Profitability

Profit from ordinary activities reported by Daimler AG for 2014 amounts to €5.0 billion (2013: €3.5 billion). The development of earnings reflects the growth in operating profit of €0.6 billion to €1.4 billion and the increase in financial income of €0.9 billion to €3.6 billion. (See table B.36)

B.36

Condensed statement of income of Daimler AG
  2014 2013
In millions of euros    
     
Revenue 83,947 75,531
Cost of sales (including R&D expenses) -75,307 -68,183
Selling expenses -6,518 -6,243
General administrative expenses -1,885 -1,779
Other operating income, net 1,122 1,497
Operating profit 1,359 823
Financial income 3,635 2,687
Profit from ordinary activities 4,994 3,510
Income tax expense/benefit -1,223 203
Net profit 3,771 3,713
     
Transfer to retained earnings -1,150 -1,306
     
Distributable profit 2,621 2,407

Revenue increased, as forecast in the previous year, due to higher unit sales of vehicles and components by €8.4 billion to €83.9 billion. In the car business, revenue thus rose by 14% to €63.0 billion. Also with trucks and vans, revenue increased for the same reason by 3% to €20.9 billion.

The earnings achieved by the car business in 2014 were significantly higher than in the previous year. The development of earnings was influenced by ongoing growth in unit sales in Europe, Asia and the United States as well as an improved model mix. The main growth drivers were the S-Class and our expanded range of compact cars. There were opposing, negative effects from expenditure to enhance products’ attractiveness and for new technologies and products, amongst other factors. Unit sales in the car business increased by 9% to 1,576,000 vehicles1 in the year under review. Of the various model series, the S-Class segment was extremely successful in 2014 with an 86% increase in unit sales to 129,000 vehicles1. Compact cars posted sales growth of 22% to 486,000 units1. Due to lifecycle reasons, unit sales in the E-Class segment were lower than in the previous year.

Earnings from trucks and vans were higher than in 2013. Sales of trucks reached 92,000 units1 (2013: 105,000). Sales of vans increased by 11% to 281,000 units1.

Cost of sales increased by 10% to €75.3 billion. Increases in unit sales and expenses for new technologies and products led to higher cost of sales. Research and development expenses, which are included in cost of sales, were higher than in the previous year at €4.9 billion (2013: €4.7 billion); as a proportion of revenue, they amounted to 5.8% (2013: 6.2%). Research and development expenses were primarily related to the renewal and expansion of the product portfolio, especially with regard to the model series of the E-Class, the SUVs and the compact class. In addition, we are continuously working on new generations of engines and alternative drive systems. At the end of the year, approximately 17,000 people were employed in the area of research and development.

Selling expenses increased by €0.3 billion to €6.5 billion. This was primarily due to higher expenses for personnel and marketing. As a proportion of revenue, selling expenses decreased from 8.3% to 7.7%.

General administrative expenses of €1.9 billion were slightly above the prior-year level (2013: €1.8 billion). In relation to revenue, they amounted to 2.2% (2013: 2.4%).

Other operating income amounted to €1.1 billion (2013: €1.5 billion). The change compared with the previous year was mainly the result of higher expenses in connection with the ongoing antitrust investigation by the EU Commission of European manufacturers of commercial vehicles. (See table B.36)

Financial income improved by €0.9 billion to €3.6 billion, primarily due to higher net income from investments in subsidiaries and associated companies. That increase was mainly the result of the sale of our 50% equity interest in Rolls-Royce Power Systems Holding GmbH to Rolls-Royce Holdings plc.

The income tax expense amounted to €1.2 billion (2013 income tax benefit of €0.2 billion). In 2013, high tax benefits were included in connection with the tax assessment of previous years. The non-recurring of those tax benefits and a higher income tax expense for 2014 due to the improved profit before income taxes led to the increase in the income tax expense compared to prior year.

Net profit increased from €3.7 billion to €3.8 billion. This development primarily reflects the improved operating profit and the increased financial income. Due in particular to the higher than forecast operating profit, net profit is above the level that was originally expected.

The economic situation of Daimler AG primarily results from its business operations and those of its subsidiaries. Daimler AG participates in the operating results of its subsidiaries through distributions. The economic situation of Daimler AG is therefore fundamentally the same as that of the Daimler Group, which is described in the chapter “Economic Situation.”

1 Unit sales relate solely to new vehicles. The unit sales of Daimler AG include vehicles invoiced to companies of the Group which have not yet been sold on to external customers by those companies. Vehicle sales by production companies of the Daimler Group are not counted in the unit sales of Daimler AG.

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