Cash flows

 

Cash provided by operating activities (see table C.05) increased by €1.3 billion to €1.7 billion. This increase is primarily due to the higher level of profit before income taxes (plus €0.9 billion). In addition, compared to the first quarter of previous year, there was a smaller increase in working capital. The comparatively high inventory increase was more than offset by the development of trade receivables and payables. Growth in new business in leasing and sales financing once again surpassed the high level of the prior-year period. Another factor was that income-tax payments decreased in the first quarter of 2014 in connection with the final assessment of previous years; the tax refund received in the first quarter of 2014 will be offset during the rest of the year.

C.05

Condensed consolidated statement of cash flows
In millions of euros Q1 2014 Q1 2013 Change
       
Cash and cash equivalents at beginning of period 11,053 10,996 +57
Cash provided by operating activities 1,693 434 +1,259
Cash used for investing activities -828 -2,260 +1,432
Cash provided by / used for financing activities -38 2,119 -2,157
Effect of exchange-rate changes on cash and cash equivalents -61 66 -127
Cash and cash equivalents at end of period 11,819 11,355 +464

C.06

Free cash flow of the industrial business
In millions of euros Q1 2014 Q1 2013 Change
       
Cash provided by operating activities 2,062 454 +1,608
Cash used for investing activities -890 -1,964 +1,074
Change in marketable debt securities -465 430 -895
Other adjustments -13 -72 +59
Free cash flow of the industrial business 694 -1,152 +1,846

C.07

Net liquidity of the industrial business
In millions of euros Mar. 31, 2014 Dec. 31, 2013 Change
       
Cash and cash equivalents 10,925 9,845 +1,080
Marketable debt securities 4,811 5,303 -492
Liquidity 15,736 15,148 +588
Financing liabilities -1,418 -1,324 -94
Market valuation and currency hedges for financing liabilities 156 10 +146
Financing liabilities (nominal) -1,262 -1,314 +52
Net liquidity 14,474 13,834 +640

C.08

Net debt of the Daimler Group
In millions of euros Mar. 31, 2014 Dec. 31, 2013 Change
       
Cash and cash equivalents 11,819 11,053 +766
Marketable debt securities 6,474 7,066 -592
Liquidity 18,293 18,119 +174
Financing liabilities -77,837 -77,738 -99
Market valuation and currency hedges for financing liabilities 146 -3 +149
Financing liabilities (nominal) -77,691 -77,741 +50
Net liquidity -59,398 -59,622 +224

Cash used for investing activities (see table C.05) amounted to €0.8 billion (Q1 2013: €2.3 billion). The change compared with the prior-year period resulted primarily from acquisitions and disposals of securities in the context of liquidity management. Those transactions resulted in a net cash inflow in the reporting period, whereas acquisitions of securities significantly exceeded disposals in the prior-year period. In addition, the slight decrease in investments in intangible assets had a positive impact. Investments in property, plant and equipment for the ramp-up of new products and for the expansion of production capacities remained at the high level of the previous year.

Cash provided by / used for financing activities (see table C.05) resulted in a cash outflow of €38 million (Q1 2013: cash inflow of €2.1 billion). The change resulted almost solely from the reduction in financing liabilities (net).

Cash and cash equivalents increased compared with December 31, 2013 by €0.8 billion, after taking currency translation into account. Total liquidity, which also includes marketable debt securities, rose by €0.2 billion to €18.3 billion.

The parameter used by Daimler to measure the financial capability of the Group’s industrial business is the free cash flow of the industrial business (see table C.06), which is derived from the reported cash flows from operating and investing activities. The cash flows from the acquisition and sale of marketable debt securities included in cash flows from investing activities are deducted, as those securities are allocated to liquidity and changes in them are thus not a part of the free cash flow.

Other adjustments relate to additions to property, plant and equipment that are allocated to the Group as their beneficial owner due to the form of their underlying lease contracts. Furthermore, effects from the financing of dealerships within the group are adjusted. In addition, the calculation of the free cash flow includes those cash flows to be shown under cash provided by financing activities in connection with the acquisition or sale of interests in subsidiaries without the loss of control.

The free cash flow amounted to €0.7 billion in the first quarter of 2014. The positive profit contributions of the industrial business were offset by the increase in working capital, defined as the net change in inventories, trade receivables and trade payables, in a total amount of €0.2 billion. Positive effects resulted from the sale of trade receivables of companies in the industrial business to Daimler Financial Services. There were negative effects from high investments in property, plant and equipment and intangible assets. In addition, income-tax and interest payments reduced the free cash flow of the industrial business.

The increase in free cash flow of €1.8 billion was mainly due to higher profit contributions from the automotive divisions. Furthermore, a smaller increase in working capital was recorded as in the first quarter of previous year. The comparatively higher inventories were more than compensated by the development of trade receivables and trade payables.

The net liquidity of the industrial business (see table C.07) is calculated as the total amount as shown in the statement of financial position of cash, cash equivalents and marketable debt securities included in liquidity management, less the currency-hedged nominal amounts of financing liabilities.

To the extent that the Group’s internal refinancing of the financial services business is provided by the companies of the industrial business, this amount is deducted in the calculation of the net debt of the industrial business.

Compared with December 31, 2013, the net liquidity of the industrial business increased by €0.6 billion to €14.5 billion. The increase mainly reflects the free cash flow of €0.7 billion.

Net debt at Group level, which primarily results from the refinancing of the leasing and sales financing business, decreased by €0.2 billion compared with December 31, 2013. (See table C.08)

The Daimler Group once again utilized the attractive conditions in the international money and capital markets in the first quarter of 2014 for refinancing

In the first quarter of 2014, Daimler had a cash inflow of €4.4 billion from the issuance of bonds (Q1 2013: €4.7 billion); outflows for the redemption of maturing bonds amounted to €3.3 billion (Q1 2013: €1.5 billion). (See table C.09)

C.09

Benchmark emissions
Issuer Volume Month of emission Maturity
       
Daimler AG €750 million Jan. 2014 Jan. 2022
Daimler Finance
North America
$1,500 million Mar. 2014 Mar. 2017
Daimler Finance
North America
$650 million Mar. 2014 Mar. 2021

In addition to the emissions shown in the table C.09, we undertook multiple smaller emissions in various countries and currencies. We were the first international company to issue a bond in the domestic capital market of the People’s Republic of China.

Furthermore, in early April 2014, an asset-backed securities (ABS) transaction was conducted in the United States in a volume of approximately $2 billion due to the very favorable market environment.

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