Daimler Posts EBIT of Minus Euro 1,426 Million in First Quarter of 2009
Written by admin on April 27, 2009 under Automobile News.
-The global financial and economic crisis and the resulting difficult automotive markets placed a significant burden on the earnings of the Daimler Group in the first quarter of 2009.
Daimler posted EBIT of minus euro 1,426 million for the first quarter of 2009 (Q1 2008: plus euro 1,976 million).
The significant decline in earnings primarily reflects the sharp drops in unit sales at Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz Vans in the first quarter of 2009. The measures already taken mitigated the decline in earnings, but were far from sufficient to compensate for the effect of the decrease in Group revenue related to lower unit sales. Increased cost of risk at Daimler Financial Services led to a fall in that division’s operating results.
Earnings in the first quarter of 2008 were positively affected by gains realized on the sale of real estate properties at Potsdamer Platz (euro 449 million) and gains connected with the transfer of EADS shares (euro 102 million). There was an opposing effect from charges relating to Daimler’s equity interest in Chrysler (euro 491 million). Special items are shown in the table titled “Figures for the 1st Quarter 2009.”
The Group posted a net loss for the period of euro 1,286 million (Q1 2008: net profit of euro 1,332 million); earnings per share amounted to minus euro 1.40 (Q1 2008: plus euro 1.29).
Unit sales down by 34% in the first quarter
In the first quarter of 2009, Daimler sold 332,300 cars and commercial vehicles worldwide, which was 34% lower than in the same period of last year.
The Daimler Group’s first-quarter revenue decreased significantly from euro 24.0 billion to euro 18.7 billion in 2009. Adjusted for exchange-rate effects, revenue fell by 25%.
At the end of the first quarter of 2009, Daimler employed 263,819 people worldwide (end of Q1 2008: 273,902). Of that total, 164,983 people were employed in Germany (end of Q1 2008: 166,661).
The free cash flow of the industrial business was negative and fell significantly by euro 2.2 billion to minus euro 1.1 billion.
The main reason for the decrease in the free cash flow was the development of the divisions’ earnings. In addition, the free cash flow of the prior-year period included proceeds from the sale of real estate at Potsdamer Platz and from the transfer of EADS shares totaling euro 1.4 billion. However, there were positive effects on the free cash flow of the industrial business from the development of inventories.
Details of the divisions in the first quarter of 2009
Due to the ongoing contraction of worldwide automobile markets and the model changeover of the high-volume E-Class, Mercedes-Benz Cars sold 231,200 vehicles in the first quarter of 2009 (Q1 2008: 318,300). First-quarter revenue decreased by 27% to euro 9.1 billion.
The division posted EBIT of minus euro 1,123 million in the first quarter, which was significantly below the result of the prior-year quarter (plus euro 1,152 million).
The decline in earnings is mainly a result of the significant decrease in demand for automobiles and the resulting drop in unit sales. The lifecycle-related replacement of the E-Class also had a negative impact on sales. Earnings were additionally reduced by a shift in demand towards smaller models and ongoing price pressure in automobile markets. The decline in earnings was partially offset by the timely initiation of cost-adjusting actions such as the introduction of short-time work at plants in Germany.
Daimler Trucks sold 65,400 vehicles worldwide in the first quarter of 2009 (Q1 2008: 107,700). The significant decrease was caused by the worldwide recession. Revenue decreased from euro 6.3 billion to euro 4.9 billion.
Due to the significant decline in unit sales, the division recorded EBIT of minus euro 142 million, which was significantly below the EBIT of plus euro 403 million posted in the prior-year quarter. There was an additional negative impact on EBIT in Q1 2009 of euro 45 million from the measures initiated in 2008 for the repositioning of Daimler Trucks North America. Positive effects resulted from cost adjustments and further efficiency improvements.
The Trucks Europe/Latin America unit (Mercedes-Benz) sold 23,100 vehicles in the first quarter (Q1 2008: 33,800), a decrease compared with the prior-year quarter, as expected. Sales of 17,200 units by Trucks NAFTA (Freightliner, Sterling, Western Star and Thomas Built Buses) were also lower than in the prior-year period (Q1 2008: 27,500). Trucks Asia (Mitsubishi Fuso) sold 25,100 vehicles in the first quarter (Q1 2008: 46,500).
The Daimler Group adjusted its segment reporting at the beginning of 2009. The business activities of Mercedes-Benz Vans and Daimler Buses, which were previously reported under Vans, Buses, Other, are now presented separately.
Due to a severe market slump, Mercedes-Benz Vans’ unit sales decreased to 28,800 vehicles in the first quarter (Q1 2008: 68,600). Revenue of euro 1.3 billion was also well below the figure for the prior-year period.
The Mercedes-Benz Vans division posted EBIT of minus euro 91 million (Q1 2008: plus euro 186 million). Positive effects resulted from efficiency increases and the development of some currencies.
Despite the difficult market situation, Mercedes-Benz Vans continued to defend its market leadership for medium-sized and large vans in Western Europe, taking a market share of 16.7% (Q1 2008: 16.3%).
Daimler Buses sold 6,800 buses and chassis worldwide in the first quarter of this year (Q1 2008: 9,200). As the decline in unit sales is almost solely accounted for by lower volumes of chassis in Latin America, revenue decreased at the much lower rate of 2% to euro 904 million. The division achieved EBIT of euro 65 million (Q1 2008: euro 75 million).
At Daimler Financial Services, new business decreased by 12% compared with the prior-year quarter to euro 5.9 billion. Contract volume amounted to euro 62.0 billion at the end of the first quarter, which was 2% lower than at the end of 2008.
The division posted first-quarter EBIT of minus euro 167 million (Q1 2008: plus euro 168 million). The decline in earnings was primarily due to charges resulting from further increases in risk provisions. An additional factor is that the EBIT for the period includes losses from the sale of parts of the non-automotive van leasing portfolio. Furthermore, expansion of Mercedes-Benz Bank’s direct banking business entailed expenses, which had a negative impact on first-quarter earnings.
The other business activities — in particular the equity holdings in Chrysler, EADS and Tognum, which were previously allocated to Vans, Buses, Other — have been included in “Reconciliation” since the beginning of 2009.
In the first quarter of 2009, Daimler’s share in the net profit of EADS amounted to euro 83 million (Q1 2008: euro 22 million). The equity-method inclusion of the 19.9% equity interest in Chrysler did not lead to any further charges on earnings. In connection with the legal transfer of Chrysler’s international sales activities to Chrysler LLC and due to the valuation of Chrysler-related assets the Group recorded a total gain of euro 40 million in the first quarter of 2009.
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