Revenue and EBIT

Revenue

In the year 2019, the Daimler Group’s revenue of €172.7 billion (2018: €167.4 billion) was slightly above the prior-year level. Also, adjusted for positive exchange-rate effects, revenue was slightly higher than in the previous year. (See table B.10)

B.10 Revenue by segment and region

  2019 2018 19/18
In millions of euros     % change
       
Daimler Group 172,745 167,362 +3
       
Divisions      
Mercedes-Benz Cars 93,877 93,103 +1
Daimler Trucks 40,235 38,273 +5
Mercedes-Benz Vans 14,801 13,626 +9
Daimler Buses 4,733 4,529 +5
Daimler Mobility 28,646 26,269 +9
Reconciliation -9,547 -8,438 -13
       
Regions      
Europe 69,541 68,496 +2
thereof Germany 26,339 24,802 +6
NAFTA 52,196 47,952 +9
thereof United States 45,422 41,152 +10
Asia 40,657 40,627 +0
thereof China 18,954 19,790 -4
Other markets 10,351 10,287 +1
Daimler AR2019 B.11 consolidated revenue by region

The development of revenue was positively affected primarily by stronger pricing for new vehicles at Daimler Trucks and growth in contract volume at Daimler Mobility.

The Daimler Group therefore met the forecast made at the beginning of the year. The Mercedes-Benz Cars division achieved revenue at the prior-year level; at the beginning of the year, we had anticipated a slight increase in revenue. Revenue at Daimler Trucks was slightly above the prior-year level; we had forecasted a significant increase. The Mercedes-Benz Vans division had forecasted significant revenue growth for 2019 and was able to meet this forecast by the end of the year. The Daimler Buses division achieved a slight increase in revenue in 2019 and therefore did not meet the forecast of significant revenue growth in 2019. However, Daimler Mobility significantly increased its revenue in 2019 and therefore surpassed its forecast of slight revenue growth.

EBIT

The Daimler Group achieved EBIT of €4.3 billion in 2019, which is significantly lower than in the previous year (2018: €11.1 billion). The Daimler Group had expected EBIT to be slightly above the prior year figure. (See table B.12 and graphic B.13)

B.12 EBIT by segment

  2019 2018 19/18
In millions of euros     % change
       
Mercedes-Benz Cars 3,359 7,216 -53
Daimler Trucks 2,463 2,753 -11
Mercedes-Benz Vans -3,085 312 .
Daimler Buses 283 265 +7
Daimler Mobility 2,140 1,384 +55
Reconciliation -831 -798 -4
Daimler Group¹ 4,329 11,132 -61

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 in-come taxes is included in Note 34 of the Notes to the Consolidated Financial Statements.

Daimler AR2019 B.13 development of earnings

The Mercedes-Benz Cars and Mercedes-Benz Vans divisions posted earnings significantly below the prior-year figures. This mainly resulted from a reassessment of risks relating to ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz diesel vehicles in various regions and markets, as well as from an updated risk assessment for an expanded recall of vehicles with Takata airbags. Earnings at the Mercedes-Benz Vans division were also reduced by expenses arising from the review and prioritization of the product portfolio, in connection with the planned discontinuation of production of the X-Class in May 2020. At Daimler Trucks, volume decreases mainly caused the negative earnings development. On the other hand, Daimler Buses posted earnings above the prior-year level. Daimler Mobility also surpassed its prior-year figure significantly. The earnings of the Daimler Group were reduced by declining discount rates. Exchange-rate effects in total also had a negative impact on operating profit.

The reconciliation of segment earnings to Group EBIT resulted in a higher expense than in the previous year.

In the Management Report for 2018, we had forecasted a return on sales for the Mercedes-Benz Cars division of between 6 % and 8 %. As the year 2019 progressed, in the context of our capital market reporting, we adjusted this expectation to a level of between 3 % and 5 %. The Mercedes-Benz Cars division met this expectation. For the Mercedes-Benz Vans division, we had anticipated a return on sales of between 5 % and 7 %. As the year 2019 progressed, in the context of our capital market reporting, we gradually adjusted the expectation downwards to a forecast of minus 15 % to minus 17 %. At the end of the year, the Mercedes-Benz Vans division was not able to meet that forecast. The downgrading of expectations for both divisions resulted mainly from a reassessment of risks relating to ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz diesel vehicles in various regions and markets, as well as from an updated risk assessment for an expanded recall of vehicles with Takata airbags. For the Daimler Trucks division, we had originally forecasted a return on sales of between 7 % and 9 %. As the year progressed, in the context of our capital market reporting, we adjusted the forecast to 6 % to 8 %, which the Daimler Trucks division achieved at the end of the year. Daimler Buses met the forecast of a return on sales of between 5 % and 7 %. The Daimler Mobility division, however, did not achieve its anticipated return on equity of between 17 % and 19 % for the year 2019 due to expenses related to the realignment of the YOUR NOW group.

The revenue of the Mercedes-Benz Cars division in the year 2019 was €93,877 million (2018: €93,103 million) and therefore at the prior-year level (+1 %). The division posted EBIT of €3,359 million (2018: €7,216 million). Its return on sales was 3.6 % and thus below the prior-year figure (2018: 7.8 %). (See table B.12)

Earnings in 2019 were reduced by €1,882 million due to a reassessment of risks relating to ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz Cars diesel vehicles in various regions and markets. Furthermore, expenses in connection with an updated risk assessment for an expanded recall of vehicles with Takata airbags caused a reduction in earnings of €600 million. In addition, earnings were reduced by advance expenditures for new technologies and vehicles, as well as by exchange-rate effects. Furthermore, the measurement at fair value of shares in Aston Martin Lagonda Global Holdings plc (Aston Martin) had a negative impact on EBIT. On the other hand, improved pricing had a positive effect on EBIT.

Daimler AR2019 B.14 return on sales

The Daimler Trucks division increased its revenue in the year 2019 by 5 % to €40,235 million (2018: €38,273 million). The division achieved EBIT of €2,463 million (2018: €2,753 million). Its return on sales was below the prior-year figure at 6.1 % (2018: 7.2 %). (See table B.12)

In particular, higher unit sales in the NAFTA region and positive exchange-rate effects boosted EBIT. Further positive effects resulted from better pricing across all brands. Lower volumes, especially in the EU30 region and Asia, adversely affected earnings. Additional negative effects resulted from the adjustment of used-vehicle valuation. EBIT was also reduced by higher expenditures for new technologies as well as by costs in connection with capacity adjustments.

Due to higher unit sales and a more favorable model mix, the Mercedes-Benz Vans division’s revenue increased in the year 2019 by 9 % to €14,801 million (2018: €13,626 million). EBIT amounted to minus €3,085 million (2018: plus €312 million). The division’s return on sales decreased to minus 20.8 % (2018: plus 2.3 %). (See table B.12)

EBIT was affected by a reassessment of risks relating to ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz diesel vehicles in various regions and markets (€2,200 million). EBIT was also reduced by expenses in connection with the review and prioritization of the product portfolio (€828 million) and an updated risk assessment for an expanded recall of vehicles with Takata airbags (€341 million). Furthermore, exchange-rate effects adversely affected EBIT. On the other hand, EBIT was positively affected by higher unit sales and a more favorable model mix.

Due to the positive development of unit sales, the revenue of the Daimler Buses division increased by 5 % to €4,733 million in the year 2019 (2018: €4,529 million). The division posted EBIT of €283 million (2018: €265 million). Its return on sales was at the prior-year level of 6.0 % (2018: 5.9 %). (See table B.12)

EBIT was positively affected by strong growth in unit sales in Brazil as well as by exchange-rate effects. Negative effects on earnings resulted in particular from the lower capitalization of development costs.

Daimler Mobility achieved EBIT of €2,140 million in 2019 (2018: €1,384 million). The division’s return on equity increased to 15.3 % (2018: 11.1 %). (See graphic B.15)

Daimler AR2019 B.15 return on equity

Earnings increased by €718 million due to the merger of the mobility services of Daimler Group and BMW Group in the year 2019. Growth in contract volume also had a positive impact. The normalization of credit risk costs and expenses of €405 million in connection with the realignment of the YOUR NOW group affected EBIT negatively. In the year 2018, earnings had been reduced by €418 million due to effects from the conclusion of the Toll Collect arbitration proceedings.

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 €808 million (2018: €757 million). In the year 2019, expenses of €425 million are included in connection with ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz diesel vehicles. In the prior year, the impairment by €150 million of Daimler’s equity investment in BAIC Motor Corporation Ltd. (BAIC Motor) affected earnings negatively. Furthermore, expenses are included in both years in connection with the development of the divisional structure (“Project Future”).

The elimination of intra-Group transactions resulted in an expense of €23 million in 2019 (2018: €41 million).

The reconciliation of Group EBIT to profit before income taxes is shown in table B.16.

B.16 Reconciliation of Group EBIT to profit before income taxes

  2019 2018
In millions of euros    
     
Group EBIT 4,329 11,132
Amortization of capitalized borrowing costs¹ -16 -15
Interest income 397 271
Interest expense -880 -793
Profit before income taxes 3,830 10,595

1 Amortization of capitalized borrowing costs is not included in the internal performance measure EBIT, but is a component of cost of sales.

Change in the internal management and reporting structure as of January 1, 2020

As of January 1, 2020, changes have taken place in connection with the internal management and reporting structure and thus with the reportable segments. The Group’s activities are now divided into the segments Mercedes-Benz Cars, Mercedes-Benz Vans, Daimler Trucks & Buses and Daimler Mobility. The Mercedes-Benz Cars and Mercedes-Benz Vans segments are combined for external reporting purposes into the reportable segment Mercedes-Benz Cars & Vans, in line with the type of products and services offered as well as the brands, distribution channels and customer profiles.

In addition, as explained in the Corporate Profile section in the chapter on financial performance measures, we now report adjusted EBIT in addition to EBIT for the Daimler Group and for the segments from the year 2020 onwards.

Table B.17 shows the reconciliation from EBIT as booked to adjusted EBIT for both the Daimler Group and the segments for the financial year 2019.

B.17 Reconciliation EBIT to adjusted EBIT

  Mercedes-
Benz Cars
Daimler
Trucks
Mercedes-Benz Vans Daimler Buses Daimler
Mobility
Recon- ciliation Daimler Group
In millions of euros              
               
2019              
EBIT 3,359 2,463 -3,085 283 2,140 -831 4,329
Legal proceedings (and related measures) as well as Takata 2,482 2,541 425 5,448
Restructuring measures 828 405 1,233
M&A transactions -718 -718
Adjusted EBIT 5,841 2,463 284 283 1,827 -406 10,292
               
Adjusted return on sales/return on equity (in %)1 6.2 6.1 1.9 6.0 13.1    

1 Adjusted return on sales is the ratio of adjusted EBIT to sales. Adjusted return on equity is the ratio of adjusted EBIT to average equity on a quarterly basis.

 

The adjustments in connection with legal proceedings comprise expenses from the reassessment of risks relating to ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz Cars diesel vehicles in various regions and markets, as well as expenses in connection with the updated risk assessment for an extended recall of Takata airbags. The material adjustments in connection with restructuring measures comprise expenses from the realignment of the YOUR NOW group and expenses in connection with the review and prioritization of the product portfolio. The effects in connection with M&A transactions comprise income from the merger of the mobility services of Daimler Group and BMW Group.

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