Daimler posts net profit of €2,726 million in Q3-2016

Daimler AG has posted record unit sales and EBIT adjusted for special items in the third quarter of 2016. The Group’s worldwide unit sales increased to 754,100 cars and commercial vehicles, more than ever before in a third quarter and surpassing the total for the prior-year period by 5%.

In the first nine months of the year, the Group’s unit sales increased by 6% to 2.2 million vehicles, while net profit improved to €2,726 million/ Rs 19,845 crore (Q3 2015: €2,415 million/ Rs 17,575 crore), up 12.9% YoY.

The Group’s third-quarter revenue amounted to €38.6 billion/ Rs 280,913 crore, which is 4% higher than in the third quarter of 2015. Adjusted for exchange-rate effects, revenue grew by 3%.

The Daimler Group achieved third-quarter EBIT of €4,037 million/ Rs 29,380 crore, thus surpassing its prior-year earnings of €3,661 million/ Rs 26,643 crore. The Group EBIT adjusted for special items reached its highest level to date of €4,010 million/ Rs 29,180 crore (Q3 2015: €3,657 million/ Rs 26,613 crore).  The net profit attributable to the shareholders of Daimler AG increased to €2,595 million/ Rs 18,885 crore (Q3 2015: €2,385 million/ Rs 17,355 crore), leading to an increase in earnings per share to €2.43/ Rs 176 (Q3 2015: €2.23/ Rs 162).

“Daimler again posted record earnings in the third quarter. We will use this to utilise the potential of electric mobility. With our new product brand, EQ, we have established an important basis for leadership also with electric drive systems,” stated Dr Dieter Zetsche, chairman of the board of management of Daimler AG and head of Mercedes-Benz Cars.

Investments in 2016

The Daimler Group invested €1.4 billion/ Rs 10,190 crore in property, plant and equipment in the third quarter of this year (Q3 2015: €1.1 billion/ Rs 8,005 crore). Most of that investment, €1.1 billion, was at the Mercedes-Benz Cars division (Q3 2015: €0.8 billion/ Rs 5,820 crore). The main focus of capital expenditure was on production preparations for new models, in particular the derivatives of the C-Class and the E-Class, as well as investments for new transmissions and engine versions.

Another area of capital expenditure was for the ongoing expansion of the international production and component plants. At Daimler Trucks, the main investments were for engines, transmissions and new vehicles, as well as the optimization of the worldwide production network.

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The Daimler Group’s research and development spending in the third quarter of the year amounted to €1.9 billion/ Rs 13,830 crore (Q3 2015: €1.6 billion/ Rs 11,645) crore, of which €0.6 billion/ Rs 4,367 crore was capitalized (Q3 2015: €0.5 billion). More than two thirds of the research and development spending (€1.4 billion/ Rs 10,190 crore) was at the Mercedes-Benz Cars segment (Q3 2015: €1.2 billion/ Rs 8,730 crore).

A substantial proportion of that amount represents advance expenditure for the mobility of the future. The other main areas there, as at Daimler Trucks, were new vehicle models, particularly fuel-efficient and environmentally friendly drive systems, and the intensification of the modular strategy.

Outlook for the markets

At the beginning of the fourth quarter, the fundamental situation of the world economy has not changed; there are no perceptible indications of either acceleration or deceleration of growth. Although moderate expansion can be expected for the fourth quarter, full-year 2016 will probably have the lowest growth rate since the financial crisis, with expansion of global gross domestic product (GDP) of just under 2.5%.

According to recent assessments, worldwide demand for cars is likely to increase from its already high level by about 2% in 2016. Once again, the biggest contribution to this global growth should come from the Chinese market, which is likely to continue expanding at a significant rate. But the expected increase in demand will to a great extent be due to state stimulus. No more growth is expected for the US market for cars and light trucks, and sales volumes there will be slightly below the high level of the previous year. Significant growth is anticipated for the car market of Western Europe. With a view to the individual markets, this growth is continuing on a relatively broad base. Despite the vote in favor of Brexit, current assessments are that the British market will remain at its unusually high level. In Japan, a slight decrease in demand is to be expected following the significant market correction of 2015. Prospects for the major emerging markets remain mixed. In India, market growth is likely to remain solid. In Russia, however, the ongoing difficult economic situation will probably result in another double-digit drop in car sales.

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Demand for medium- and heavy-duty trucks in the regions important for Daimler should be perceptibly below the prior-year volume. A major negative factor is the expected significant market contraction in North America. In a comparatively weak overall investment environment, from today’s perspective, demand in the market for Classes 6­8 trucks can be expected to decrease by approximately 15%. But the European market has so far proven to be relatively resilient and should continue its recovery with growth of 5-10% in the full year. There is still no turnaround in sight for the Brazilian market; due to the ongoing economic recession, the company has to anticipate further market contraction there in the magnitude of 25%. The situation of the Russian market has meanwhile stabilized somewhat, so it should not contract any further than its very low prior-year level. Demand in China will recover significantly after last year’s sharp market contraction. The Japanese market for light-, medium- and heavy-duty trucks continues its solid development and should be close to its level of 2015. TheIndonesian truck market is likely to contract once again, however; from today’s perspective, Daimler anticipates contraction of approximately 15%. In India, only slight growth is meanwhile expected in the segment of medium- and heavy-duty trucks.

The Group expects significant growth in the markets for mid-size, large and small vans in Western Europe in 2016. Significant growth in demand for large vans is anticipated also in the United States. In Latin America, however, Daimler expects further significant contraction in the market for large vans. In China, significantly lower demand is now anticipated in the market addressed there.

Daimler now expects a significantly larger market volume for buses in Western Europe in 2016 than in 2015. In Brazil, further significant market contraction is anticipated in full-year 2016. 

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