Profitability

 

The Daimler Group posted EBIT of €1,787 million for the first quarter of 2014, which was significantly higher than the figure for the prior-year period (Q1 2013: €917 million). (See table C.03)

C.03

EBIT by segment
In millions of euros Q1 2014 Q1 2013 % change
       
Mercedes-Benz Cars 1,183 460 +157
Daimler Trucks 341 116 +194
Mercedes-Benz Vans 123 81 +52
Daimler Buses 53 -31 .
Daimler Financial Services 397 314 +26
Reconciliation -310 -23 .
Daimler Group 1,787 917 +95

This substantial increase in earnings was primarily due to the very positive development of unit sales and revenue at all divisions. In addition, the current product mix at Mercedes-Benz Cars and the increasing effect of the efficiency measures implemented at all divisions also had positive effects on EBIT. Foreign exchange rates had a negative impact on earnings, how­ever. EBIT was also reduced by expenses in connection with hedging Daimler’s equity interests in Tesla Motors, Inc. (Tesla) and Rolls-Royce Power Systems Holding GmbH (RRPSH). Without these special items, operating profit would have more than doubled compared with the prior-year period. For further information on Tesla and RRPSH, we refer to the sections “Events” and “Subsequent events

The special items shown in table C.04 affected EBIT in the first quarter of 2014 and 2013.

C.04

Special items affecting EBIT
In millions of euros Q1 2014 Q1 2013
     
Daimler Trucks    
Workforce adjustments -5 -13
     
Daimler Buses    
Business repositioning -1 -4
     
Reconciliation    
Measurement of put option for RRPSH -118 -15
Hedge of Tesla share price -161 -

The EBIT of the Mercedes-Benz Cars division of €1,183 million was significantly higher than the figure for the prior-year period of €460 million. The division’s return on sales was 7.0% (Q1 2013: 3.3%). (See table C.03)

The earnings development primarily reflects the ongoing growth in unit sales, especially in China and the United States. This growth was driven in particular by the S-Class and the E-Class, as well as by the expanded range of compact cars. Mercedes-Benz Cars achieved earnings growth also as a result of better pricing. Efficiency actions from the “Fit for Leadership” program also had a positive impact on earnings. There were negative effects on earnings from expenses for the enhancement of products’ attractiveness, capacity expansions and advance expenditure for new technologies and vehicles. Exchange rate effects also had a negative impact on earnings.

The first-quarter EBIT of Daimler Trucks of €341 million was significantly higher than in the previous year (Q1 2013: €116 million). The division’s return on sales was 4.8% (Q1 2013: 1.7%). (See table C.03)

In particular, increased unit sales in the NAFTA region and Asia contributed positively to the development of earnings. In Japan, there was a significant positive effect on demand from the increase in value-added tax as of April 1, 2014. There were negative effects on Daimler Trucks’ earnings, however, from lower unit sales in Latin America and from foreign exchange rates. Furthermore, expenses of €5 million were incurred for workforce adjustments in connection with the ongoing optimization programs in Germany and Brazil. The efficiency measures of the “Daimler Trucks #1” program and lower warranty costs had a positive effect on earnings.

Mercedes-Benz Vans achieved first-quarter EBIT of €123 million (Q1 2013: 81 million). The division’s return on sales increased to 5.6% from 4.1% in the prior-year period. (See table C.03)

World Premiere of the new V-Class

Earnings in the first quarter of this year reflect the positive development of unit sales and revenue, which resulted from a significant increase in demand, especially in Europe and the NAFTA region. EBIT also benefited from improved pricing. There were opposing effects from expenses related to the launch of the new V-Class.

The EBIT of the Daimler Buses division amounted to plus €53 million (Q1 2013: minus €31 million) and its return on sales was 6.2% (Q1 2013: minus 4.1%). (See table C.03)

Compared with the prior-year quarter, revenue increased due to the positive development of sales of complete buses and an advantageous model mix in Western Europe, which made a significant contribution to the improvement in earnings. Further improvements in efficiency also had a positive impact on earnings.

With EBIT of €397 million for the first quarter of this year, the Daimler Financial Services division significantly surpassed its prior-year result (Q1 2013: €314 million). (See table C.03)

The main reasons for this earnings growth were the increased contract volume and a gain of €45 million on the sale of a non-automotive-related asset in the United States. However, exchange rate effects had a negative impact on EBIT.

The reconciliation of the divisions’ EBIT to Group EBIT comprises income and expenses at the corporate level as well as effects on earnings from the elimination of intra-group transactions between the divisions.

Until the sale of the remaining EADS shares in the second quarter of 2013, income and expenses at the corporate level included Daimler’s proportionate share of the earnings of the equity-method investment in EADS, which amounted to €34 million in the first quarter of 2013.

Other items at the corporate level resulted in an expense of €314 million (Q1 2013: €91 million). This includes the expenses from hedging the price of Tesla shares of €161 million. In the first quarter of 2014, Daimler’s Board of Management and Supervisory Board decided to transfer the 50% interest in RRPSH to the partner Rolls-Royce Holdings plc. In this context, Daimler exercised the put option on the investment in RRPSH agreed upon in 2011; this resulted in an expense of €118 million in the first quarter of 2014. In mid-April 2014, the sale of the shares in RRPSH was agreed upon for a price of €2.43 billion; the carrying amount of the investment at March 31, 2014 was €1.42 billion. The transaction is expected to be closed by the end of 2014, but is still subject to the approval of the antitrust and foreign-trade authorities.

The elimination of intra-group transactions resulted in income of €4 million in the first quarter of 2014 (Q1 2013: €34 million).

Net interest expense amounted to €135 million (Q1 2013: €157 million).Expenses in connection with pension and healthcare benefits obligations were slightly below the prior-year level. Other interest result improved due to the reduced costs of maintaining liquidity following the successive expiry of refinancing at high interest rates. There was an opposing effect from lower income from cash deposits and from the measurement of interest-rate hedges.

The expense of €564 million entered under income-tax expense increased by €368 million compared with the prior-year period, primarily due to the higher profit before income taxes.

Net profit for the first quarter of 2014 amounted to €1,086 million (Q1 2013: €564 million). Net profit of €59 million is attributable to non-controlling interest (Q1 2013: €28 million) and net profit of €1,027 million is attributable to the shareholders of Daimler AG (Q1 2013: €536 million); earnings per share therefore amount to €0.96 (Q1 2013: €0.50).

The calculation of earnings per share (basic) is based on an average number of outstanding shares of 1,069.8 million (Q1 2013: 1,067.7 million).

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