Daimler has posted its best-ever figures for annual unit sales, revenue and net profit for 2016. The company also expects to increase sales and earnings again this year, helped by some growth in demand and a strengthened market position. Further growth in revenue and EBIT is also anticipated.
“In 2016, Daimler has set new records for unit sales, revenue and earnings. But what is just as important is that in the best year in our company’s history so far, we also initiated the biggest-ever transformation at Daimler,” said CEO Dieter Zetsche. “We have set our course in the direction of electric mobility and are establishing a new culture of cooperation together with our workforce. Those who wish to shape the future of the automobile at the forefront of the automotive industry need both financial strength and innovative skill. In 2016, we demonstrated that the combination of these two factors at Daimler is stronger now than ever before.”
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By GlobalDataDaimler increased its total unit sales in the year 2016 by 5 % to around 3m vehicles, achieving its growth target. The Mercedes-Benz Cars and Mercedes-Benz Vans divisions confirmed the forecasts made at the beginning of the year with significant growth (+10% and +12% respectively).
Net profit increased to the best-ever figure of EUR8.8bn (2015: EUR8.7bn) and earnings per share rose to EUR7.97 (2015: EUR7.87).
The Daimler Group posted EBIT of EUR12.9bn slightly down in 2016 (2015: EUR13.2bn) but said that slightly improved on its EBIT adjusted for special items – from EUR13.8bn in 2015 to EUR14.2bn in the year 2016 – a new record.
Daimler Trucks posted a significant decrease in unit sales of 17%, due in particular to the weaker market development in the NAFTA region, the Middle East and Turkey. Unit sales at Daimler Buses were significantly lower than in the previous year (-7%) due to significant market contraction in Brazil.
Slight decrease in workforce – high profit sharing bonus
At December 31, 2016, the Daimler Group had a total of 282,488 employees (2015: 284,015). The number of employees remained ‘nearly stable’ despite an overall increase in production. The main reason for the slight decrease was a workforce reduction at Daimler Trucks due to weak demand in major markets. The number of 170,034 people employed in Germany remained at the prior-year level (2015: 170,454).
In April 2017, Daimler AG will pay its eligible employees an amount of up to EUR5,400 for the year 2016 (prior year: EUR5,650).
Mercedes-Benz Cars unit sales up 10%
The Mercedes-Benz Cars division comprises the Mercedes-Benz brand with the sub-brands Mercedes-AMG, Mercedes-Maybach and Mercedes me, as well as the smart brand and the new EQ brand for electric mobility. In 2016, the division continued its profitable growth. Unit sales increased by 10% to the new record of 2,198,000 vehicles and revenue rose by 7% to EUR89.3bn. The car division gained market share in almost all regions. EBIT of EUR8,112m for the year 2016 was slightly higher than the prior-year figure of €7,926 million and was at its highest level to date. Return on sales was 9.1% (2015: 9.5%). Adjusted for special items, return on sales met the target of 10%, as in the previous year.
Mercedes said the main driver in sales was the SUV segment, but ‘another positive effect on EBIT resulted from a better pricing’. Negative effects resulted from expenses for advance expenditure for new technologies and vehicles. EBIT also includes expenses of EUR480m in connection with Takata airbags.
Daimler Trucks down, Mercedes Vans up
Daimler Trucks’ unit sales of 415,100 vehicles were substantially lower than the high prior-year figure (2015: 502,500). Revenue decreased to EUR33.2bn (2015: €37.6 billion). The division’s EBIT of €1,948 million was significantly below the high level of €2,576 million achieved in the previous year. Return on sales was 5.9% (2015: 6.9%).
Daimler said the negative development of earnings was primarily the result of sharply decreased unit sales in the NAFTA region, Turkey, the Middle East, Latin America and Indonesia. Earnings were also reduced by ‘intense competition in Europe’. The realisation of efficiency and material-cost improvements and exchange-rate effects had a positive impact on earnings. EBIT also includes expenses of EUR91m for workforce adjustments in the context of the ‘ongoing optimization programs’ in Brazil.
Mercedes-Benz Vans achieved another sales record in 2016. The number of 359,100 units sold was 12% higher than in 2015. Revenue of EUR12.8bn was also significantly higher than in the previous year (2015: EUR11.5 billion). EBIT of EUR1,170m set a new record level (2015: EUR880m). The division’s return on sales also increased significantly compared with the previous year to 9.1%, and was thus at the targeted level (2015: 7.7%).
EBIT reflects the very positive development of unit sales, especially in Europe, the NAFTA region and China, as well as efficiency improvements. However, expenses arose from advance expenditure for new technologies and vehicles. Expenses of EUR83m resulted in connection with Takata airbags.
Further increase in investment in the future
“Also in the coming years, we want to actively shape mobility with groundbreaking innovations, and in parallel we will push forward with digitization throughout the Group,” said Dieter Zetsche. Daimler intends to play a leading role above all in the strategic areas for the future of connectivity (Connected), autonomous driving (Autonomous), flexible use and services (Shared & Services) and electric drive (Electric), as well as in the intelligent linking up of these areas.
Research and development expenditure was increased in 2016 by another 15% to EUR7.6bn. Daimler said the focus was on new vehicle models, fuel-efficient and environmentally friendly drive systems, new safety technologies, autonomous driving and the digital connectivity of the products.
In order to implement the growth strategy with new products, innovative technologies and modern production facilities, investment in property, plant and equipment was also increased once again in 2016, from an already high level to EUR5.9bn (2015: EUR5.1bn).
Outlook: slight improvement expected in the world economy
Daimler appeared to take a sanguine view on prospects for 2017, led by a positive view of prospects for the world economy. It said that at the beginning of 2017, the world economy is continuing along a path of steady, if rather moderate, growth. Daimler assumes that growth will accelerate slightly as the year progresses. For the full year, the advanced economies are likely to achieve growth rates similar to those of 2016. The emerging markets, however, should experience a slight revival after six years of economic weakness, Daimler said. Overall, there are some indications that the world economy will perform somewhat better in 2017 than the weak growth of the previous year, but will probably not exceed the rather below-average growth corridor of 2.5 to 3%.
Outlook: automotive markets to expand again in 2017
Daimler said worldwide demand for cars is likely to increase again from a high level in 2017. According to current estimates, slight growth in the magnitude of 1 to 2% is to be expected. One of the factors decisive for global economic dynamism will be the extent to which market growth weakens in China, after the tax incentives for cars with small engines have been reduced. Despite the dynamic market development in 2016, the Chinese market should expand again slightly in 2017, Daimler says.
Daimler maintains that a fiscal stimulus in the US could support the US market in 2017 so that it maintains its exceptionally high level of more than 17m light vehicles a year. Possible fiscal-policy stimulus from the new US government could have an additional positive impact on demand. In Europe, a slightly larger market is expected overall. After the drastic contraction of recent years, the Russian car market should recover in 2017. Following two years of falling demand, a stabilisation of car sales is expected in Japan this year. In India, the dynamic growth of recent years is likely to continue with another significant increase in demand.
However, demand for medium- and heavy-duty trucks in the regions relevant for Daimler is likely to remain at the rather weak prior-year level. In the NAFTA region, the cyclical market correction can be expected to continue. In weight classes 6-8, it is assumed that demand will decrease by approximately 5% after the significant drop in 2016. In the heavy-duty segment (class 8), the weakening of demand is likely to be rather more pronounced.
The market of the EU30 region temporarily peaked last year, according to current assessments. In a rather more restrained economic environment than last year, truck sales are expected to decrease slightly. After the end of the deep economic recession in Brazil, only a slight recovery of the truck market from a very low level can be expected there. And after last year’s dramatic slump in Turkey, a further slight decrease is anticipated. Starting from a very low level, significant recovery of demand is to be expected in Russia.
The most important Asian markets from Daimler’s perspective are likely to present a mixed picture in 2017. As the Japanese market for light-, medium- and heavy-duty trucks has remained at a relatively solid level for several years, a market correction of about 5% is now expected. Following the significant drops in demand of recent years in Indonesia, the overall truck market there is expected to be in the magnitude of 2016. Slight market expansion is anticipated for India. The planned reform of value-added tax, which would significantly reduce truck prices, could have a positive impact on demand during the year. The Chinese market should remain fairly stable, following its strong growth of 2016.
Daimler expects a slight increase in demand for small, mid-size and large vans in the EU30 region in 2017, driven in particular by the German van market, but also by other major European markets. In the United States, demand for large vans is likely to remain fairly stable. On the other hand, the market for mid-size and large vans in Latin America should revive significantly in 2017, although from a very low level. In China, a revival of demand is anticipated in the market Daimler addresses there.
Outlook: further growth in unit sales in the automotive business – ‘E-class boost’
Daimler forecasts that Mercedes-Benz Cars will continue to slightly increase its unit sales in 2017, reaching a new record level. Further growth is anticipated in China and Europe. The new E-Class models in particular should provide growth impetus. Both the sedan and the wagon versions will be available for the first time over a full year. They will be followed by the new E-Class coupe this spring and by the E-Class convertible in the summer. In addition, a ‘new and particularly versatile variant of the E-Class will be launched with the All-Terrain’.
Daimler Trucks anticipates total unit sales in the year 2017 ‘in the magnitude of the previous year’. In the three major regions, Europe, North America and Japan, the division anticipates a stable level of unit sales overall, supported by a strong second half of the year. After last year’s significant market correction in the segment for heavy-duty trucks in the NAFTA region, unit sales in 2017 ‘should be at the prior-year level’. This development will be driven also by the new Freightliner Cascadia, the flagship in the North American market, which went into production at the beginning of 2017. The division assumes that it will strengthen its already strong market position once again in 2017. In a slightly declining market environment in the EU30 region, unit sales are anticipated in the volume of the previous year. Sales of trucks in Japan should also be at the prior-year level. In Brazil, it is expected that along with a gradual market recovery, unit sales should also be above the very low prior-year level. Also in India, Daimler Trucks anticipates unit sales higher than in 2016.
Mercedes-Benz Vans plans to achieve slight growth in unit sales in 2017. The division anticipates slight increases in sales of vans also in the EU30 region. The van division aims to achieve further growth also with the Sprinter, which will be produced also in North America in the future. And in late-2017, it will enter the midsize-pickup segment with the X-Class, thus further increasing its worldwide unit sales in the long term.
Outlook: growth expected for unit sales, revenue and EBIT
“We want to increase our total unit sales in the automotive divisions in total. And our financial and mobility services also target further growth,” said Dieter Zetsche. “We are on a path of stable growth, along which we will systematically continue.”
Daimler said that it expects that total unit sales can be slightly increased in the year 2017. Daimler also expects group revenue to increase slightly this year – a reflection of the overall positive development of unit sales in the automotive divisions.
At Mercedes-Benz Cars, ‘additional growth this year will be driven above all by the new E-Class models, the successful SUVs and the new convertible models’, the company said.
The anticipated growth in unit sales and revenue will have a positive impact on earnings in 2017, Daimler said.
Production to rise
Due to the expected growth in unit sales and revenue, production volumes will continue rising in 2017, Daimler said. At the same time, the efficiency-enhancing measures that have been implemented in recent years at all divisions are now ‘taking effect’. The medium- and long-term measures for structural improvements of business processes should facilitate further efficiency progress. Against this backdrop, Daimler assumes that its ambitious growth targets will be achieved with only slight workforce growth. Additional employees will be required in particular for the expansion of the international production network as well as in the area of research and development for projects in the future areas of electric mobility and digitization. More jobs are likely to be created also at companies operated together with Chinese partners and whose employees are not included in the figures for the Daimler Group.
