce the average CO2 emissions of the cars sold in the European Union to 150 grams per kilometer in 2011 (2010: 158 g/km).
Within the framework of the “Mercedes-Benz 2020” growth strategy, the product range will be significantly expanded across all segments in the coming years. In the compact-car segment alone, there will be five models with the three-pointed star in the future, which will increasingly appeal to younger customers as well. At the same time, Mercedes-Benz Cars will expand the top end of its model range – for example with three additional versions of the next S-Class and another SUV version, as well as with models such as the CLS Shooting Break, which will be launched in September 2012 as a completely new vehicle concept. Positive impetus is expected for smart this year from two highlights: The new smart fortwo electric drive will gradually be launched in more than 30 markets around the world, and the smart ebike will also be introduced.
In regional terms, Mercedes-Benz Cars sees further growth opportunities in 2012 above all in North America, as well as in China, India and Russia. Prospects in Western Europe are rather limited, however. But the division assumes that it will be able to further strengthen its position also in this extremely competitive market, due in particular to the expansion of the model portfolio. Fairly stable unit sales are anticipated for the smart brand.
Daimler Trucks also assumes that its unit sales will increase this year. Following the significant growth in 2011, the division intends to continue to grow faster than the total market in Europe. For the Brazilian market, demand is expected to fall at first following the record year 2011, due to the introduction of stricter emission standards.
The recovery of the truck market in the NAFTA region will probably continue. Because of the high average age of vehicle fleets there, the need to invest in replacements is still very high. On the basis of well-filled order books, the division assumes that it will be able to profit from that development to an above-average extent. Rising unit sales are anticipated also in Japan. Reconstruction after the natural disaster is leading to a stronger demand for trucks in that market.
With its activities in Russia, India and China, the division has created the right conditions for further growth in those markets. The final approval of the authorities for the joint venture in China was granted last year, the joint venture in Russia with Kamaz presented the first truck with components from Daimler, and the first plant in India will be opened in April 2012.
In general, the division assumes that it will be able to further improve its worldwide market position in the coming years. Daimler Trucks will be supported by a large number of new models and the flexibility of its global production network.
At Mercedes-Benz Vans, the positive trend of unit sales should continue, aided on the product side by the new city van Citan, which will enable the division to utilize additional growth potential in a new market segment as of this year. Van production in Argentina was changed over to the current generation of the Sprinter at the beginning of the year 2012. As a result, the range of products in Latin American markets is being significantly upgraded. Unit sales in China should be substantially increased by means of local production. As part of this development, in addition to the Vito and Viano models, the joint venture Fujian Daimler Automotive has also been producing the Sprinter since the end of 2011.
Daimler Buses assumes that it will be able to maintain its globally leading position in its core markets for buses above 8 tons with innovative and high-quality new products. However, a slight decrease in unit sales is anticipated in 2012 because of the introduction of Euro V emission regulations in Brazil. Slight growth in unit sales is expected in Western Europe, the stable core market, due to the launch of the new Mercedes-Benz Citaro, a product of outstanding quality.
Daimler Financial Services anticipates further growth for both contract volume and new business in its core business of vehicle financing and leasing. This should be supported in particular by growth in the BRIC markets and by the provision of financial services for the new cars in the compact-car segment. In the area of insurance, the division aims to achieve further growth in the number of policies brokered and in its market share. Strong growth is also expected in the new Mobility Services business unit, into which the car2go mobility concept was integrated in the year 2011.
On the basis of assumptions on the development of major sales markets and the planning of the divisions, the Daimler Group expects that its unit sales will increase again significantly this year, and that its revenue will also continue to grow. Daimler aims to post EBIT from the ongoing business in the magnitude of the prior year. This is based on the assumption of currency exchange rates at close to the present levels.
The following EBIT targets have been set for the divisions:
- Mercedes-Benz Cars: at the prior-year level
- Daimler Trucks: at least at the prior-year level
- Mercedes-Benz Vans: at least at the prior-year level
- Daimler Buses: at least at the prior-year level
- Daimler Financial Services: slightly below the prior-year level
Daimler aims for an annual average return on sales for the automotive business of 9% across market and product cycles. This is based on target returns on sales for the individual divisions, which are to be achieved on a sustained basis as of 2013, of 10% for Mercedes-Benz Cars, 8% for Daimler Trucks, 9% for Mercedes-Benz Vans and 6% for Daimler Buses. The target for Daimler Financial Services is a return on equity of 17%.
In the period of 2012 through 2013, Daimler will invest a total of €21.5 billion in research and development activities (€10.9 billion) and property, plant and equipment (€10.6 billion). That is €3.2 billion more than in the years 2010 and 2011.
In order to achieve its ambitious growth targets, Daimler will require additional employees in all its divisions. In connection with expanding the production capacities, new jobs will be created above all in North America, Asia and Hungary. By developing production capacities abroad, the jobs in Germany are being secured for the long term.
Table: Earnings in both years were affected by special factors, which are listed in the following table:
Credits: Daimler AG
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