Statement of income

The Group’s total revenue increased by 2.0 % to €167.4 billion in 2018; adjusted for exchange rate effects, it increased by 4.3 %. The revenue growth primarily reflects an increase in sales for our products at Daimler Trucks, as well as increased contract volume at Daimler Financial Services. Further information on the development of revenue is provided in the Business Development section of this Combined Management Report. (See table B.17)

Cost of sales amounted to €134.3 billion in 2018, increasing by 3.6 % compared with the previous year. The rise in cost of sales was caused by higher business volumes and consequentially higher material expenses. The higher material expenses also reflect increased prices of raw materials. At Daimler Financial Services, the higher interest-rate level led to higher refinancing costs. In the prior year, cost of sales included expenses for voluntary service activities and expenses for a specific vehicle recall of €0.4 billion. Further information on cost of sales is provided in E Note 5 of the Notes to the Consolidated Financial Statements. (See table B.17)

Overall, gross profit in relation to revenue decreased from 21.0 % to 19.8 %.

Due to the growth in unit sales, selling expenses increased by €0.1 billion to €13.1 billion. As a percentage of revenue, selling expenses decreased slightly from 7.9 % to 7.8 %. (See table B.17)

General administrative expenses of €4.0 billion were above the level of the previous year (2017: €3.8 billion). The increase was mainly due to higher expenses for consulting services and personnel. As a percentage of revenue, general administrative expenses increased slightly to 2.4 % (2017: 2.3 %). (See table B.17)

Research and non-capitalized development costs increased by €0.6 billion to €6.6 billion in 2018. They were mainly related to the development of new models, advance expenditure for the renewal of existing models, and the further development of fuel-efficient and environmentally friendly drive systems, as well as safety technologies, automated and autonomous driving and the digital connectivity of our products. As a proportion of revenue, research and non-capitalized development costs increased from 3.6 % to 3.9 %. Further information on the Group’s research and development costs is provided in the Research and Development section of the Sustainability chapter of this Combined Management Report. (See table B.17)

Other operating income of €2.3 billion is at the same level as in previous year. In 2018, insurance compensation of €0.2 billion is included. Income of €0.4 billion from the sale of property, plant and equipment was included in 2017. Other operating expense increased to €1.5 billion (2017: €1.0 billion), mainly due to additions to other provisions. Further information on the composition of other operating income and expense is provided in Note 6 of the Notes to the Consolidated Financial Statements. (See table B.17)

In 2018, our share of profit from equity-method investments of €0.7 billion was significantly lower than the prior-year level (2017: €1.5 billion). The decrease was on the one hand due to the agreement reached with the German Federal Government to conclude the Toll Collect arbitration proceedings. This agreement had a negative impact on earnings of €0.4 billion in the year 2018. Furthermore, in the year 2018, a negative impact resulted from the impairment of €0.2 billion of the investment in BAIC Motor (2017: positive impact from the reversal of the impairment of €0.2 billion of the investment in BAIC Motor). (See table B.17)

Other financial expense/income increased from an expense of €0.2 billion to income of €0.2 billion. This improvement is partly the result of the gain of €0.1 billion included in the year 2018 due to the measurement at fair value of the interest in Aston Martin. Furthermore, income in connection with derivative financial transactions also improved. (See table B.17)

Net interest expense amounted to €0.5 billion (2017: €0.4 billion). Net expenses related to defined-benefit pension plans improved primarily due to higher interest income resulting from the extraordinary contribution of €3.0 billion to the pension plan assets in 2017. Other interest expense increased mainly because of higher refinancing costs. (See table B.17)

The tax expense of €3.0 billion (2017: €3.3 billion) stated under income tax expense decreased only insignificantly despite the reduction in profit before income taxes. The effective tax rate for 2018 was 28.4 % (2017: 24.0 %). The prior year included high income tax benefits resulting from the comprehensive tax reform in the United States. Due to the reduction in the nationwide federal corporate income tax rate for US companies, the future net tax liabilities of the US-subsidiaries of Daimler had to be remeasured with the new tax rate, resulting in an income tax benefit of €1.6 billion. Opposing the positive impact from the US tax reform, tax expenses were recognized in 2017 in connection with the interpretation of tax laws. (See table B.17)

Net profit for the year 2018 of €7.6 billion (2017: €10.6 billion) was significantly below the prior-year figure. Net profit of €0.3 billion is attributable to non-controlling interests (2017: €0.3 billion). Net profit attributable to the shareholders of Daimler AG amounts to €7.2 billion (2017: €10.3 billion), representing a decrease in earnings per share to €6.78 (2017: €9.61). (See table B.17)

The calculation of earnings per share is based on an unchanged average number of outstanding shares of 1,069.8 million.

B.17 Statement of income 1

  Consolidated Industrial Business Daimler Financial
  2018 2017 3 2018 2017 3 2018 2017 3
In millions of euros            
Revenue 4 167,362 164,154 141,093 139,624 26,269 24,530
Cost of sales 4 -134,295 -129,626 -111,589 -108,640 -22,706 -20,986
Gross profit 33,067 34,528 29,504 30,984 3,563 3,544
Selling expenses -13,067 -12,951 -12,174 -12,210 -893 -741
General administrative expenses -4,036 -3,808 -3,075 -2,815 -961 -993
Research and non-capitalized development costs -6,581 -5,938 -6,581 -5,938 - -
Other operating income 2,330 2,259 2,137 2,056 193 203
Other operating expense -1,462 -1,043 -1,404 -1,000 -58 -43
Profit/loss on equity-method investments, net 656 1,498 1,108 1,497 -452 1
Other financial income/expense, net 210 -210 218 -209 -8 -1
Interest income 271 214 270 214 1 0
Interest expense -793 -582 -788 -577 -5 -5
Profit before income taxes 10,595 13,967 9,215 12,002 1,380 1,965
Income taxes -3,013 -3,350 -2,615 -4,064 -398 714
Net profit 7,582 10,617 6,600 7,938 982 2,679
thereof attributable to non-controlling interests 333 339        
thereof attributable to shareholders of Daimler AG 7,249 10,278        

1 The columns “Industrial business” and “Daimler Financial Services” represent a business point of view.

2 The industrial business comprises the vehicle segments Mercedes-Benz Cars, Daimler Trucks, Mercedes-Benz Vans and Daimler Buses. Intra-group eliminations between the industrial business and Daimler Financial Services are generally allocated to the industrial business.

3 The prior-year figures have been adjusted due to the effects of first-time adoption of IFRS 15 and IFRS 9. Information on adjustments to prior-year figures is disclosed in Note 1 of the Notes to the Consolidated Financial Statements.

4 In 2017 at the Daimler Financial Services segment, in addition to the adjustment of prior-year figures due to IFRS 15, the Group’s internal revenue and cost of sales have been adjusted by the same amount. These adjustments have been fully eliminated in the reconciliation.