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Daimler AG (ticker symbol: DAI) today reported its results for the second quarter, which ended June 30, 2021. The Group’s total unit sales increased by 36% to 736,400 passenger cars and commercial vehicles (Q2 2020: 541,800). Revenue grew by 44% to €43.5 billion (Q2 2020: €30.2 billion). EBIT was €5,185 million (Q2 2020: minus €1,682 million). Adjusted EBIT, reflecting the underlying #business, was €5,420 million (Q2 2020: minus €708 million). Net profit was €3,704 million (Q2 2020: net loss of €1,906 million).
“We achieved a strong #performance across all divisions in the second quarter. At Mercedes-Benz Cars and Vans, we posted double-digit margins for the third quarter in a row and thus demonstrated the resilience of our #business - despite the persistently low availability of semiconductors. The entire industry is currently struggling with longer delivery times, which unfortunately also affect our customers. We are doing what we can to minimize the impact. Given the high demand for our vehicles, delivery to our customers has top priority,” stated Ola Källenius, Chairman of the Board of Management of #daimler AG and Mercedes-Benz AG. “Our transformation towards emission-free and software-driven mobility is supported by a high level of free cash flow in the industrial #business. We are implementing our strategy at full speed.”
Investments, free cash flow and liquidity
The Group’s investments in property, plant and equipment in the second quarter totaled €1.0 billion (Q2 2020: €1.3 billion). Research and development expenditure amounted to €2.4 billion (Q2 2020: €2.3 billion). The free cash flow of the industrial #business was €2,586 million (Q2 2020: €685 million), including important upfront investments in future products. The increase was triggered by operating #performance, disciplined and focused capital allocation and a solid cash conversion. The adjusted free cash flow of the industrial #business improved to €2,950 million (Q2 2020: €778 million). The net liquidity of the industrial #business increased to €20.9 million at the end of the second quarter, compared to €20.1 billion at the end of the first quarter 2021 and €17.9 billion at year-end 2020. This is mainly a result of the free cash flow from the industrial #business.
Sales by the Mercedes-Benz Cars & Vans division increased by 29% to 619,600 vehicles in the second quarter (Q2 2020: 480,800). Revenue was €28.2 billion (Q2 2020: €18.9 billion). EBIT amounted to €3,438 million (Q2 2020: minus €1,125 million) and the return on sales was 12.2% (Q2 2020: minus 5.9%). Positive effects resulted from the increase in unit sales, a favourable product mix, pricing and ongoing cost measures. Adjusted EBIT reached €3,604 million (Q2 2020: minus €284 million) with the adjusted return on sales at 12.8% (Q2 2020: minus 1.5%). Cash flow before interest and taxes (CFBIT) was €2,502 million (Q2 2020: €430 million). Adjusted CFBIT amounted to €2,805 million (Q2 2020: €522 million). The adjusted cash conversion rate (CCR) was plus 0.8 (Q2 2020: minus 1.8).
Sales by Mercedes-Benz Cars rose by 27% to 521,200 vehicles in the second quarter (Q2 2020: 408,900). Mercedes-Benz Vans’ sales were up 37% to 98,400 vehicles (Q2 2020: 71,900).
The #daimler Trucks & Buses division showed an increase in unit sales of 91% to 116,800 vehicles in the first quarter (Q2 2020: 61,000). Revenue was €10.0 billion (Q2 2020: €6.2 billion). EBIT amounted to €819 million (Q2 2020: minus €756 million) and the return on sales was 8.2% (Q2 2020: minus 12.2%). Positive effects resulted from the sales increase in almost all regions, primarily from the market recovery, as well as a higher contribution to earnings from the after sales #business, pricing, ongoing cost discipline as well as a contribution from the listing of Proterra, Inc. and the sale of the Campinas plant. Adjusted EBIT was €831 million (Q2 2020: minus €747 million) and adjusted return on sales was 8.3% (Q2 2020: minus 12.0%). Cash flow before interest and taxes (CFBIT) soared to an inflow of €667 million (Q2 2020: outflow of €121 million). Adjusted CFBIT amounted to an inflow of €693 million (Q2 2020: outflow of €121 million). The adjusted cash conversion rate (CCR) was plus 0.8 (Q2 2020: 0.2).
Unit sales by #daimler Trucks increased by 94% to 112,100 vehicles in the second quarter (Q2 2020: 57,900). #daimler Buses sold 4,700 vehicles, an increase of 52% (Q2 2020: 3,100).
At #daimler Mobility, new #business increased by 23% to €17.2 billion in the second quarter (Q2 2020: €14.0 billion), driven by strong sales developments at the industrial #business. Contract volume was €150.6 billion at the end of the quarter (end of the first quarter 2021: €152.7 billion/end of 2020: €150.6 billion). Revenue was €6.9 billion (Q2 2020: €6.5 billion). The division’s EBIT amounted to €924 million (Q2 2020: €205 million). Positive effects resulted from lower credit-risk provisions, a credit provision release of €120 million, lower refinancing costs and improved development of the #business operations, as well as from strict cost discipline. At 23.9%, return on equity was much higher than the 5.6% in the prior-year period. Adjusted EBIT was €930 million (Q2 2020: €313 million) and adjusted return on equity was 24.0% (Q2 2020: 8.6%).
Daimler Truck spin-off on track
Daimler intends to generate value for its shareholders and to raise its profitability by creating two pure-play companies, one focused on cars and vans with the other on trucks and buses. It is intended that a significant majority stake in #daimler Truck will be distributed to #daimler shareholders. The transaction and the listing of #daimler Truck on the Frankfurt Stock Exchange are on track and expected to be completed before year-end 2021. The project is currently in the preparatory and auditing phase. At an extraordinary general meeting in autumn, #daimler shareholders will have to approve this historic strategic step.
Outlook for #daimler and the divisions
Daimler expects a gradual normalization of economic conditions in the important markets. The company assumes that the world economy will be able to recover from the pandemic-related weakness of the year 2020, aided by the increasing availability of effective vaccines, among other things. Furthermore, the company assumes that the worldwide shortage of supply of semiconductor components will affect the #business also in the second half of the year. The company also recognizes that the visibility how the supply situation will actually develop further is currently low. Based on the expected market development and the current assessments of the divisions, #daimler anticipates revenue and EBIT in 2021 to be significantly above the prior year’s level.
The company assumes that the current worldwide supply shortage of semiconductor components will affect Mercedes-Benz Cars unit sales also in the third quarter. Mercedes-Benz Cars unit sales could be in the magnitude of the second quarter or below. Full year unit sales are expected to be at prior year level (previously: significantly above).
Based on the #performance in the first half of the year and the above mentioned assumptions, the divisions expect the following adjusted returns in the year 2021:
- Mercedes-Benz Cars & Vans: adjusted return on sales of 10 - 12% (unchanged)
- #daimler Trucks & Buses: adjusted return on sales of 6 - 8% (previously: 6 – 7%)
- #daimler Mobility: adjusted return on equity of 17 - 19% (previously: 14 - 15%).
Daimler’s #business plan covers the full year 2021 and is based on the existing Group structure, including #daimler Trucks & Buses. The spin-off of #daimler Truck, including significant parts of the related financial services #business, will be examined before
the end of 2021. Before the spin-off, #daimler will reclassify #daimler Truck as discontinued operations. The expected considerable positive effects in the second half of the year cannot be reliably determined at present.
The adjusted cash conversion rate (ratio of cash flow to EBIT) for the Mercedes-Benz Cars & Vans division in 2021 is expected to be between 0.7 and 0.9 and for #daimler Trucks & Buses between 0.8 and 1.0.
Investments in property, plant and equipment in 2021 on a group level are expected to be in the magnitude of the previous year; research and development investments on a group level are now expected to be significantly (previously: slightly) above the prior year’s level.
Daimler now expects the free cash flow of the industrial #business for 2021 to be slightly (previously: significantly) below 2020's figure. This includes payments in the context of the settlement with the US-regulators and plaintiff representatives of the consumer class actions relating to diesel emissions, cash-outs due to the restructuring program, higher cash taxes than in 2020, as well as costs related to the planned spin-off of #daimler Truck. The adjusted free cash flow of the industrial #business is now expected to be in the magnitude of the prior-year level or slightly above (previously: in the magnitude of the prior-year level).
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