Daimler AG (ticker symbol: DAI) today reported its results for the second quarter, which ended June 30, 2020. The key figures were strongly influenced by the corona pandemic and the resulting decline in demand for cars, vans, trucks and buses. The Group’s total unit sales decreased by 34% to 541,800 passenger cars and commercial vehicles (Q2 2019: 821,700). Revenue slipped significantly by 29% to €30.2 billion (Q2 2019: €42.7 billion). EBITwas minus €1,682 million (Q2 2019: minus €1,558 million). Adjusted EBIT, reflecting the underlying business, was minus €708 million (Q2 2019: plus €2,447 million). Net loss was €1,906 million (Q2 2019: net loss of €1,242 million). Industrial free cash flow was positive in the quarter, and industrial net liquidity remained on a solid level versus first quarter 2020.
Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG: “Due to the unprecedented COVID-19 pandemic, we had to endure a challenging quarter. But our net industrial liquidity is a testament to effective cost control and cash management, which we must continue to enforce. We are now seeing the first signs of a sales recovery – especially at Mercedes-Benz passenger cars, where we are experiencing strong demand for our top end models and our electrified vehicles. Going forward, we are firmly determined to continue to improve the cost base of our company. At the same time, we are committed to our key strategic objectives: to lead in electrification and digitalization.”
Following a positive start to the year, the covid-19 pandemic and the related countermeasures brought economic activity worldwide to a temporary standstill. Daimler countered the drop in demand by quickly suspending production in March, April and May, and by introducing short-time work. To safeguard the company’s financial strength, expenditure was reduced and investments were focused on the most critical future projects. Working capital was managed carefully with a focus on inventory reduction. These measures were successful: At the end of the second quarter, the net liquidity of the industrial business was €9.5 billion (end of Q1 2020: €9.3 billion). The free cash flow of the industrial business was €685 million (Q2 2019: minus €1,302 million). The adjusted free cash flow of the industrial business, which was still influenced by high upfront investments in future products, was €778 million (Q2 2019: minus €1,208 million).
While the worldwide effects of the pandemic led to a significant decrease in earnings at Mercedes-Benz Cars & Vans, Daimler Trucks & Buses and Daimler Mobility, implemented cost-cutting measures countered the negative effects.
Sales of the Mercedes-Benz Cars & Vans division decreased by 30% to 480,800 vehicles in the second quarter (Q2 2019: 686,800). Adjusted EBIT, reflecting the underlying business, was minus €284 million (Q2 2019: plus €1,148 million) and adjusted return on sales was minus 1.5% (Q2 2019: plus 4.5%). A favorable model mix, driven particularly by the success of the newest products, contributed positively to profitability. Restructuring expenses for capacity adjustments in the global production network, e.g. in Hambach, Tuscaloosa and Aguascalientes (€687 million), and the initiated personnel cost reduction program (€101 million), had a negative impact. Both initiatives will reduce fixed costs in the medium and long term.
The Daimler Trucks & Buses division showed a decrease in unit sales of 55% to 61,000 vehicles in the second quarter (Q2 2019: 134,900). Adjusted EBIT amounted to minus €747 million (Q2 2019: plus €834 million) and adjusted return on sales was minus 12.0% (Q2 2019: plus 7.2%). Declining volumes had a strong impact on earnings while restructuring activities, which will improve long-term competitiveness, helped reduce fixed costs significantly. Encouragingly, order intake is now developing positively in nearly all core regions.
At Daimler Mobility, new business decreased by 24% to €14.0 billion in the second quarter (Q2 2019: €18.4 billion). Adjusted EBIT amounted to €313 million (Q2 2019: €483 million) and adjusted return on equity was 8.6% (Q2 2019: 14.0%). Due to the economic slowdown in connection with the covid-19 pandemic, higher credit loss expenses had a negative impact on EBIT. Furthermore, EBIT was reduced by expenses (€105 million) in connection with the adjustment of the YOUR NOW Group.
The covid-19 pandemic will continue to have a strong impact on developments during the rest of the year. From today’s perspective, a considerable decline in global economic output must be expected for full-year 2020. Daimler assumes that the pandemic-related decrease in unit sales will not be offset in the remainder of this year. Therefore, efficiency and capacity measures are to be intensified.
Assuming that the economic recovery continues in the second half of the year and that there is no new major wave of covid-19 infections in our key sales markets, Daimler expects both Group EBIT and the free cash flow of the industrial business to be positive in 2020, but lower than in the previous year. The free cash flow of the industrial business does not take into account possible expenses in connection with legal and governmental proceedings. As EBIT of the Mercedes-Benz Cars & Vans division was burdened by substantial special effects in 2019, EBIT is expected to be above the prior-year level despite the effects of the pandemic. Daimler Mobility’s adjusted return on equity is not expected to reach the level of the prior year.
Source: Daimler AG