Profitability

 

The Daimler Group posted EBIT of €3,732 million for the third quarter of 2014, which was significantly higher than the prior-year figure (Q3 2013: €2,231 million). Due to the positive development of business at all the divisions, EBIT from the ongoing business increased from €2,300 million to €2,787 million.

In particular, the product mix at Mercedes-Benz-Cars and the increasing impact of the efficiency measures that have been implemented at all divisions had a positive effect on operating profit. Foreign exchange rates had a slightly negative impact on earnings, however. (see table C.03)

The third quarter of 2014 was particularly influenced by the sale of the shares in Rolls-Royce Power Systems Holding GmbH (RRPSH). This resulted in a gain of €1,006 million, which is presented in the reconciliation.

The special items shown in table (see table C.04) affected EBIT in the third quarter and the first nine months of 2014 and 2013.

C.03

EBIT by segment
In millions of euros Q3 2014 Q3 2013 % change Q1-3 2014 Q1-3 2013 % change
             
Mercedes-Benz Cars 1,584 1,200 +32 4,176 2,701 +55
Daimler Trucks 588 522 +13 1,384 1,072 +29
Mercedes-Benz Vans 176 152 +16 541 437 +24
Daimler Buses 64 59 +8 167 55 +204
Daimler Financial Services 355 322 +10 1,088 955 +14
Reconciliation 965 -24 . 1,258 3,170 -60
Daimler Group 3,732 2,231 +67 8,614 8,390 +3

C.04

Special items affecting EBIT
In millions of euros Q3 2014 Q3 2013 Q1-3 2014 Q1-3 2013
         
Mercedes-Benz Cars        
Impairment of investments in the area of alternative drive systems -30 -51 -30 -94
         
Daimler Trucks        
Workforce adjustments -30 -8 -106 -103
         
Mercedes-Benz Vans        
Reversal of impairment of investment in Fujian Benz Automotive Corp. Ltd. - - 61 -
         
Daimler Buses        
Business repositioning - -2 -9 -26
         
Reconciliation        
Sale of shares in RRPSH 1,006 - 1,006 -
Measurement of put option for RRPSH - -21 -118 -50
Remeasurement of Tesla shares - - 718 -
Hedge of Tesla share price -1 - -230 -
EADS – remeasurement and sale of remaining shares - 13 - 3,222

Mercedes-Benz Cars’ third-quarter EBIT of €1,584 million was significantly higher than the prior-year figure of €1,200 million. The division’s return on sales was 8.5% (Q3 2013: 7.3%). (see table C.03)

The earnings development primarily reflects the ongoing growth in unit sales, especially in Asia, Europe and the United States. That growth was driven in particular by the S-Class and 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, which includes impairments on investments in the area of alternative drive systems of €30 million. Exchange-rate effects also had a slightly negative impact on earnings.

Mercedes-Benz S-Class

The EBIT of €588 million posted by Daimler Trucks for the third quarter of 2014 was above the prior-year level (Q3 2013: €522 million). The division’s return on sales was 6.9% (Q3 2013: 6.5%). (see table C.03)

The main driver of the earnings growth was the ongoing very positive development of unit sales in the NAFTA region. The successful implementation of the Daimler Trucks #1 growth and efficiency program also had a positive impact on earnings. However, there were negative effects from lower unit sales in Latin America and Europe as well as from currency development. Workforce adjustments in the context of ongoing optimization programs in Germany and Brazil resulted in expenses of €30 million. An additional factor was that there was no longer a contribution to earnings from RRPSH due to the exercise of the put option.

Mercedes-Benz Vans achieved third-quarter EBIT of €176 million, which is significantly higher than the earnings in the prior-year period of €152 million. The division’s return on sales increased slightly to 7.0%, compared with 6.7% in the prior-year period. (see table C.03)

Earnings in the third quarter reflect the very positive development of unit sales, especially in Europe and the NAFTA region. Earnings were negatively affected, however, by research and development expenditure for new products and by expenses for the market launch of the new Vito.

Daimler Buses’ EBIT of €64 million was higher than its very good earnings of the prior-year period (Q3 2013: €59 million). The division achieved a return on sales of 6.2%, compared with 5.2% in the third quarter of 2013. (see table C.03)

The positive business development, a favorable product mix and further efficiency progress in Western Europe more than offset the decreases in earnings in Latin America. Despite the difficult economic situation in Argentina and Brazil and the declining market in Turkey, earnings improved once again compared with the very strong prior-year quarter. Positive exchange-rate developments also contributed to third-quarter earnings.

The Daimler Financial Services division surpassed its prior-year earnings with EBIT of €355 million in the third quarter (Q3 2013: €322 million). (see table C.03)

The main reason for this development was the growth in contract volume. Additional expenses arose in connection with the expansion of business operations.

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.

Items at the corporate level resulted in income of €947 million (Q3 2013: expense of €30 million). This primarily reflects the gain of €1,006 million on the sale of the shares in RRPSH.

The elimination of intra-group transactions resulted in income of €18 million in the third quarter of 2014 (Q3 2013: €6 million).

Net interest expense in the third quarter of 2014 improved by €10 million to €149 million (Q3 2013: €159 million). Expenses in connection with pension and healthcare benefits obligations were lower than the prior-year level. Other interest result improved due to lower costs for maintaining adequate 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 remeasurement of interest-rate hedges.

The tax expense of €760 million entered under income-tax expense is €585 million higher than in the third quarter of last year. In both periods, the tax expense was relatively low compared with profit before income taxes. In the third quarter of 2014, a gain was recognized on the sale of the RRPSH shares that was largely tax free. In the prior-year period, tax benefits related to the tax assessment of previous years led to the relatively low income-tax expense.

Net profit for the third quarter of 2014 amounted to €2,821 million (Q3 2013: €1,897 million). Net profit of €86 million is attributable to non-controlling interest (Q3 2013: €61 million) and net profit of €2,735 million is attributable to the shareholders of Daimler AG (Q3 2013: €1,836 million); earnings per share therefore amount to €2.56 (Q3 2013: €1.72).

The calculation of earnings per share (basic) is based on an average number of outstanding shares of 1,069.8 million (Q3 2013: 1,069.4 million).

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