Daimler AG has reported its results for the first quarter ended 31 March 2020. The group‘s total unit sales decreased by 17% to 644,300 passenger cars and commercial vehicles (Q1 2019: 773,800) due to the global spread of the coronavirus. Revenue slipped slightly by 6% to €37.2 billion (Q1 2019: €39.7 billion). First-quarter EBIT was €617 million (Q1 2019: €2,798 million). Adjusted EBIT, reflecting the underlying business, was €719 million (Q1 2019: €2,310 million).
“The Covid-19 pandemic has substantial effects on the global economy – and our company,” said Ola Källenius, chairman of Daimler AG and Mercedes-Benz AG. “We took the proactive decision to stop production in March, and moved very quickly into cash preservation and cost management mode. As a consequence, Daimler ended the first quarter with a positive result and a robust liquidity. Now we have started with a gradual ramp-up of our production. At the same time, we are continuing to invest in key technologies, including electrification and digitalisation. They are non-negotiable elements of our future.”
In the first quarter of 2020, net profit was €168 million (Q1 2019: €2,149 million). Net profit attributable to the shareholders of Daimler AG amounted to €94 million (Q1 2019: €2,095 million), leading to a decline in earnings per share to €0.09 (Q1 2019: €1.96).
Investments, free cash flow and liquidity
The group‘s investments in property, plant and equipment in the first quarter totalled €1.6 billion (Q1 2019: €1.7 billion). Research and development expenditure amounted to €2.4 billion (Q1 2019: €2.4 billion). The free cash flow of the industrial business was minus €2.3 billion (Q1 2019: minus €2.0 billion) and was particularly influenced by the global effects of the pandemic. The adjusted free cash flow of the industrial business was minus €1.9 billion (Q1 2019: minus €2.0 billion), which is still influenced by high upfront investments in future products.
Daimler responded to the temporary drop in demand caused by the pandemic by instigating production stoppages in March and April, thus securing the group‘s financial strength. The net liquidity of the industrial business decreased to €9.3 billion at the end of first quarter, compared with €11.0 billion at year-end 2019. The decrease is particularly due to the negative free cash flow of the industrial business.
In early April, Daimler AG increased its financial flexibility with a further loan facility agreement for €12 billion. This is in addition to the existing €11 billion revolving credit facility, which has not yet been utilised, and has a term until 2025 including extension options.
Divisional results
The effects of the pandemic and the resulting decrease in unit sales led to a significant earnings downturn at Mercedes-Benz Cars & Vans as well as Daimler Trucks & Buses. Earnings at Daimler Mobility were also negatively affected by additional expenses for credit risk provisions in connection with the pandemic.
Daimler Trucks & Buses division showed a decrease in unit sales of 20% to 97,600 vehicles in the first quarter (Q1 2019: 121,400). Revenue was €8.7 billion (Q1 2019: €10.2 billion). EBIT amounted to €247 million (Q1 2019: €553 million) and return on sales was 2.8% (Q1 2019: 5.4%). Cash flow before interest and taxes (CFBIT) was minus €85 million (Q1 2019: minus €232 million) leading to a cash conversion rate (CCR) of minus 0.3 (Q1 2019: minus 0.4).
Sales by Daimler Trucks fell by 20% to 92,500 vehicles in the first quarter (Q1 2019: 115,900). Daimler Buses sold 5,100 vehicles (Q1 2019: 5,500) – a decrease of 8%.
Sales by the Mercedes-Benz Cars & Vans division decreased by 16% to 546,700 vehicles in the first quarter (Q1 2019: 652.400). Revenue was €23.2 billion (Q1 2019: €24.1 billion). EBIT amounted to €510 million (Q1 2019: €1,143 million) and return on sales was 2.2% (Q1 2019: 4.8%). Adjusted EBIT was €603 million (Q1 2019: €1,372 million) and adjusted return on sales was 2.6% (Q1 2019: 5.7%). Cash flow before interest and taxes (CFBIT) was minus €1,729 million (Q1 2019: minus €835 million). Adjusted CFBIT amounted to minus €1,281 million (Q1 2019: minus €756 million). The adjusted cash conversion rate (CCR) was minus 2.1 (Q1 2019: minus 0.6).
Sales by Mercedes-Benz Cars slipped by 15% to 470,600 vehicles in the first quarter (Q1 2019: 555.300). Mercedes-Benz Vans‘ sales were down 22% to 76,200 vehicles (Q1 2019: 97,000).
At Daimler Mobility, new business decreased by 7% to €16.2 billion in the first quarter (Q1 2019: €17.3 billion). Contract volume was €159.6 billion at the end of the quarter (December 31, 2019: €162.8 billion). Revenue was €7.1 billion (Q1 2019: €6.9 billion). The division‘s EBIT amounted to €58 million (Q1 2019: €1,209 million). At 1.6%, return on equity was lower than the figure of 35.7% in the prior-year period. Adjusted EBIT was €58 million (Q1 2019: €491 million) and adjusted return on equity was 1.6% (Q1 2019: 14.5%).
Outlook for Daimler and divisions
Given the continuing effects of the pandemic, Daimler believes that the original forecast for the financial year 2020, as disclosed in connection with annual report 2019, is no longer valid.
Daimler expects unit sales in 2020 to be below the levels of the previous year for the group and for Mercedes-Benz Cars, Mercedes-Benz Vans, Daimler Trucks and Daimler Buses. Daimler Mobility also expects a lower new business volume than in 2019.
Given the anticipated market development and the assessment of its divisions, Daimler expects group revenue and group EBIT for the financial year 2020 to be below the prior year.
Having implemented a comprehensive set of cash protection measures and having increased the financial flexibility, Daimler is confident of being well positioned to manage its business, both during and after the pandemic. As part of the measures already initiated to secure liquidity and reduce costs, Daimler will also reduce spending on property, plant and equipment, as well as on research and development compared with the previous year. However, Daimler will maintain upfront investments that are necessary to secure the future of the company.
