Daimler AG has reported a massive plunge in profits for the first quarter of 2009. The net loss of EUR1,286m compared with net profit of EUR1,332m in Q1 2008 while EBIT was minus EUR1,426m for period compared with a EUR1,976m profit last year. Revenue fell to EUR18.7bn versus EUR24bn in 2008.
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Adjusted for exchange-rate effects, revenue fell by 25%.
“The significant decline in earnings primarily reflects the sharp drops in unit sales (34%) at Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz Vans in the first quarter of 2009,” Daimler said in a statement.
“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.”
It is worth noting that Q1 2008 earnings were positively affected by gains on the sale of properties at Potsdamer Platz in Berlin (EUR449m) and from the transfer of EADS shares (EUR102m) offset by EUR491m in charges relating to Daimler’s equity interest in Chrysler, which the automaker on Tuesday said it would divest at a cost of EUR700m to be booked in the second quarter.
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By GlobalDataDaimler expects a fall in unit sales and revenue for full year 2009 and will continue with measures to save EUR4bn this year. It has forecast a gradual improvement in operating profitability in the remainder of the year but a “significant operating loss” in the second quarter.
Mercedes-Benz Cars expects positive earnings again in second half of this year.
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 free cash flow of the industrial business was negative and fell significantly by EUR2.2bn to minus EUR1.1bn.
Due to the ongoing contraction of worldwide markets and the model changeover of the high-volume E-Class, Mercedes-Benz Cars sold 231,200 vehicles in the first quarter of 2009 compared with 318,300 in 2008 and first-quarter revenue fell 27% to EUR9.1bn.
The division posted Q1 EBIT of minus EUR1,123m compared with a EUR1,152m profit in last year.
Daimler said the decline in earnings was mainly due to the “significant decrease in demand for automobiles and the resulting drop in unit sales” while the life cycle-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 automaker said.
The decline in earnings was partially offset by cost-reduction measures such as short time working at German plants.
Daimler Trucks sold 65,400 vehicles versus 107,700 in Q1 2008. Revenue decreased from EUR6.3bn to EUR4.9bn.
The division booked EBIT of minus EUR142m versus a EUR403m profit. Q1 EBIT was also affected by the booking of EUR45m related to measures begun in 2008 to reposition Daimler Trucks North America. Positive effects resulted from cost adjustments and further efficiency improvements.
Due to the severe market slump, Mercedes-Benz Vans’ unit sales decreased to 28,800 vehicles in the first quarter compared with 68,600 a year ago. Revenue was EUR1.3bn and EBIT was minus EUR91m versus positive EUR186m last year. Positive effects resulted from efficiency increases and improved exchange rates.
Daimler Financial Services’ new business decreased by 12% to EUR5.9bn. Contract volume amounted to EUR62.0bn 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 EUR167m versus plus EUR168m in 2008.
The decline was primarily due to charges resulting from further increases in risk provisions. EBIT for the period also included losses from the sale of parts of the non-automotive leasing portfolio.
Daimler expects its total unit sales to decrease significantly this year. It sold 2.1m vehicles worldwide in 2008.
“Mercedes-Benz Cars will not be able to avoid the expected weakness of major sales markets and in particular of its main market segments,” Daimler said.
“Overall, unit sales in 2009 will therefore be lower than in the prior year. Lower volumes are anticipated above all in the markets of the United States, Western Europe and Japan, which have been particularly hard hit by the economic and financial crisis. Unit sales should be partially stabilised by growth in the emerging markets, however.”
Mercedes-Benz Cars expects to at least maintain its market shares and that “the bottom of the EBIT curve was reached in the first quarter”.
“Due in particular to the cost-reducing measures and the launch of the new E-class in Europe and the US launch planned for June 2009, there should be a gradual improvement in profitability over the next three quarters and positive earnings in the second half of the year.”
Daimler Trucks is also assuming that unit sales will fall “significantly” in all its major markets but expects to maintain shares in core markets.
“The full impact of the significant drop in demand in all markets since the beginning of this year will be felt as of the second quarter. Further burdens on earnings are therefore anticipated, especially in the second quarter. The repositioning of Daimler Trucks North America will give rise to expenses of EUR150m, of which EUR45m was already recognised in the first quarter.”
Mercedes-Benz Vans does not expect an improvement in unit sales in the coming months. In line with the significant fall in demand in all markets, further burdens on earnings are anticipated, particularly in the second quarter.
Daimler Financial Services is expecting rising credit defaults and higher refinancing expenses for the full year but said the lowest point for earnings should have been reached in the first quarter. Contract volume is expected to decrease versus 2008.
“The Daimler Group anticipates a gradual improvement in operating profitability as the year progresses. Earnings in the second quarter are expected to be significantly negative once again, however,” it said.
