Cash flows

 

Cash provided by operating activities (see table C.05) of €3.3 billion in the first nine months of 2014 was slightly above the level of the prior-year period. Profit before income taxes included a non-cash gain on the remeasurement and an expense from hedging the price of Tesla shares in a net amount of €0.5 billion in the first nine months of 2014, as well as a cash effective gain of €1.0 billion on the sale of the share in RRPS. In the prior-year period, it included a non-cash gain of €3.4 billion on the remeasurement of the EADS shares. Excluding those effects, profit before income taxes improved significantly compared with the prior-year period. Working capital increased at a higher rate than in the prior-year period. The comparatively higher inventory increase was not fully offset by the development of trade receivables and payables. Growth in new business in leasing and sales financing surpassed the high level of the prior-year period by €1.5 billion. Another factor was that the positive business development in the first nine months of 2014 led to higher income-tax payments.

C.05

Condensed consolidated statement of cash flows
In millions of euros Q1-3 2014 Q1-3 2013 Change
       
Cash and cash equivalents at beginning of period 11,053 10,996 57
Cash provided by operating activities 3,270 3,160 110
Cash used for investing activities -1,557 -4,159 2,602
Cash provided by / used for financing activities -457 777 -1,234
Effect of exchange-rate changes on cash and cash equivalents 301 -159 460
Cash and cash equivalents at end of period 12,610 10,615 1,995

C.06

Free cash flow of the industrial business
In millions of euros Q1-3 2014 Q1-3 2013 Change
       
Cash provided by operating activities 7,603 6,430 1,173
Cash used for investing activities -1,737 -4,183 2,446
Change in marketable debt securities -1 1,736 -1,737
Other adjustments1 957 -104 1,061
Free cash flow of the industrial business 6,822 3,879 2,943
1 The effects from the financing of the Group’s own dealerships, which are reflected in cash provided by operating activities, are eliminated under other adjustments.

C.07

Net liquidity of the industrial business
In millions of euros Sept. 30, 2014 Dec. 31, 2013 Change
       
Cash and cash equivalents 11,659 9,845 1,814
Marketable debt securities 5,357 5,303 54
Liquidity 17,016 15,148 1,868
Financing liabilities 626 -1,324 1,950
Market valuation and currency hedges for financing liabilities 233 10 223
Financing liabilities (nominal) 859 -1,314 2,173
Net liquidity 17,875 13,834 4,041

C.08

Net debt of the Daimler Group
In millions of euros Sept. 30, 2014 Dec. 31, 2013 Change
       
Cash and cash equivalents 12,610 11,053 1,557
Marketable debt securities 6,840 7,066 -226
Liquidity 19,450 18,119 1,331
Financing liabilities -83,642 -77,738 -5,904
Market valuation and currency hedges for financing liabilities 241 -3 244
Financing liabilities (nominal) -83,401 -77,741 -5,660
Net debt -63,951 -59,622 -4,329

Cash used for investing activities (see table C.05) amounted to €1.6 billion (Q1-3 2013: €4.2 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 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 recent years. In both 2014 and 2013, the first nine months were affected by proceeds from the sale of equity interests. In August 2014, the sale of the shares in RRPSH was concluded and a capital gain of €2.4 billion was recognized. In the first nine months of 2013, cash used for investing activities was significantly affected by the sale of the remaining shares in EADS (€2.3 billion) and by the capital increase at Beijing Benz Automotive Co., Ltd. (BBAC) (€0.2 billion).

Cash provided by / used for financing activities (see table C.05) resulted in a cash outflow of €0.5 billion (Q1-3 2013: cash inflow of €0.8 billion). The change resulted almost solely from the reduction in financing liabilities (net).

Cash and cash equivalents increased compared with December 31, 2013 by €1.6 billion, after taking currency translation into account. Total liquidity, which also includes marketable debt securities, increased by €1.3 billion to €19.5 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 from financing activities in connection with the acquisition or sale of interests in subsidiaries without the loss of control.

The free cash flow of the industrial business amounted to €6.8 billion in the first nine months of 2014. The sale of the shares in RRPSH contributed €2.4 billion of that amount. The positive profit contributions to earnings of the automotive divisions were reduced by the increase in working capital, defined as the net change in inventories, trade receivables and trade payables, in a total amount of €1.1 billion. The positive development of other operating assets and liabilities was related to the business expansion. Additional positive effects resulted from the sale of trade receivables to Daimler Financial Services by companies in the industrial business. There were negative effects on the free cash flow of the industrial business from high investments in property, plant and equipment and intangible assets, income-tax payments and interest payments.

The increase in the free cash flow of €2.9 billion to €6.8 billion reflects the positive business development and was primarily due to higher profit contributions of the automotive divisions. Higher cash inflows (net) from acquisitions and sales of shares in companies as well as decreasing investments in intangible assets also had a positive impact. Payments of income taxes and interest increased, however.

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. At September 30, 2014, the Group’s internal refinancing was of a higher volume than the financing liabilities originally taken on in the industrial business due to the application of the industrial business’s own financial funds. This resulted in a positive value for the financing liabilities of the industrial business, thus increasing net liquidity.

Compared with December 31, 2013, the net liquidity of the industrial business increased by €4.0 billion to €17.9 billion. The increase mainly reflects the positive free cash flow. Dividend payments to the shareholders of Daimler AG reduced net liquidity by €2.4 billion. The assumption of the refinancing of the Group’s own dealerships by the industrial business as well as positive currency effects led to a total reduction in net liquidity of €0.3 billion.

Net debt at Group level, which primarily results from the refinancing of the leasing and sales financing business, increased by €4.3 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 nine months of 2014 for refinancing.

In the first three quarters of 2014, Daimler had a cash inflow of €10.1 billion from the issuance of bonds (Q1-3 2013: €9.3 billion). Bonds were redeemed in an amount of €8.9 billion (Q1-3 2013: €5.2 billion). (see table C.09)

The Daimler Group carried out two so-called benchmark emissions in the third quarter. In early July, Daimler AG issued a ten-year bond in the euro market with a volume of €500 million. In August, Daimler Finance North America LLC issued bonds with three-, five- and ten-year maturities in one transaction in the US capital market with a total volume of US $2.5 billion.

In addition to the emissions shown in the table (see table C.09), the Daimler Group undertook multiple smaller emissions in various countries and currencies. In September for example, Mercedes-Benz Finansman Türk A.Ş. issued a bond for the first time in the context of the Euro Medium Term Note (EMTN) program.

In addition, an asset-backed securities (ABS) transaction was conducted in the United States in July in a volume of approximately US $1.1 billion.

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
Daimler AG £400 million May 2014 Dec. 2016
Daimler AG €500 million July 2014 July 2024
Daimler Finance
North America
$1,500 million Aug. 2014 Aug. 2017
Daimler Finance
North America
$500 million Aug. 2014 Sept. 2019
Daimler Finance
North America
$500 million Aug. 2014 Aug. 2024
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