Daimler pushes its sustainable business strategy forward

Jul 8, 2020
Stuttgart
  • Manager Sales and Finance Communications
  • Successful crisis management of COVID-19 pandemic
  • Production to be ramped up worldwide subject to demand
  • Dividend proposal takes into account stakeholder interests and business situation
  • Focus on increased efficiency and strategic investments in the future

Stuttgart (Germany) – Daimler AG (ticker symbol DAI) is maintaining its course in the midst of challenging economic conditions and continuing to invest in the key technologies of the future to successfully shape the transformation. “Despite all the challenges presented by the corona pandemic, we must not neglect the key tasks of the transformation. Electrification and digitization in all their forms are the main technological tasks and continue to require high funding. Not least, COVID-19 has once again made it clear that we must be more careful with our environment if we want to avoid causing enormous damage to ourselves in the long term. Daimler’s goal continues to be emission-free mobility,” says Manfred Bischoff, Chairman of the Supervisory Board of Daimler AG, at the company’s virtual Annual Shareholders’ Meeting on Wednesday.

The agenda of the Annual Meeting includes advance resolutions on capital measures and amendments to the Articles of Incorporation. Among other things, the changes are intended to make virtual meetings and electronic participation possible again in the future. The agenda also features proposed changes in the Supervisory Board’s composition. Dr. Paul Achleitner’s term of office as a member of the Supervisory Board representing the shareholders expires at the end of the Annual Meeting. The Supervisory Board proposes Timotheus Höttges, Chairman of the Board of Management of Deutsche Telekom AG, Bonn, for election to the Supervisory Board.

“Daimler’s future will be sustainably fascinating, sustainably climate-neutral and last but not least, sustainably profitable. In view of an ever-faster changing world, we must change at a faster pace. We need a lane change towards decarbonization. That’s the direction we're headed in and we're following insistently,” says Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG, in his speech to shareholders.

The next generation of the S-Class, which will be presented in autumn, represents the future of Mercedes-Benz. It combines the two strategic focuses of electrification and digitization. 48-volt technology is standard with all engines, and the plug-in hybrid version sets new standards in this segment in terms of electric range. The market launch of the S-Class will be followed in 2021 by the EQS, the first fully electric luxury sedan from Mercedes-Benz based on an all-electric architecture. At the same time, Mercedes-Benz is taking the next major step in terms of digitization, safety and automated driving functions with an updated version of the MBUX navigation and infotainment system.

“The S-Class is the world's best-selling luxury sedan, and with the latest generation, we want to offer our customers innovation, safety, comfort and quality like never before. We are above all a luxury brand and there is great potential for further growth, especially at the upper end of the segments in which we are operating. So we will systematically strengthen our brand portfolio and make it more attractive to a broader target group. We are focused on building the most desirable cars in the world. That is our promise and the best path towards more profitable growth,” says Källenius.

Current situation

After the global economy had started the year with positive indicators, the COVID-19 pandemic and the countermeasures taken brought economic activities worldwide to a temporary standstill. Daimler proactively countered the drop in demand caused by the pandemic by suspending production in March, April and May, and by introducing short-time work. At the same time, expenditure was reduced and investments were consequently focused on future-oriented projects. This safeguarded the company’s financial strength. At the end of the first quarter, the net liquidity of the industrial business was at a robust level of €9.3 billion. In addition, Daimler significantly increased its financial flexibility at the beginning of April with an additional syndicated credit facility of €12 billion. “The measures we took were aimed at dealing with the situation in the short term but were also designed to support our long-term course,” says Källenius.

The Board of Management and the Supervisory Board will propose to the shareholders at the Annual Meeting a dividend of €0.90 per share for the past financial year (2018: €3.25). “The dividend proposal takes into account the careful and prudent balancing of the interests of all stakeholders to which the company is responsible as well as the current business situation, in particular liquidity and the business outlook,” says Bischoff. The proposed total dividend payout amounts to €1.0 billion (2018: €3.5 billion).

Earnings declined in the past financial year, mainly due to substantial extraordinary expenses, while unit sales remained at the prior-year level. Daimler sold a total of 3.34 million cars and commercial vehicles (2018: 3.35 million). Revenue increased by 3% to €172.7 billion (2018: 167.4), and the Daimler Group achieved EBIT of €4.3 billion (2018: €11.1 billion). Adjusted EBIT reflects the ongoing business and amounted to €10.3 billion. Net profit decreased to €2.7 billion (2018: €7.6 billion). Net profit attributable to the shareholders of Daimler AG amounted to €2.4 billion (2018: €7.2 billion).

Outlook

As a result of the COVID-19 pandemic, global vehicle markets have suffered a massive slump in recent months. In the first half of the year, unit sales of the Mercedes-Benz brand fell by nearly 19% to the number of about 870,000 cars. “Mercedes-Benz has already made up some ground in the second quarter. In China, for example, Mercedes-Benz achieved its best second quarter ever in terms of unit sales. We are cautiously optimistic that other markets will follow this development step by step. As soon as demand picks up again, we can increase production quickly and efficiently,” Källenius says.

Truck sales fell by 38% to around 150.000 vehicles in the first six months of 2020 as a result of the pandemic and the already weaker market environment, especially in Europe and North America. Order intake shows positive signs in recent weeks in almost all key markets. At Daimler Mobility, contract volume on June 30 was 2% lower at about €155 billion - compared to June 2019 and based on preliminary figures. Also in China, things are already looking up again. The negative effects of the first quarter were offset in the second quarter.

Against the backdrop of the worldwide effects of the COVID-19 pandemic, Daimler expects negative adjusted Group EBIT and a negative free cash flow in the industrial business in the second quarter. Also, as forecasted in the first quarter revenue, will decrease significantly although the development of revenue in recent weeks, particularly in the passenger car business, gives cause for cautious optimism. The early adjustment of production and the measures introduced to limit costs and expenses had a positive effect on cash flow and liquidity.

“The necessary investments in the future can no longer be generated through increased revenue and ‘normal’ efficiency gains. The Board of Management has therefore adopted a program to improve the cost structure. Cost discipline covers all areas of the company and is an essential prerequisite for a financially successful future,” says Bischoff. In order to streamline processes and structures and to improve financial strength, Daimler launched a comprehensive initiative across all divisions and the Group at the end of 2019. The respective measures are being implemented at full speed and their positive effects are already being felt. “Our previous efficiency goals covered the upcoming transformation, but not a global recession. That is why we are further refining our course,” says Källenius.

“What makes me confident: There are plenty of reasons why Daimler can emerge from the current situation stronger than before. That is why we now have to set the right priorities quickly. Daimler’s business model combined with the innovative spirit, expertise and the commitment of its employees has all the prerequisites to take mobility to the next level. The Supervisory Board is fully aware of the complex tasks facing the Board of Management and supports all appropriate measures to shape the future successfully,” says Bischoff.

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