The development of profitability was affected in financial year 2017 by the decrease in operating profit by €0.7 billion to €1.1 billion, as well as by the increase in financial income by €0.4 billion to €5.9 billion. (See table B.34)

B.34 Condensed income statement of Daimler AG

  2017 2016
In millions of euros    
Revenue 112,685 107,178
Cost of sales (including R&D expenses) -101,874 -96,271
Selling expenses -7,312 -6,454
General administrative expenses -2,010 -1,844
Other operating expense, net -355 -749
Operating profit 1,134 1,860
Financial income 5,866 5,430
Income taxes -2,018 -1,422
Net profit 4,982 5,868
Transfer to retained earnings -1,077 -2,391
Distributable profit 3,905 3,477

Daimler AG slightly increased its unit sales in 2017, as had been forecast in the previous year. Unit sales in the car business increased by 3 % to 1,870,000 vehicles1. The SUV segment was particularly successful in 2017, with a 16 % increase in sales to 639,000 units1. The E-Class segment recorded growth of 11 % to 274,000 units1. Due to the lifecycle of the C-Class, sales of 336,000 units1 in this segment were lower than in the previous year (2016: 375,000). Sales of trucks amounted to 106,000 (2016: 101,000) units1 and sales of vans increased by 5 % to 357,000 units1.

Revenue increased by €5.5 billion to €112.7 billion and was thus higher than our expectations as stated in the “Outlook” section of last year’s Annual Report. Revenue in the car business increased by 6 % to €87.0 billion due to higher unit sales of vehicles and components. Despite the termination of a contract-manufacturing agreement, revenue in the commercial-vehicle business increased by 1 % to €25.7 billion.

Cost of sales increased by 6 % to €101.9 billion. Increases in unit sales and expenses for new products and technologies led to higher cost of sales. Research and development expenses, which are included in cost of sales, were significantly higher than in the previous year at €7.6 billion (2016: €6.6 billion); as a proportion of revenue, they amounted to 6.8 % (2016: 6.1 %). Research and development expenses were primarily related to the renewal and expansion of the product portfolio, especially with regard to the model series of the SUVs, the compact class and the S-Class, as well as the successor model of the Sprinter. In addition, work is continuing on new generations of engines, alternative drive systems and the intensification of the module strategy. At the end of the year, approximately 20,000 people were employed in the area of research and development.

Selling expenses increased by €0.9 billion to €7.3 billion. This was primarily due to higher expenses for marketing, commissions and outgoing freight. As a proportion of revenue, selling expenses increased from 6.0 % to 6.5 %.

General administrative expenses of €2.0 billion were slightly above the prior-year level (2016: €1.8 billion). In relation to revenue, they amounted to 1.8 % (2016: 1.7 %).

Other operating expense, net amounted to €0.4 billion (2016: €0.7 billion). The prior-year figure mainly comprised expenses in connection with a legal proceeding. (See table B.34)

Financial income increased by €0.4 billion to €5.9 billion, primarily due to improved income from investments in subsidiaries and associated companies. This mainly reflects increased dividend distributions as well as lower impairments of investments in subsidiaries. On the other hand, financial income was affected by increased interest expense relating to pensions. This primarily resulted from a decrease in the discount rate. In the previous year, there was a positive effect from a change in the law on the calculation of the discount rate.

The income tax expense amounts to €2.0 billion (2016: €1.4 billion). The increase primarily reflects tax expenses for prior periods relating to tax assessments of previous years. The figure for 2016 includes tax benefits recognized for prior periods.

Net profit decreased from €5.9 billion to €5.0 billion, and was thus in line with the expectations stated in the “Outlook” section of last year’s Annual Report. The development primarily reflects the lower operating profit as well as a higher income tax expense. There was an opposing effect from the improved financial income.

The economic situation of Daimler AG is primarily determined by its business operations and those of its subsidiaries. Daimler AG participates in the operating results of its subsidiaries through profit distributions. The economic situation of Daimler AG is therefore fundamentally the same as that of the Daimler Group, which is described in the chapter “Overall Assessment of the Economic Situation.” (See Economic Situation)

1 Unit sales relate solely to new vehicles. The unit sales of Daimler AG include vehicles invoiced to companies of the Group which have not yet been sold on to external customers by those companies. Vehicle sales by production companies of the Daimler Group to external customers and to subsidiaries of Daimler AG, as well as contract manufacturing by Daimler AG are not counted in unit sales.

Financial position, liquidity and capital resources
Daimler AG