Daimler raises outlook for strong first quarter results | Automotive Industry News
Daimler bullish on outlook, despite headwinds of chip shortage of uncertain duration
Daimler today announced its results for the first quarter ended March 31, 2021 and raised its outlook for the full year. Profit was boosted, in particular, by strong sales in China. However, he also warned that the global shortage of critical semiconductor components had affected shipments in the first quarter and predicted a further impact on sales in the second quarter.
Daimler’s total unit sales in the first quarter increased 13% to 728,600 cars and light commercial vehicles (Q1 2020: 644,300) due to the recovery in the global economy.
Revenue reached 41.0 billion euros (Q1 2020: 37.2 billion euros), supported by a favorable product mix and pricing, he said. The strong operational performance of the first quarter resulted in a rebound in EBIT to 5,748 million euros (Q1 2020: 617 million euros). Adjusted EBIT, reflecting the underlying business, was also multiplied to € 4,970 million (Q1 2020: € 719 million).
Harald Wilhelm, Chief Financial Officer of Daimler AG, said: “Deliveries, revenues and profits increased significantly, notably thanks to favorable winds in China, a strong product mix and favorable pricing, supported by improvements in industrial performance and cost control. After this promising start, we are convinced that we can keep up the pace to improve our margins on a sustainable basis and at the same time expand our range of electric vehicles. “
In the first quarter of 2021, net profit was 4,373 million euros (Q1 2020: 168 million euros). Net profit attributable to shareholders of Daimler AG amounted to EUR 4,290 million (Q1 2020: EUR 94 million), resulting in an increase in earnings per share to EUR 4.01 (Q1 2020: EUR 0.09 ).
Sales of the Mercedes-Benz Cars & Vans division increased by 15% to 627,300 vehicles in the first quarter (Q1 2020: 546,700). Revenue amounted to € 26.9 billion (Q1 2020: € 23.2 billion). EBIT was € 4,078 million (Q1 2020: € 510 million) and the return on sales was 15.2% (Q1 2020: 2.2%). Adjusted EBIT reached 3,841 million euros (Q1 2020: 603 million euros) with an adjusted return on sales of 14.3% (Q1 2020: 2.6%). Cash flow before interest and taxes (CFBIT) is an inflow of 1,968 million euros (Q1 2020: outflow of 1,729 million euros). The adjusted CFBIT represents an inflow of 3,129 million euros (Q1 2020: outflow of 1,281 million euros). The adjusted currency conversion rate (CCR) was plus 0.8 (Q1 2020: minus 2.1).
Mercedes-Benz Cars sales increased 15% to 538,900 vehicles in the first quarter (Q1 2020: 470,600). Mercedes-Benz Vans sales increased 16% to 88,400 vehicles (Q1 2020: 76,200).
The Daimler Trucks & Buses division recorded a 4% increase in unit sales to 101,300 vehicles in the first quarter (Q1 2020: 97,600). Turnover amounted to 8.7 billion euros (Q1 2020: 8.7 billion euros). EBIT was € 1,041 million (Q1 2020: € 247 million) and the return on sales was 12.0% (Q1 2020: 2.8%). Adjusted EBIT was € 518 million (Q1 2020: € 247 million) and adjusted return on sales was 6.0% (Q1 2020: 2.8%). Cash flow before interest and taxes (CFBIT) skyrocketed to 621 million euros (Q1 2020: outflow of 85 million euros). The adjusted CFBIT represents an inflow of 435 million euros (Q1 2020: outflow of 85 million euros). The adjusted currency conversion rate (CCR) was plus 0.8 (Q1 2020: minus 0.3).
Daimler Trucks unit sales increased 6% to 97,600 vehicles in the first quarter (Q1 2020: 92,500). Daimler Buses sold 3,700 vehicles, a decrease of 27% (Q1 2020: 5,100).
Daimler Truck spin-off ‘well on track’
Daimler said its Truck spin-off is on track to be completed by the end of this year. It intends to generate value for its shareholders and increase its profitability by creating two pure-play companies, one focused on cars and vans and the other on trucks and buses. It is expected that a significant majority stake in Daimler Truck will be distributed to Daimler shareholders. The transaction and listing of Daimler Truck on the Frankfurt Stock Exchange are on track and should be completed before the end of 2021. The project is currently in the preparation and audit phase. At an extraordinary general meeting in the fall, Daimler shareholders will have to approve this major strategic step.
Daimler said he expects a gradual normalization of economic conditions in important markets. The company assumes that the global economy will be able to recover from the weakness of 2020 linked to the pandemic, aided by the increasing availability of effective vaccines. Based on the expected development of the market and the current assessments of the divisions, Daimler continues to forecast that the group’s unit sales, revenues and EBIT in 2021 will be significantly higher than the level of the previous year.
The current global shortage of certain semiconductor components has affected first quarter shipments and Daimler said it expects this shortage could have an additional impact on second quarter sales. Although “visibility is currently limited”, Daimler assumes some recovery in the third and fourth quarters.
Based on first quarter performance, the divisions expect the following adjusted returns in 2021:
- Mercedes-Benz cars and vans: adjusted sales yield of 10 to 12%
- Daimler Trucks & Buses: adjusted sales yield of 6 to 7%
- Daimler Mobility: adjusted return on equity of 14 to 15%
Daimler’s business plan covers the whole of 2021 and is based on the existing group structure, including Daimler Trucks & Buses. The Daimler Truck spin-off, including significant parts of the related financial services business, will be reviewed before the end of 2021, he said. Prior to the split, Daimler will reclassify Daimler Truck as a discontinued operation. The considerable positive effects expected in the second half of the year cannot be reliably determined at this time.
The adjusted cash conversion rate (cash flow / EBIT ratio) for the Mercedes-Benz Cars & Vans division in 2021 is expected to be between 0.7 and 0.9 and for Daimler Trucks & Bus between 0.8 and 1, 0. Daimler expects the reported free cash flow from industrial activity for 2021 to be lower than the 2020 figure, due to payments as part of the settlement with U.S. regulators in civil litigation relating to diesel emissions. Adjusted free cash flow from industrial activity is now expected to be around the level of the previous year despite higher cash taxes.