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July 28, 2022

Costs focus keeps Mercedes Q2 profit up

Sees a gas reduction potential of around 50% in Germany

Mercedes-Benz Group Q2 2022 revenue rose 7% year on year to EUR36.4 billion (Q2 2021: EUR34.1 billion) and adjusted EBIT increased 8% to EUR4.9 billion (EUR4.6 billion) as the company focused on luxury vehicles, EVs and premium vans. A “relentless focus on costs helped to offset lower sales and higher raw material costs”, the automaker said.

Due to the Ukraine situation, it has worked to safeguard supply chains and to “maximise the potential for reducing or substituting the use of natural gas in vehicle production”. In Sindelfingen, where the EQS, S-Class and Mercedes-Maybach are produced, the paint shop could operate without gas supply in an emergency mode.

“Mercedes-Benz sees a gas reduction potential of around 50% in Germany without impact if regional pooling is possible. The company’s long-term goal is to switch from gas to electricity and other renewable energy sources,” it said in a statement.

Mercedes-Benz Cars

Sales fell 7% to 487,100 vehicles from 521,200 though net pricing improved and the product mix remained favourable, helping to lift revenue by 8%, adjusted EBIT by 20%, and the adjusted return on sales to 14.2%.

The automaker said demand could not be fulfilled due to semiconductor and logistical challenges, causing unit sales in the “top-end luxury” segment to fall to 75,500 vehicles from 77,900.

Unit sales of so called core luxury vehicles reached 272,600 (266,200) thought entry luxury volume fell to 139,100 from 177,100.

Sales of electrified models rose 16% to 57,600.

Mercedes-Benz CarsQ2-2022Q2-2021Change 22/21YTD2022YTD2021Change 22/21
Sales in units487,100521,200-7%974,1001,060,100-8%
–           thereof xEV63,60059,400+7%137,600121,700+13%
–           thereof BEV31,30020,700+51%58,60039,100+50%
Revenue*26,999 24,974+8%52,83548,898+8%
EBIT*3,7923,021+26%8,0636,811+18%
EBIT adjusted*3,8333,201+20%8,0766,716+20%
Return on Sales (RoS) in %14.012.1+1.9%pts15.313.9+1.4%pts
Return on Sales (RoS) adjusted in %14.212.8+1.4%pts15.313.7+1.6%pts
Cash Flow Before Interest and Tax (CFBIT)*2,3932,290+4%4,2404,558-7%
Cash Flow Before Interest and Tax (CFBIT) adjusted*2,9482,495+18%4,6285,442-15%
Cash Conversion Rate adjusted0.80.80.60.8
* in millions of EUR      

Mercedes-Benz Vans

Q2 unit sales remained flat with 100,100 vehicles worldwide (98,400). Adjusted EBIT was unchanged at EUR0.4 billion thanks to strongly improved net pricing, which helped to partially offset higher raw material prices and production inefficiencies, caused mainly by semiconductor shortages.

Demand for electric vans, especially in the commercial sector, rose 84% to 3,500 units driven by the eSprinter and eVito. Deliveries of the new T-Class started in Q2.

Mercedes-Benz VansQ2-2022Q2-2021Change 22/21YTD2022YTD2021Change 22/21
Sales in units100,10098,400+2%188,600186,800+1%
Revenue*4,1073,669+12%7,7947,067+10%
EBIT*382432-12%730722+1%
EBIT adjusted*414418-1%880746+18% 
Return on Sales (RoS) in %9.311.8-2.5%pts9.410.2-0,8%pts
Return on Sales (RoS) adjusted in %10.111.4-1,3%pts11.310.6+0.7%pts
Cash Flow Before Interest and Tax (CFBIT)*254201+26%632-95
Cash Flow Before Interest and Tax (CFBIT) adjusted*333299+11%770485+59%
Cash Conversion Rate adjusted0.80.70.90.7
* in millions of €      

 Outlook 

Mercedes said: “The geopolitical and macroeconomic conditions continue to be characterised by an exceptional degree of uncertainty, including the war in Ukraine, its impacts on supply chains, and the development of prices for raw materials and energy. Further effects due to the rapidly changing situation in Russia and Ukraine are not currently known but could possibly have substantial negative consequences for business activities, should it escalate beyond its current state.

In addition, the continued very high inflationary pressure for consumers and companies and the associated central bank increases in interest rates as well as ongoing bottlenecks in global supply chains make the outlook more difficult. Not least the further course of the pandemic, in particular in China, holds uncertainties for the expected development of the market.

Despite the macro risks, Mercedes-Benz continues to see healthy and high quality demand for its products for the second half of the year, in all core markets. Order books are solid and healthy demand is driven by a strong product portfolio which is further developing during the course of the year. Demand is seen remaining higher than supply.”

Mercedes-Benz Cars

Mercedes-Benz Cars continues to expect a slight sales increase. Pricing and mix are expected to remain on a high level, with top-end vehicle sales growth seen at more than 10% year-on-year.

Between January and June, Cars achieved an adjusted Return on Sales of around 15% and aims to achieve that in H2. However, material costs, higher research and development expenses and effects from the used car business are assumed to result in a negative effect of around 2 RoS points versus the H1 run rate.

Full year guidance for adjusted RoS is now at 12%-14%, rather than the 11.5% and 13% seen earlier.

Van sales are expected to remain “slightly above” the 2021 level and the adjusted RoS is expected to remain at 8% to 10%. Investments in property, plants and equipment and research and development are expected to remain “significantly above” prior year levels due to spending to upgrade existing combustion engine platforms and to develop the electric VAN.EA platform.

Group revenue this year is now seen “significantly above” the 2021 level, up from a previously expected “slightly above.” EBIT is now seen “slightly above” the prior-year level, rather than “at the prior-year level”.

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