Annual Report 2019

We assume that the Daimler Group will generate revenue in 2020 at the level of the previous year. Also Mercedes-Benz Cars & Vans as well as Daimler Mobililty expect revenue at the previous year level, while Daimler Trucks & Buses anticipates a significant revenue decrease.

Despite the expectation of unit sales slightly below and revenue at the prior-year level, we anticipate significant earnings growth for the Daimler Group in 2020, after EBIT in 2019 was adversely affected by a number of material adjustments. This includes the Daimler Trucks & Buses and Daimler Mobility divisions with decreases in EBIT. The first positive effects on earnings should already occur in 2020 from the significant efficiency measures that have already been taken at all divisions, such as savings in personnel and material costs, portfolio and model adjustments, the ongoing implementation of platform strategies and the stricter allocation of capital. However, these measures will only take full effect in subsequent years. On the other hand, restructuring measures and the job cuts that have been initiated will have a negative impact on earnings in 2020.

We are standardizing and modularizing our production processes throughout the Group. In this context, we are making intelligent use of vehicle platforms, allowing us to achieve further cost advantages. In parallel, we are pushing forward with digital connectivity in all divisions and at all stages of the value chain – from development to production to sales and service. In this way, we are opening up additional scope to become even faster, more flexible and more efficient – to the benefit of our customers. However, earnings will be reduced by the continuation of high expenditure: for innovative technologies (especially for reducing fuel consumption and for electrification), for the digitization of our products and processes, and for the expansion and modernization of our worldwide production capacities.

On the basis of the market developments we anticipate, the aforementioned factors and the planning of our divisions, we assume that Group EBIT in 2020 will be significantly above the level of 2019, which was affected by numerous material adjustments.

For the transparent presentation of the ongoing business, as of the year 2020, we will calculate and forecast adjusted return on sales for Mercedes-Benz Cars & Vans and Daimler Trucks & Buses and adjusted return on equity for Daimler Mobility. For the two automotive divisions, we will also forecast an adjusted cash conversion rate, which is derived from the adjusted cash flow before interest and taxes (CFBIT) and adjusted EBIT. The adjustments include individual items if they lead to material effects in a reporting period. These individual items relate in particular to legal proceedings and related measures, restructuring measures and M&A transactions. Further information on the management system is provided in the »Performance measurement system« section.

The individual divisions have the following expectations for adjusted returns in 2020:

• Mercedes-Benz Cars & Vans: adjusted return on sales of 4 to 5 %
• Daimler Trucks & Buses: adjusted return on sales of 5 %
• Daimler Mobility: adjusted return on equity of 12 %

At Mercedes-Benz Cars, positive effects will result from a more favorable sales structure for our cars. There should be supporting effects for both cars and vans from measures for efficiency improvements, especially significant material-cost savings and improved personnel costs. There will be negative effects, however, from the continuation of very high expenditure for new technologies and vehicles, especially the expenses incurred to meet the CO₂ targets.

Daimler Trucks & Buses should also benefit from efficiency-improving measures, in particular reduced variable costs and lower personnel costs. Opposing effects will result, however, from the expected market contractions in the NAFTA and EU30 regions, as well as from the continuation of high expenditure for new technologies and vehicles.

With regard to the adjusted return on equity expected for Daimler Mobility, there will be positive effects from the fleet-management business and the focus of our mobility services, as well as negative effects from the normalization of credit-risk costs and slightly lower interest income. In addition, a higher equity ratio due to stricter regulatory requirements will have a negative impact on the adjusted return on equity.