The development of profitability was affected in financial year 2018 by the increase in financial income of €1.4 billion to €7.3 billion, as well as by the decrease in operating profit of €2.3 billion to €-1.2 billion. (See table B.34)

B.34 Condensed income statement of Daimler AG

  2018 2017
In millions of euros    
Revenue 112,491 112,685
Cost of sales (including R&D expenditure) -103,232 -101,874
Selling expenses -7,904 -7,312
General administrative expenses -2,304 -2,010
Other operating expense, net -292 -355
Operating profit -1,241 1,134
Financial income 7,318 5,866
Income taxes -1,055 -2,018
Net profit 5,022 4,982
Transfer to retained earnings -1,545 -1,077
Distributable profit 3,477 3,905

Unit sales by Daimler AG in 2018 were slightly lower than in the prior year and thus lower than our expectation as stated in the Outlook section of last year’s Annual Report. Sales of cars decreased by 4 % to 1,791,000 units1. Due to starts of production, sales decreased of the GLE-Class by 18 % to 137,000 units1 and of the B-Class by 21 % to 62,000 units1. Sales of 303,000 units1 of the C-Class were lower than in the previous year, partially for lifecycle reasons (2017: 336,000 units1). The GLC-Class was extremely successful in 2018, with a sales increase of 18 % to 293,000 units1. Truck sales increased by 6 % to 112,000 units1 and van sales rose by 8 % to 386,000 units1.

At €112.5 billion, revenue remained at the prior-year level and in line with our expectations as stated in the Outlook section of last year’s Annual Report. Revenue in the car business decreased by 4 % to €83.8 billion due to lower vehicle sales. Along with higher unit sales, revenue in the commercial-vehicle business increased again by 12 % to €28.7 billion.

Cost of sales rose by 1 % to €103.2 billion. The increase results primarily from higher expenses for production materials and purchased services. This was mainly due to higher expenses for new products and technologies, expenses related to certification according to the new WLTP (Worldwide Harmonized Light Vehicles Test Procedure) standard and expenses for service measures. Research and development expenses, which are reported under cost of sales, were higher than in the previous year at €8.1 billion (2017: €7.6 billion); as a proportion of revenue, they amounted to 7.2 % (2017: 6.8 %). Research and development expenses primarily related to the renewal and expansion of the product portfolio, in particular electric vehicles and the S-Class, C-Class, SUVs and the new Sprinter. In addition, work is continuously being carried out on new engine generations, alternative drive systems and the intensification of the module strategy. At the end of the year, approximately 20,500 people were employed in the area of research and development.

Selling expenses increased by €0.6 billion to €7.9 billion. This was primarily due to higher expenses for freight, marketing and sales systems. As a proportion of revenue, selling expenses increased from 6.5 % to 7.0 %.

General administrative expenses of €2.3 billion were higher than in the previous year (2017: €2.0 billion). They include costs in connection with Project Future amounting to €0.2 billion. As a proportion of revenue, general administrative expenses amounted to 2.0 % (2017: 1.8 %).

The aforementioned functional costs include expenses in the amount of €0.6 billion in connection with the transfer of pension obligations and special-purpose assets to Daimler Pensionsfonds AG.

Other operating expense, net amounted to €0.3 billion (2017: €0.4 billion). Income from other periods increased, on the other hand, expenses for legal proceedings had an impact. (See table B.34)

Financial income increased by €1.4 billion to €7.3 billion. The increase is primarily due to an increase of €4.6 billion in income from investments in subsidiaries. On the other hand, financial income was adversely affected by an increase of €3.2 billion in interest expenses, primarily in connection with company pensions. This was mainly due to significant higher interest expenses as a result of the return on the special-purpose assets, which was negative, unlike in the previous year, and to expenses resulting from the proportionate transfer of pension obligations and special-purpose assets to Daimler Pensionsfonds AG. In addition, the measurement of pension obligations also contributed to higher interest expenses.

The income tax expense amounts to €1.1 billion (2017: €2.0 billion). The lower operating profit led to a lower income tax expense. Furthermore, the prior-year figure included high tax expenses from other periods.

Net profit amounts to €5.0 billion (2017: €5.0 billion), and was thus in line with the expectations stated in the Outlook section of last year’s Annual Report.

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.

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 are not counted in unit sales.

Financial position, liquidity and capital resources
Daimler AG