Daimler AG, reporting its first full financial year results since selling a majority stake in Chrysler to Cerberus Capital Management on 1 October, on Thursday said preliminary, unaudited group 2007 earnings before interest and tax (EBIT) rose 74% to EUR8.7bn ($US12.7bn), ahead of target and up from EUR5.0bn ($7.3bn) in 2006.
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Net profit rose just 5% to EUR4.0bn ($5.8bn) while earnings per share were up 4.6% to EUR3.83 ($5.59). Revenue of EUR99.4bn ($145.2bn) was flat (EUR99.2bn, $144.9bn in 2006). Directors have proposed a 33% dividend rise to EUR2.00 per share ($2.92).
Summarising its 2008 outlook, Daimler said in a statement: “Further significant improvement of EBIT from continuing operations [is] expected.”
The automaker added that its EUR8,710m EBIT result was ahead of the earnings target of at least EUR8.5bn ($12.4bn) that had previously been announced for 2007.
“There was a positive impact from the significantly higher EBIT from the Mercedes-Benz Cars division, which profited from the efficiency improvements it achieved and from the favourable development of unit sales,” Daimler said. “The Daimler Trucks division achieved earnings in excess of the high prior-year level despite the decrease in unit sales in the NAFTA region and Japan.
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By GlobalData“Daimler Financial Services was unable to equal its prior-year earnings, primarily due to the expense of setting up its own financial services organisation in the NAFTA region following the separation from Chrysler Financial.”
It added that EBIT posted by vans, buses and other was higher than in 2006 due to earnings improvements in the vans and buses units, but also due to special gains realised in connection with the transfer of an interest in EADS. This segment’s EBIT was, however, hit by the group’s share of the results of EADS and Chrysler.
Daimler said EBIT was also hit by unfavourable currency hedging conditions though 2007 earnings included gains on the transfer of shares in EADS as well as charges relating to the new management model and the 19.9% interest in Chrysler.
Special items
Special items on the 2007 books also included a $120m hit to “support” Mercedes car division suppliers. That was, however, offset by a $126m positive adjustment for pension plan/healthcare changes at Daimler trucks and a gain of $114m on the sale of property in Japan.
Expenses relating to restructuring and the new UAW contract at Chrysler totalled $470m.
Daimler said that, despite Chrysler-related charges that totalled EUR2.2bn ($3.2bn), the net profit of EUR4.0bn ($5.8bn) was higher than in 2006.
Daimler sold 2.1m vehicles in 2007, up just 1% on 2006. Group revenue of EUR99.4bn ($145.2bn) was flat, but up 3% if adjusted for currency translation effects, the automaker said.
The board in 2007 set a voluntary profit-sharing bonus of EUR3,750 ($5,476) per person for the approximately 131,000 eligible employees of Daimler, significantly exceeding the EUR2,000 ($ 2,920) paid out in 2006 – it will pay the 2007 bonus in April.
“With this high level of profit sharing, the group is honouring the employees’ major contribution to the achievement of operating profit as well as to the successful realignment of Daimler [last year],” the company said.
Expenditure for research and development increased 11% to EUR4.1bn ($6bn) in 2007.
Mercedes-Benz Cars (also including Maybach, Smart, AMG, and McLaren, sold 1,293,200 vehicles in 2007, up 3% on a record 2006. Mercedes-Benz also increased unit sales 3% to 1,180,100 vehicles. Smart sold 103,100 vehicles (102,700 in ‘06).
Division revenue was 2% higher at EUR52.4bn and EBIT up substantially to EUR4,753m ($6,941m) (2006: EUR1,783m, $2,604m).
The 9.1% return on sales was well above the targeted of 7% as cost efficiency was further improved. Daimler said the significant increase in earnings was also due to the positive development of unit sales though currency effects were negative.
Daimler Trucks sold 467,700 vehicles in 2007 – off 9% and due largely due to “significantly lower” market volumes in the key markets of the US, Canada, and Japan. Unit sales in Europe and Latin America increased significantly, however. Revenue of EUR28.5bn ($41.6bn) was also down from the prior year (EUR31.8bn, $46.4bn) as a result of the lower unit sales (-10%). Nonetheless, with EBIT of EUR2.1bn ($3.1bn), the division exceeded prior-year earnings by 15% while return on sales rose from 5.8% to 7.5%.
Daimler said the earnings boost was primarily due to efficiency improvements from its so-called global excellence programme, better model mix, and higher unit sales in Europe and Latin America.
The vans, buses, other segment (primarily Mercedes-Benz vans and Daimler buses units) boosted revenue 7% to EUR14.1bn ($20.6bn), due mostly to increased unit sales.
EBIT rose to EUR1,956m ($2,856m) in 2007 from 2006’s EUR1,327m, $ 1,939m.
Mercedes-Benz vans sold a record 289,100 vehicles worldwide in 2007 (2006: 256,900). Worldwide sales of the Sprinter van (also sold in the US under the Dodge and Freightliner brands) totalled 184,300 units, up from 157,200 in ‘06.
Daimler Bus sales rose 8% to 39,000 units.
Outlook
Daimler said North American car and light truck market is likely to continue suffering from the impact of falling house prices in 2008 while western Europe passenger car sales are also likely to remain flat, at about 14.8m units.
“Therefore, global growth in 2008 is once again expected to be primarily driven by the high growth rates of the major emerging markets, especially China, India and Russia.”
It also sees commercial vehicle sales expanding, including in North America where a recovery of demand for medium and heavy-duty Class 5 to 8 trucks is seen in the second half of the year.
Japan is seen flat but “robust development” in western Europe for medium and heavy-duty trucks “seems likely to continue, so demand should be similar to the very high prior-year level”, the automaker added, noting that it expects “a moderate increase in revenue” during 2008.
“The regional focus of expansion is likely to be mainly in the growth markets of Asia and Eastern Europe.”
M-B Cars is also maintaining a previously-announced goal of increasing return on sales to an average 10% by 2010 while further efficiency improvements should boost earnings at Daimler Trucks this year. By 2010, the division plans average return on sales of 8%, up on the earlier target of over 7%.
Daimler expects to post EBIT from continuing operations of “well above” the prior-year level in 2008.
