Daimler has reported a third quarter gain (up 8%) to operating profit as sales of Mercedes-Benz cars rose. However, there was a warning over diesel litigation cost uncertainties.
Daimler revenue climbed by 8% to EUR43.3bn (Q3 2018: EUR40.2bn). Also adjusted for positive exchange-rate changes, revenue was slightly higher than the prior-year level. The Daimler Group posted third quarter EBIT of EUR2.7bn (Q3 2018: EUR2.5bn), an increase of 8%.
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The group’s total unit sales in the quarter rose by 6% to 839,300 passenger cars and commercial vehicles (Q3 2018: 794,700).
“Strong sales at Cars and Vans supported our Q3 financial performance. However, in order to master the transformation in the next few years, we need to increase our efforts considerably: We have to significantly reduce our costs and consistently strengthen our cash flow,” said Ola Källenius, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars.
In the third quarter, group net profit rose by 3% to EUR1,813m (Q3 2018: EUR1,761m).
Mercedes-Benz Cars sold 604,700 vehicles in the third quarter, which is 8% more compared to third quarter of last year (Q3 2018: 559,500). Mercedes-Benz Cars’ revenue increased by 9% to EUR23.5bn (Q3 2018: EUR21.7bn) and its EBIT improved by 4% to EUR1,423m (Q3 2018: EUR1,372m). Return on sales was 6.0% (Q3 2018: 6.3%).
At the end of the third quarter, the Daimler Group employed 304,680 people worldwide (year-end 2018: 298,683, end of Q3 2018: 300,367). Of that total, 178,097 people were employed in Germany (year-end 2018: 174,663, end of Q3 2018: 176,287) and 27,029 in the United States (year-end 2018: 26,310, end of Q3 2018: 26,079). The consolidated subsidiaries in China employed 4,427 people at the end of September (year-end 2018: 4,424, end of Q3 2018: 4,410).
At group level, Daimler continues to expect unit sales in 2019 at the previous year’s number and revenue slightly above the prior year. Mercedes-Benz Cars assumes that revenue will be at the previous year’s level. Daimler Trucks now expects revenue in the magnitude of the prior year. The divisions Mercedes-Benz Vans and Daimler Mobility anticipate slight revenue growth. Daimler Buses expects a significant increase in revenue.
Diesel litigation warning
Daimler said it is subject to governmental information requests, inquiries, investigations, administrative orders and proceedings as well as court proceedings in connection with diesel exhaust emissions. It said that as legal proceedings are “fraught with a large degree of uncertainty, it is possible that in the context of their final resolution some of the provisions we have recognized for them could prove to be insufficient.” As a result, it said, “additional expenditures may arise, which may negatively affect profitability expectations.”
Based on the expected market development and the current assessments of the divisions, Daimler assumes that Group EBIT in 2019 will be significantly below the previous year’s level. The divisions mentioned below continue to expect these returns in 2019:
- Mercedes-Benz Cars: a return on sales of 3% to 5%,
- Mercedes-Benz Vans: a return on sales of minus 15% to minus 17%,
- Daimler Buses: a return on sales of 5% to 7%,
- Daimler Mobility: a return on equity of 17% to 19%.
Due to a faster than expected economic downturn in the commercial-vehicle core markets of Europe and North America in the third quarter, earnings of Daimler Trucks will be adversely affected in the fourth quarter of this year, the company said. Against this backdrop, Daimler Trucks now anticipates a return on sales of 6% to 8% as well as slightly lower unit sales.
See also: Mercedes-Benz hits record Q3 car sales
