Daimler AG (DAI) showed a profit of €612 million ($850 million) or 65 eurocents (90 cents) per share during the first quarter of 2010, which was a sharp contrast to a loss of €1.3 billion ($1.8 billion) or €1.40 ($1.95) per share in the prior-year quarter.
Earnings before income and taxes (EBIT) improved to €1.2 billion ($1.7 billion) from a loss of €1.4 billion ($1.9 billion) in the first quarter of 2009. Due to improved performance in all the segments and a recovery in all the markets, the company raised its EBIT outlook to €4 billion ($5.6 billion) for 2010 from the previous outlook of €2.3 billion ($3.2 billion).
The hefty gain in profit was fueled by an impressive rise in unit volumes in all the divisions, especially Mercedes-Benz Cars. In the quarter, Daimler’s global unit sales escalated 21% to 402,700 cars and commercial vehicles. Consequently, revenues (adjusted for exchange-rate effects) grew 15% to €21.2 billion ($29.5 billion).
Segment Performance
Mercedes-Benz Cars: The segment was strongly influenced by sales growth in its E-Class and S-Class models. Unit sales went up by a robust 20% to 277,100 vehicles, helped by strong sales in China and the U.S. This helped revenues to grow 28% to €11.6 billion ($16.1 billion), supported by an improved product mix and pricing.
EBIT was €806 million ($1.1 billion) in contrast to a loss of €1.1 billion ($1.5 billion) a year ago. Unfavorable currency translation effects, partially offset by improvements in efficiency and cost reduction actions, negatively affected the earnings. The company anticipates an EBIT of €2.5 billion to €3 billion ($3.5 billion to $4.2 billion) for 2010, approximately double the previous guidance of more than €1.5 billion ($2.1 billion).
Daimler Trucks: The segment’s performance was aided by higher sales volume in Latin America (79% increase) and Southeast Asia (48% increase), partially offset by lower sales volume in Germany, the Middle East and Japan. The segment sold 70,600 trucks during the quarter, up 8% on a year-over-year basis. Revenues were €4.9 billion ($6.8 billion), a tad lower (1%) than the year-ago level.
EBIT was €130 million ($181 million) compared to a loss of €142 million ($197 million) a year ago. The earnings were positively impacted by measures to reduce costs, especially from the repositioning of the subsidiaries, Daimler Trucks North America and Mitsubishi Fuso Truck and Bus Corporation. The company expects an EBIT of €500 million to €700 million ($695 million to $973 million) for 2010, significantly up from the previous outlook of €200 million ($278 million).
Mercedes-Benz Vans: The segment’s performance was boosted by higher unit sales, particularly in the Western European market. Unit sales shot up 62% to 46,700 vehicles. Revenues appreciated 31% to €1.7 billion ($2.4 billion).
EBIT was €64 million ($89 million) compared to a loss of €91 million ($126 million) in the prior year. Unfavorable currency effects, largely offset by improvements in efficiency and reductions in cost, adversely affected the earnings. The company continues with its guidance to achieve an EBIT of €250 million ($348 million) for 2010.
Daimler Buses: This segment sold 8,400 buses and bus chassis in the quarter, up from the year-ago level by 23.5%. Revenues rose 12% to €1.7 billion ($2.4 billion). However, EBIT declined to €41 million ($57 million) from €65 million ($90 million) a year ago. This was attributable to lower unit sales in Western Europe, partially offset by the improvement in Latin America. The company maintained its outlook to achieve an EBIT of €180 million ($250 million) for 2010.
Daimler Financial Services: Revenues in the segment fell marginally by 3% to €3.1 billion ($4.3 billion). Worldwide contract volume decreased €59.9 billion ($83.3 billion) during the quarter. However, new business increased 6% to €6.2 billion ($8.6 billion).
The segment EBIT was €119 million ($165 million) compared to a loss of €167 million ($232 million) in the prior-year quarter. This was attributable to lower provisions for risks and higher interest margins. Daimler Financial Services raised its EBIT outlook to more than €500 million ($695 million) for 2010 from the previous outlook of at least €350 million ($487 million).
Financial Position
Daimler’s cash and cash equivalents was €9.5 billion ($13.2 billion) as of March 31, 2010. Net debt, primarily related to the refinancing of the leasing and sales-financing business, increased €751 million ($1 billion) as of March 31, 2010, compared to December 31, 2009, due to unfavorable currency exchange rate movements.
Free cash flow was €300 million ($417 million) during the quarter, a sharp contrast to an outflow of €1.1 billion ($1.5 billion) in the year-ago quarter. This was attributable to an improvement in earnings in all the segments, which more than compensated the negative impacts of an increase in inventory and higher payments for interest and taxes. Capital expenditure increased to €738 million ($1 billion) in the quarter from €688 million ($956 million) in the prior year.
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