Cash flows

Cash used for/provided by operating activities (see table B.23) resulted in a cash inflow of €0.3 billion in 2018 (2017: cash outflow of €1.7 billion). The positive development was primarily due to the prior-year cash outflow of €3.0 billion resulting from the extraordinary contribution to the German pension plan assets. This was supplemented by positive effects from the leasing and sales-financing business. In addition, cash used for/provided by operating activities reflects lower income taxes paid, as well as a higher cash inflow due to dividends distributed by Beijing Benz Automotive Co., Ltd. Opposing effects were due to the general business performance and the development of working capital, reflecting in particular the stronger increase in inventories. At Mercedes-Benz Cars and Mercedes-Benz Vans, this resulted from the launch of new models and capacity expansions in the NAFTA region, among other things. Furthermore, the temporary increase in inventories, due to delivery delays was not fully reduced. The higher increase in inventories at Daimler Trucks was partially due to higher sales expectations in the NAFTA region and in Europe.

B.23 Condensed statement of cash flows 1

  Consolidated Industrial Business Daimler Financial Services
             
  2018 2017 3 2018 2017 3 2018 2017 3
In millions of euros            
             
Cash and cash equivalents at beginning of period 12,072 10,981 9,515 8,751 2,557 2,230
Profit before income taxes 10,595 13,967 9,215 12,002 1,380 1,965
Depreciation and amortization/impairments 6,305 5,676 6,177 5,521 128 155
Other non-cash expense and income and
gains/losses on disposals of assets
-1,050 -1,960 -1,557 -2,028 507 68
Change in operating assets and liabilities            
Inventories -3,850 -1,455 -3,738 -1,264 -112 -191
Trade receivables -884 -1,597 -779 -1,087 -105 -510
Trade payables 1,694 1,259 1,723 1,130 -29 129
Receivables from financial services -10,257 -11,412 -7 -67 -10,250 -11,345
Vehicles on operating leases -1,609 -3,304 1,208 1,019 -2,817 -4,323
Other operating assets and liabilities 877 210 1,067 -386 -190 596
Dividends received from equity-method investments 1,380 843 1,304 842 76 1
Income taxes paid -2,858 -3,879 -1,698 -3,715 -1,160 -164
Cash used for/provided by operating activities 343 -1,652 12,915 11,967 -12,572 -13,619
Additions to property, plant and equipment and intangible assets -10,701 -10,158 -10,534 -10,025 -167 -133
Investments in and disposals of shareholdings -417 -687 14 -626 -431 -61
Acquisitions and sales of marketable debt securities
and similar investments
471 537 505 435 -34 102
Other 726 790 708 791 18 -1
Cash used for investing activities -9,921 -9,518 -9,307 -9,425 -614 -93
Change in financing liabilities 17,456 16,794 8,889 8,976 8,567 7,818
Dividends paid -4,220 -3,727 -4,215 -3,723 -5 -4
Other transactions with shareholders -10 62 -20 -20 10 82
Internal equity and financing transactions -5,127 -6,233 5,127 6,233
Cash used for/provided by financing activities 13,226 13,129 -473 -1,000 13,699 14,129
Effect of foreign exchange rate changes on cash
and cash equivalents
133 -868 149 -778 -16 -90
Cash and cash equivalents at end of period 15,853 12,072 12,799 9,515 3,054 2,557

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.

Cash used for investing activities (see table B.23) amounted to €9.9 billion (2017: €9.5 billion). The change compared with the prior year primarily resulted from increased investments in property, plant and equipment. Opposing effects resulted from lower cash outflows for the investments in shareholdings, due to a prior year acquisition of an interest in LSH Auto International Limited (LSHAI).

Cash provided by financing activities (see table B.23) amounted to €13.2 billion (2017: €13.1 billion). The slight increase was primarily caused by higher net cash inflows from financing liabilities in the context of refinancing the leasing and sales-financing business, as well as by making use of good conditions in the international money and capital markets. Opposing effects resulted from the increased dividend payment to shareholders of Daimler AG.

Cash and cash equivalents increased by €3.8 billion compared with December 31, 2017, after taking currency-translation effects into account. Total liquidity, which also includes marketable debt securities and similar investments, increased by €3.3 billion to €25.4 billion.

The parameter used by Daimler to measure the financial capability of the Group’s industrial business is the free cash flow of the industrial business (see table B.24), which is derived from the reported cash flows from operating and investing activities. The cash flows from the acquisition and sale of marketable debt securities and similar investments included in cash flows from investing activities are deducted, as those securities are allocated to liquidity and changes in them are thus not a part of the free cash flow.

B.24 Free cash flow of the industrial business

  2018 Dec. 31,
2017
18/17
In millions of euros   Change
       
Cash provided by operating activities 12,915 11,967 +948
Cash used for investing activities -9,307 -9,425 +118
Change in marketable debt securities and similar investments -505 -435 -70
Other adjustments -205 -102 -103
Free cash flow of the
industrial business

2,898

2,005

+893

Other adjustments relate to non-cash additions to property, plant and equipment that are allocated to the Group as their beneficial owner due to the form of their underlying lease contracts. Furthermore, effects from the financing of dealerships and effects from internal deposits within the Group are adjusted. In addition, the calculation of the free cash flow includes those cash flows to be shown under cash from financing activities in connection with the acquisition or sale of interests in subsidiaries without loss of control.

The free cash flow of the industrial business amounted to €2.9 billion in 2018 and was significantly higher than the prior-year figure of €2.0 billion; however, it did not exceed the dividend payment for 2018 of €3.9 billion. The free cash flow of the industrial business thus did not fully achieve all our expected targets as stated in the Outlook section of Annual Report 2017.

The €0.9 billion increase in the free cash flow to €2.9 billion resulted primarily from the prior-year cash outflow for the extraordinary contribution to the pension plan assets and the lower income taxes paid in the current year. The increased cash inflow also resulted from the dividends distributed by Beijing Benz Automotive Co., Ltd. Furthermore, there were lower cash outflows for the investments in shareholdings, due to a prior year acquisition of an interest in LSHAI.

Opposing effects were due to the general business performance and the development of working capital, reflecting in particular the stronger increase in inventories. At Mercedes-Benz Cars and Mercedes-Benz Vans, this resulted from the launch of new models and capacity expansions in the NAFTA region, among other things. Furthermore, the temporary increase in inventories, due to delivery delays was not fully reduced. The higher increase in inventories at Daimler Trucks was partially due to higher sales expectations in the NAFTA region and in Europe. In addition higher investments in property, plant and equipment affected the free cash flow of the industrial business.

In 2018, the free cash flow of the Daimler Group led to a cash outflow of €10.2 billion (2017: €11.9 billion). Besides the effects of the free cash flow of the industrial business, the free cash flow of the Daimler Group is mainly affected by the leasing and sales-financing business of Daimler Financial Services.

The net liquidity of the industrial business (see table B.25) is calculated as the total amount as shown in the statement of financial position of cash, cash equivalents and the marketable debt securities and similar investments included in liquidity management, less the currency-hedged nominal amounts of financing liabilities.

B.25 Net liquidity of the industrial business

  2018 Dec. 31,
2017
18/17
In millions of euros   Change
       
Cash and cash equivalents 12,799 9,515 +3,284
Marketable debt securities and similar investments 8,364 8,894 -530
Liquidity 21,163 18,409 +2,754
Financing liabilities -4,771 -1,600 -3,171
Market valuation and ­currency hedges for ­financing liabilities -104 -212 +108
Financing liabilities (nominal) -4,875 -1,812 -3,063
Net liquidity 16,288 16,597 -309

To the extent that the Group’s internal refinancing of the financial services business is provided by the companies of the industrial business, this amount is deducted in the calculation of the net debt of the industrial business.

Compared with December 31, 2017, the net liquidity of the industrial business remained almost unchanged at €16.3 billion. The dividend payment to the shareholders of Daimler AG led to a decrease in net liquidity, which was offset by the positive free cash flow and positive exchange-rate effects.

Net debt at Group level, which primarily results from refinancing the leasing and sales-financing business, increased compared with December 31, 2017 by €14.4 billion to €119.6 billion. (See table B.26).

B.26 Net debt of the Daimler Group

  2018 Dec. 31, 2017 18/17
In millions of euros   Change
       
Cash and cash equivalents 15,853 12,072 +3,781
Marketable debt securities and similar investments 9,577 10,063 -486
Liquidity 25,430 22,135 +3,295
Financing liabilities -144,902 -127,124 -17,778
Market valuation and ­currency hedges for financing liabilities -97 -229 +132
Financing liabilities (nominal) -144,999 -127,353 -17,646
Net debt -119,569 -105,218 -14,351
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