The Daimler Group achieved EBIT of €14.7 billion in 2017 (2016: €12.9 billion), which surpassed the prior-year figure significantly. (See B.12 and B.13)
The development of earnings reflects primarily the very good situation of unit sales in the automotive segments. Accordingly, the Mercedes-Benz Cars division increased its earnings due in particular to further growth in unit sales, especially of the SUV models and the new E-Class. Daimler Trucks also significantly improved its earnings compared with the previous year, mainly due to increased unit sales in the NAFTA region and the sale of real estate in Japan. Mercedes-Benz Vans and Daimler Buses achieved EBIT at the prior-year level. EBIT at Daimler Financial Services increased significantly. Exchange-rate effects had a net positive impact on operating profit.
The reconciliation of segment earnings to Group EBIT resulted in income slightly above the prior-year level.
The Mercedes-Benz Cars division significantly increased its EBIT in 2017 and thus met the forecasts made in Annual Report 2016. For the Daimler Trucks division, the EBIT forecast in Annual Report 2016 was slightly below the prior-year figure. We adjusted those assessments gradually upwards as the year progressed in the context of our quarterly reporting, as the division’s unit sales increased faster than expected in some key markets and as expenses for the fixed-cost optimization were below our expectations. The earnings of Mercedes-Benz Vans also developed better than we had forecast at the beginning of the year. We had anticipated a significant decrease compared with the previous year. As the year 2017 progressed, we addjusted that assessment upwards in the context of our quarterly reporting to EBIT in the magnitude of the previous year, as the division’s unit sales increased faster than expected. Daimler Buses also achieved EBIT at the prior-year level. It thus did not meet the forecast made in Annual Report 2016 of EBIT slightly above the prior-year level. Daimler Financial Services significantly increased its EBIT and thus surpassed the forecast made in Annual Report 2016.
B.12 EBIT by segment
|In millions of euros||% change|
|Daimler Financial Services||1,970||1,739||+13|
1 EBIT, the indicator of operating performance, comprises earnings before interest income/expense and corporate income taxes. The reconciliation of the Daimler Group’s EBIT to earnings before income taxes is included in Note 33 of the Notes to the Consolidated Financial Statements.
B.16 Reconciliation of Group EBIT to profit before income taxes
|In millions of euros|
|Amortization of capitalized borrowing costs1||-13||-12|
|Profit before income taxes||14,301||12,574|
1 Amortization of capitalized borrowing costs is not included in the internal performance measure EBIT, but is a component of cost of sales.
The Mercedes-Benz Cars division posted EBIT of €9,207 million in 2017, which is significantly above the prior-year figure of €8,112 million. The division’s return on sales was 9.7 % (2016: 9.1 %). (See graphic B.14)
The positive earnings development primarily reflects the increased unit sales of new vehicles. The main drivers were the SUV segment and the new E-Class. Additional positive effects on EBIT resulted from exchange-rate effects and income of €183 million in connection with the remeasurement of the investment in THERE Holding B.V. now using the equity method. Negative effects resulted from advance expenditure for new technologies and future vehicles and from expenses for the expansion of production capacities. Higher expenses for raw materials also had a negative impact on EBIT. Furthermore, expenses for voluntary service activities and expenses for a specific vehicle recall ( €425 million) had a significant impact on earnings. In the year 2016, EBIT included expenses in connection with Takata airbags ( €480 million) and expenses in connection with remeasurement of inventories ( €238 million).
Daimler Trucks’ EBIT in the year 2017 of €2,380 million was significantly above the prior-year figure of €1,948 million. The division’s return on sales was 6.7 % (2016: 5.9 %). (See graphic B.14)
The positive development of earnings was primarily the result of increased unit sales in the NAFTA region. EBIT was also boosted by income from the sale of real estate at the Kawasaki site in Japan ( €267 million) and by efficiency improvements. Higher expenses for raw materials and expenses of €172 million for the fixed-cost optimization had a negative impact on EBIT.
Mercedes-Benz Vans achieved EBIT in 2017 of €1,181 million, similar to the prior-year level (2016: €1,170 million). The division’s return on sales was 9.0 % (2016: 9.1 %). (See graphic B.14)
EBIT was affected by higher expenses for product ramp-ups and new technologies. Furthermore, earnings were reduced by the termination of a contract-manufacturing arrangement. These effects were offset by the positive development of unit sales, especially in Europe, China and Latin America, and by exchange-rate effects. Prior-year EBIT included expenses in connection with Takata airbags ( €83 million) and expenses from a voluntary severance program at the Düsseldorf plant ( €38 million).
The Daimler Buses division’s EBIT of €243 million in 2017 (2016: €249 million) was at the high prior-year level. The return on sales decreased slightly to 5.6 % (2016: 6.0 %). (See graphic B.14)
Further efficiency enhancements and higher unit sales in Latin America almost offset the inflation-related cost increase in Latin America and the negative exchange-rate effects.
Daimler Financial Services posted EBIT of €1,970 million in 2017, thus significantly surpassing its prior-year earnings of €1,739 million. The division’s return on equity was 17.6 % (2016: 17.4 %). (See graphic B.15)
This positive development was the result of increased contract volume and a further improvement in the cost-of-risk situation. On the other hand, there were negative effects from a higher interest-rate level, increased expenses for the expansion of mobility services and the digitization of the business system.
The reconciliation of the divisions’ EBIT to Group EBIT comprises gains and/or losses at the corporate level and the effects on earnings of eliminating intra-group transactions between the divisions.
Items at the corporate level resulted in expenses of €254 million (2016: €333 million). In 2017, this primarily comprises expenses related to legal proceedings. On the other hand, the reversal of an impairment of €240 million of Daimler’s equity investment in BAIC Motor had a positive effect on earnings. In the previous year, there were expenses of €400 million in connection with a legal proceeding, the impairment of €244 million of Daimler’s equity investment in BAIC Motor, and losses of €241 million from currency transactions not allocated to business operations. The gain of €605 million recognized on the contribution of the Renault S.A.(Renault) and Nissan Motor Company Ltd. (Nissan) shares into the German pension-plan assets did not offset those expenses.
The elimination of intra-group transactions resulted in expenses of €45 million in 2017 (2016: income of €17 million).
The reconciliation of Group EBIT to profit before income taxes is shown in table B.16.