Daimler AG (OTC: DMLRY) reported its first quarterly loss in a decade on Wednesday (July 24) because of one-time charges related to Takata airbag inflators in Mercedes-Benz cars and legal risks for ongoing diesel emissions investigations in Germany.
Sales and earnings for commercial trucks provided a bright spot in the report, which followed two company warnings that a difficult quarter was coming.
Daimler is the Stuttgart, Germany-based parent company of Mercedes-Benz cars and Daimler Trucks, the world's largest commercial truck and bus maker. Group sales declined 1 percent to 822,000 passenger cars and heavy-duty trucks and buses.
Trucks buck trend
Daimler Trucks sales were up 2 percent to 126,474 vehicles in the second quarter compared with 123,910 in the same period last year. Revenue increased 14 percent to $9.5 billion (€10.5 billion) versus $8.4 billion (€9.2 billion) a year earlier. Return on sales was 6.9 percent compared with 5.9 percent in the year-ago quarter.
Daimler Trucks leads U.S. sales of heavy-duty trucks through its Freightliner and Western Star brands. It also has a majority stake in medium-duty truck maker Mitsubishi Fuso.
"The incoming orders at Trucks were lower than the exceptionally high numbers in the prior year," Martin Daum, head of the Daimler Trucks & Buses said on a conference call with analysts. "This applies particularly to North America, but you have to highlight that 2018 was a very unusual year."
Daimler Trucks opened its order books for 2020 in June, but Daum said he expects most orders will come in the fall, returning to a normal pattern after 2019 orders were placed earlier than usual in 2018.
"We have a very strong and solid order backlog that provides good visibility for the second half of the year." he said. "So we feel confident for that period." But he told analysts some production downtime is possible in the third quarter "if the market changes unexpectedly."
Daimler reported a net loss of $1.34 billion (€1.2 billion) compared with a net profit of $1.62 billion (€1.8 billion) a year ago. The net loss per share was $1.12 (€1.24) compared with earnings of $1.45 (€1.61) per share in the second quarter of 2018.
Daimler lost $1.44 billion (€1.6 billion) before interest and taxes (EBIT) compared with $2.34 billion (€2.6 billion) in the second quarter a year ago.
Revenue in the quarter rose 5 percent to $38.47 billion (€42.7 billion) compared with $36.76 billion (€40.8 billion) in the year-ago quarter.
"Our second quarter results were mainly impacted by exceptional items of 4.2 billion euros," Ola Källenius, Chairman of the Board of Management of Daimler AG and Head of Mercedes-Benz Cars, said in a statement.
Källenius, who succeeded Dieter Zetsche as CEO on May 22, said sales, earnings and EBIT should improve in the second half of the year by focusing "on improving our operating performance and cash-flow generation."
"In general, we are intensifying the Group-wide performance programs and reviewing our product portfolio in order to safeguard future success," Källenius said.
Daimler said on July 12 that its second quarter results would be "significantly below market expectations" with only Daimler Trucks and Daimler Financial Services reporting positive results. It issued an earlier profit warning on June 24.
Daimler expects EBIT in 2019 to be significantly below 2018. By division, projected 2019 returns are:
- Mercedes-Benz Cars: return on sales of 3 percent to 5 percent
- Daimler Trucks: a return on sales of 7 percent to 9 percent
- Mercedes-Benz Vans: a return on sales of minus 15 percent to minus 17 percent
- Daimler Buses: a return on sales of 5 percent to 7 percent,
- Daimler Financial Services: a return on equity of 17 percent to 19 percent.
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