Daimler AG reports a surge in worldwide sales and profits to new heights, boosted by one-off gains in the first half of 2017.
IHS Markit perspective
- Significance: Daimler's momentum continues into the second quarter with record sales and revenues driven by a strong performance from the Mercedes-Benz car division.
- Implications: While some one-off factors have influenced the revenue and EBIT figures, core strength in the group's vehicle divisions is driving the performance.
- Outlook: Mercedes-Benz's model assault has revitalised the company's fortunes, and continued high levels of investment in new technology and partnerships indicate a clear mission to maintain this lead in the premium segment.
Daimler AG has reported record second-quarter 2017 revenue and unit sales, as global group sales surged 8% year on year (y/y) to 822,500 units, including cars and commercial vehicles. According to a Daimler AG financial release, group revenue rose 7% y/y in the second quarter, reaching the highest recorded quarterly figure of EUR41.2 billion (USD47.9 billion). Daimler said the figure equated to around a 5% y/y increase once exchange-rate effects had been factored in. Net profit for the second quarter rose a more modest 2% y/y to EUR2.507 billion, whereas EBIT surged 15% to EUR3.746 billion. The second quarter's performance builds on an impressive first-quarter performance to leave the first-half revenue up 9% y/y to just short of EUR80 billion and net profit leapt 38% y/y to EUR5.308 billion.
"We had an excellent second quarter," said Dr Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars. "Our strategy is taking effect. We have set ourselves ambitious goals. And we are achieving them – in terms of unit sales and profitability. Step by step, we are optimising efficiency throughout the group. The transformation of Daimler is going ahead at full speed. And we have everything we need for it: the resources to invest and the scope to innovate."
All Daimler's automotive divisions contributed positively to revenue gains in the first half, with only the light commercial vehicle (LCV) unit slipping in its second-quarter performance. Mercedes-Benz Cars' second-quarter performance topped all records, with 595,200 units worldwide lifting revenue 7% to EUR23.571 billion. The performance of the LCV division was mixed as record unit sales (up 4% y/y to the new record of 103,400 vehicles in the second quarter) was offset by a 3% y/y dip in revenues to EUR3.3 billion. EBIT fell to EUR358 million, significantly lower than in second quarter 2016 (EUR401 million). The van division is incurring higher expenses from investment in new technologies and future products, as well as the end of the Volkswagen Crafter contract manufacturing arrangement, which would not have any bearing on unit sales.
Group EBIT of EUR3,746 million in the second quarter was driven by sales growth and one-off factors such as special items that had a negative impact on earnings in the second quarter of last year. EBIT at the Daimler Trucks division fell 13% y/y to EUR543 million, reflecting increased expenses for customer-service measures at Mercedes-Benz Trucks. Mercedes-Benz Vans' EBIT also fell 11% y/y to EUR358 million. The Daimler Financial Services division's EBIT rose 9% y/y to EUR522 million. Exchange-rate effects had a positive impact on operating profit at all divisions. "We are successfully utilising growth opportunities and making systematic use of business potential as well as the opportunities of digitisation," said Bodo Uebber, member of the board of management of Daimler AG responsible for finance and controlling and Daimler Financial Services. "We will therefore invest more and comprehensively in the future, so from today's perspective, investment in property, plant and equipment, and research and development expenditure will be increased significantly this year and in the coming years. We have the financial resources that are required for this growth path."
All Daimler's automotive divisions contributed to the performance, with Mercedes-Benz Cars' jumping 9% y/y, while Mercedes-Benz Light Commercial Vehicles' rose 4% y/y to 103,400 vehicles. Daimler Trucks' unit sales rose 8% to 116,400 vehicles. Mercedes cars performed well in all major markets with the exception of the slowing US market. The strong performance of the car division is again being driven by the new E-Class family, to which the brand will add the cabriolet in September. The revised S-Class sedan is also making a debut this month (July) and the company's new additions to the sport utility vehicles (SUV) ranges also carry momentum .
Outlook and implications
Daimler's strong results momentum has carried through to the second quarter and has put the company in a very strong position half-way through the year, with records for revenue and unit sales across most divisions. The company booked EUR800 million in one-off sales from land at Mitsubishi Fuso Truck and Bus Corporation at the Kawasaki site in Japan (EUR300 million) and dividends from Beijing Benz Automotive Co (BBAC) (EUR400 million). Positive exchange-rate effects also helped earnings. However, underpinning the performance in the first half of 2017 was the core health of the main operating business, such as the very strong global sales performance by the Mercedes-Benz Cars unit. The operating profit boost was mainly the result of ongoing strong sales of the new W213 version of the Mercedes-Benz E-Class, which was launched at the beginning of last year, while the company's SUV sales continued to develop very strongly, helped by range expansion with models like the GLC Coupe coming on line, with these high-end models helping overall model mix. Mercedes-Benz Cars' model assault has revitalised the company's fortunes and shows no signs of abating. For full-year 2017, IHS Markit forecasts that Daimler group sales across all concerns will be in the range of 3.1 million units, up from 2.95 million units in 2016, while Mercedes-Benz cars will maintain a healthy lead over BMW, with sales of 2.11 million units to the latter's 2.02 million units.
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