Daimler set to top 3 million vehicle sales in 2016

In 2016 Daimler AG expects to continue its growth and improve on its return on sales. Last year, when Daimler sold Atlantic Foundries (Pty), return on sales increased  across all products.

Daimler says it will “profit to an above-average extent from the anticipated slight growth in global demand for automobiles, thus strengthening its position in major markets and further increasing its unit sales”.

Accordingly, further growth is expected in revenue and EBIT from the ongoing business.

In financial year 2015, the Group achieved its best ever EBIT of €13.5 billion (2014: €10.8 billion) and its best EBIT from the ongoing business of €13.8 billion (2014:€10.1 billion).

Net profit of €8.9 billion was significantly higher than in the previous year (2014: €7.3 billion). Earnings per share increased to €8.08 (2014: €6.51).

Daimler increased its total unit sales in 2015 to 2.9 million vehicles sold; 12 per cent higher than in 2014. This growth was primarily driven by the Mercedes-Benz Cars division (+16 per cent) and to a lesser extent by Mercedes-Benz Vans (+9 per cent).

At Daimler Trucks, the growth in unit sales of 1 per cent was lower than originally expected, mainly due to weak markets in Latin America and Indonesia. At Daimler Buses, for which slight growth had been expected at the beginning of the year, unit sales were significantly below the prior-year level. This was primarily due to the pronounced weakness of the markets for bus chassis in Latin America.

                                          Earnings grow by one-third

Driven by the growth in unit sales, Daimler increased its total revenue by 15 per cent to €149.5 billion in 2015; adjusted for exchange-rate effects, revenue grew by 9 per cent.

In financial year 2015, the Group achieved its best ever EBIT of €13.5 billion (2014: €10.8 billion) and its best EBIT from the ongoing business of €13.8 billion (2014:€10.1 billion).

Net profit of €8.9 billion was significantly higher than in the previous year (2014: €7.3 billion). Earnings per share increased to €8.08 (2014: €6.51).

Bodo Uebber, board of management member at Daimler AG responsible for finance, said: “We increased our EBIT from the ongoing business by over a third compared with 2014; compared with 2010, our earnings have actually almost doubled. And revenue has increased by more than 50 per cent in the past five years.”

At the Annual Shareholders’ Meeting on April 6, 2016, the Board of Management and the Supervisory Board will propose the distribution of a dividend of €3.25 per share (2014: €2.45). “With the dividend again increased and thus the highest ever profit distribution by Daimler AG, we will as usual let the shareholders participate in the company’s success, while expressing our confidence about the ongoing course of business,” stated Bodo Uebber.

The dividend pay-out will amount to €3,477 million (2014: €2,621 million) and the distribution ratio will be 40.2 per cent (2014: 37.6 per cent) of the net profit attributable to the Daimler shareholders.

Net liquidity of the industrial business increased to €18.6 billion at the end of 2015 (2014: €17.0 billion), although there was an extraordinary contribution to the pension plan assets in Germany and the US of €1.2 billion, and €0.7 billion was applied for the acquisition of the digital mapping business, HERE.

At €5.9 billion, the free cash flow of the industrial business adjusted for special items was also once again higher than in the previous year (2014: €5.2 billion) and significantly higher than the dividend distribution proposed for the year 2015.

Workforce expansion – Due to the strong product demand, the workforce expanded by 1% compared with the end of 2014. At December 31, 2015, the Daimler Group had a total of 284,015 employees. The number of people employed in Germany increased to 170,454 (2014: 168,909).

With about 6,500 apprentices, Daimler provides more than one third of the apprenticeships of all the German vehicle manufacturers.

In April 2016, Daimler AG will pay eligible employees up to €5,650 for financial year 2015 – the highest amount to date (2014: €4,350).

                                           Details of divisions  

Mercedes-Benz Cars division increased for the sixth consecutive year and passed the two-million mark for the first time with 2,001,400 vehicles sold (+16 per cent). Market share increased in nearly all regions. Revenue rose by 14 per cent to €83.8 billion.

The division’s EBIT for 2015 of €8,226 million was a substantial 41 per cent higher than the prior-year figure of €5,853 million. Return on sales increased to 9.8 per cent (2014: 8.0 per cent).

Daimler Trucks increased unit sales 1 per cent to 502,500 vehicles in 2015, the highest level since the year 2006. Revenue grew by 16 per cent to €37.6 billion (2014: €32.4 billion).

The division’s EBIT of €2,576 million was substantially higher than the €1,878 million achieved in 2014 (+37 per cent). Return on sales increased to 6.9 per cent from 5.8 per cent in the previous year.

The positive earnings development was mainly the result of higher unit sales in the NAFTA region and Europe, as well as the realization of further efficiency improvements and positive exchange rate effects. EBIT includes expenses of €58 million for workforce actions in connection with the ongoing optimization programs in Brazil and Germany.

Further expenses of €61 million resulted from the sale of Atlantis Foundries (Pty.) Ltd - see BELOW. Prior-year earnings were reduced by an expense from the impairment of the investment in Kamaz PAO.

Mercedes-Benz Vans again set a sales record in 2015, with an increase of 9 per cent to 321,000 units. At €11.5 billion, revenue was also significantly higher than in the previous year (2014: €10.0 billion). The division achieved EBIT of €900 million in 2015, which is substantially higher than the prior year earnings of €682 million (+32 per cent).

Return on sales increased to 7.8 per cent from 6.8 per cent in 2014.

EBIT reflects the positive development of unit sales, especially in Europe and the NAFTA region. This was primarily driven by very high growth rates for the V-Class and the new Vito.

Daimler Buses sold 28,100 buses and bus chassis worldwide in 2015 (2014: 33,200). This significant decrease in unit sales was largely due to the ongoing poor economic situation in Brazil.

Nevertheless, the division was able to maintain its clear leading position in its core markets for buses with a gross vehicle weight of over 8 metric tons. Business with complete buses in Western Europe developed favourably during the year under review, with sales increasing from the prior-year level.

Revenue was at €4.1 billion (2014: €4.2 billion). The division’s EBIT for 2015 amounted to €214 million and 9 per cent above the prior-year level (2014: €197 million).

Return on sales amounted to 5.2 per cent (2014: 4.7 per cent). Positive effects on earnings primarily resulted from the good business with complete buses with a positive product mix in Western Europe, as well as further efficiency improvements.

In the automotive divisions, there was also a negative effect from the restructuring of the Group’s own dealer network with a net expense of €144 million (2014: €116 million) in total. Outlook: further expansion of automotive markets in 2016

                                              China still expanding

According to current estimates, global demand for passenger cars in the year 2016 is likely to increase again by between 3 and 4 per cent from its high level of 2015.

Although growth rates in the traditional markets of the US and Western Europe will probably be significantly lower than the substantial growth of recent years, the Chinese market should expand significantly once again, thus making the largest contribution to worldwide growth, claims Daimler.

In the US market for cars and light trucks, only slight growth is to be expected after the all-time high in the reporting year. Slight market growth is anticipated also for the market of Western Europe.

While little growth is likely in the core markets of Germany and the UK, considerable catch-up potential exists in other markets such as Italy. In Japan, a stabilization of demand is expected following the significant market correction of the previous year.

Daimler sees the outlook for the large emerging markets as remaining “mixed”. Market growth in India should accelerate again, whereas the ongoing recession in Russia will most likely result in a further decrease in car sales.

Demand for medium- and heavy-duty trucks should be slightly below the prior-year volume in all relevant regions in total, but market developments will remain disparate at the regional level.

                               Class 8 truck demand weakening

In the North American truck market, the gradual weakening of the industrial sector is likely to have a significant impact. From today’s perspective, demand for Classes 6-8 trucks is likely to decrease by approximately 10 per cent.

But the European market so far seems to be fairly unaffected by the uncertain development of the world economy, and should continue its recovery with slight growth this year.

The Brazilian market shows no signs of improvement. Due to the ongoing economic recession and the continuation of relatively unfavourable financing conditions, further market contraction in the magnitude of 10% has to be expected in 2016.

The situation in the Russian market will remain strained, so demand there can only be expected at about the prior-year level.

Demand in China is likely to be impacted by the growth slowdown in the manufacturing sector. From today’s perspective, only a moderate market recovery can be anticipated.

Demand in Japan for light-, medium- and heavy-duty trucks is likely to be solid. In a rather sluggish economic environment, the market volume should be at about the prior-year level. The Indonesian truck market is expected to stabilize at the low level of 2015.

In India, significant growth in the segment of medium- and heavy-duty trucks is anticipated.

Daimler expects a slight increase in demand for mid-size and large vans in Western Europe in 2016 and stable demand for small vans. Also for the US, moderate growth is anticipated in the market for large vans.

In Latin America, however, further substantial contraction is expected in the market for large vans, while in China, more lively demand is expected in the market addressed there.

A slightly larger market volume than in the previous year is expected for buses in Western Europe. Following the significant drop in demand for buses in Brazil, further market contraction is anticipated in 2016.

                                         Further outlook for growth

Mercedes-Benz Cars will continue its »Mercedes-Benz 2020« growth strategy in 2016. Overall, the division intends to significantly increase its unit sales and thus reach a new record level. This is based on the very attractive and young model portfolio, which will be expanded with some additional new products.

In 2017, a total of ten Mercedes-Benz plug-in hybrid models will be on the market, twice as many as at present.

Significant growth in unit sales is expected also from the smart brand in 2016. At the end of the year, all smart models will also be offered with electric drive.

From a regional perspective, Mercedes-Benz Cars expects the Asian markets to be particularly strong drivers of the growth in unit sales in 2016. In the year 2015, China was for the first time the biggest sales market for Mercedes-Benz. Following strong growth of 41 per cent in 2015, further expansion is planned in 2016, above all with the models produced locally. But the growth rate in China will be more moderate this year.

Further growth will be achieved with the new models also in North America, and Mercedes-Benz Cars intends to profit to an above-average degree from the ongoing revival of demand expected for Western Europe.

Daimler Trucks anticipates unit sales in 2016 at the level of the previous year. The division expects to sell slightly more vehicles in Western Europe than in 2015. In Turkey, however, a significant decrease in unit sales is likely, mainly due to purchases that were brought forward to 2015 because of the Euro VI emissions standard that came into effect also in Turkey at the beginning of 2016.

                             €500 million trucks boost for Brazil

In Brazil, the division anticipates a further drop in vehicle deliveries following last year’s market slump. The lack of economic growth and unfavourable financing conditions are likely to impact the business also in 2016.

For the sustained strengthening of Daimler Trucks’ competitiveness in Brazil, approximately €500 million will be invested by 2018 in tailored products, innovative technologies and the optimization of the production network.  

In the NAFTA region, Daimler Trucks expects unit sales to be below the high level of the previous year in a contracting market.

The company’s executives claim that with a modern product range in combination with the strong components of the Detroit brand, customers’ requirements can be “ideally satisfied and market leadership safeguarded”.

Daimler will persist with its vertical integration plan and accordingly the trucks division is to increase the proportion of its own engines and transmissions installed in the number of trucks sold.

In Japan and Indonesia, Daimler Trucks anticipates unit sales in the magnitude of the year 2015. In India, growth in unit sales should be achieved with the very well-positioned product portfolio.

And the division will generate additional unit sales in Asia and Africa with the expanded range of FUSO vehicles produced in India.

Mercedes-Benz Vans plans to achieve significant growth in unit sales in 2016. The division anticipates significant increases in sales of vans in Europe, its core market. Vito, launched in North America and Latin America in 2015, will stimulate additional demand in those markets also in 2016.

And Mercedes-Benz Vans aims to achieve additional growth with the Sprinter, which will be produced also in North America in the future. Furthermore, the V-Class multipurpose vehicle and the Vito commercial van will be launched in China, thus expanding the division’s presence in the market there.

Daimler Buses assumes it will be able to defend its market leadership in its core markets for buses above 8 tons with innovative and high-quality new products. For the year 2016, total unit sales are anticipated at the prior-year level.

                                          Forward investment

Investment in property, plant and equipment will, once again, be increased from an already very high level to €5.1 billion (2014: €4.8 billion).

At Mercedes-Benz Cars, investment in property, plant and equipment of €3.6 billion was at the prior-year level.

Investment in property, plant and equipment at Daimler Trucks in 2015 increased to €1.1 billion. Following the completion of its Euro VI product offensive, the focus was on the further expansion of the technical advantage and the adaption of production capacities to the high demand.

The focus of investment at the Mercedes-Benz Vans division was on the next-generation Sprinter, the new midsize pickup and production preparations for the new Vito in Latin America.

Daimler Buses invested primarily in new products and in the modernization and expansion of its production facilities.

Together with Audi and BMW, Daimler acquired the digital mapping business, HERE, in 2015. The digital maps from HERE are the basis for new assistance systems going as far as fully autonomous driving. Daimler’s share of the purchase price was €0.67 billion.
                                   Atlantis Foundries

In May last year, German metal casting group Neue Halberg Guss acquired the engine block castings specialist Atlantis Foundries (formerly Atlantis Diesel Engines) from Mercedes- Benz South Africa.

Daimler AG/ Mercedes-Benz South Africa took control of Atlantis Foundries in 1999, and achieved a record cast production of 60,000 tons in 2012. Atlantis Foundries produces automotive castings for both the passenger and commercial vehicle industries. In addition, the company machines cylinder blocks and crankshafts for automotive applications.

Neue Halberg Guss said the deal would result in the formation of one of the largest foundry networks for engine parts in the world. Atlantis Foundries interim managing director Tobias Hobbach, appointed as a result of the departure of Felix Homburg, said the change of ownership was positive and represented an opportunity for growth in the company.

Atlantis Foundries staff have been guaranteed one year of employment, even though Halberg Guss recently entered into a seven-year agreement with Daimler/Mercedes- Benz South Africa to supply engine blocks to the German and US markets.

Neue Halberg Guss GmbH develops and produces cast iron cylinder blocks, crankshafts and rear axle casings for European automobile and engine manufacturers. Its products/services include cylinder blocks for passenger vehicles and trucks, cylinder heads for trucks, crankshafts for passenger vehicles and power train units and other cast components.

The company was founded in 1988 and is based in Saarbrücken, Germany. As of May 2011, Halberg Guss GmbH has operated as a subsidiary of Neue Halberg Guss GmbH, a company formed by the Dutch HTP Group. HTP specialises in the acquisition and restructuring of companies and has among others the Bavarian caravan builder Knaus Tabbert and the automotive supplier Geiger and Reum under its wing.

Halberg Guss supplies leading car manufacturers such as Volkswagen and Daimler. The company maintains production sites in Saarbrücken and Leipzig, Germany and currently has a workforce of around 2,100 employees.

This is not the first time Halberg Guss has bought into South African foundry capacity. In 2007 the company bought foundry plants in Port Elizabeth and Brits from engineering and construction giant Murray & Roberts – a short-lived arrangement as the German company ran into financial problems. The company was renamed Autocast South Africa. Last year Standard Bank took control of the company.