The Daimler Group achieved EBIT of €10.8 billion in 2014 (2013: €10.8 billion), with significant increases across all divisions in total. Compared to previous year, there was a negative impact on Group EBIT, however, caused by a lower contribution from the reconciliation of segment EBIT to Group EBIT. (See table B.12 and graphic B.13)
|EBIT by segment|
|EBIT||EBIT from ongoing business|
|In millions of euros||% change||% change|
|Daimler Financial Services||1,387||1,268||+9||1,387||1,268||+9|
This result was positively affected in particular by the new S-Class in its first full year, the expanded range of compact automobiles and better pricing at Mercedes-Benz Cars. At Daimler Trucks, increased unit sales in the NAFTA region were the main factor contributing to the significant earnings improvement in 2014. The earnings posted by Mercedes-Benz Vans were also significantly higher than in the previous year, due in particular to the very positive development of unit sales. Daimler Buses achieved significantly improved earnings primarily due to strong unit sales of complete buses and a positive product mix in Western Europe. Daimler Financial Services was also able to significantly surpass its prior-year earnings as a result of increased contract volume. In all divisions, the increasing impact of the implemented efficiency programs had a positive impact on operating profit. The development of currency exchange rates had a negative impact on earnings, however.
Gains recognized on the disposal of shares in Rolls-Royce Power Systems Holding GmbH (RRPSH) and on the remeasurement and sale of shares in Tesla Motors Inc. (Tesla) (less the loss on the related share-price hedges) boosted earnings by a total of €1,482 million. Expenses connected with the EU Commission’s ongoing antitrust investigation of European manufacturers of commercial vehicles reduced earnings by €600 million. In the previous year, the remeasurement and sale of the remaining 7.4% of EADS shares resulted in a gain of €3,223 million.
Due to the favorable business development in all divisions, Daimler was able to significantly exceed its prior-year EBIT from the ongoing business of €8.0 billion, achieving €10.1 billion in 2014, which is in line with our expectations as stated in the Outlook section of Annual Report 2013. (See table B.12)
The Mercedes-Benz Cars and Daimler Trucks divisions significantly increased their EBIT from the ongoing business in 2014 and thus met the forecasts made in Annual Report 2013. The same applies to the Mercedes-Benz Vans division, which achieved EBIT from the ongoing business at the prior-year level. However, the earnings of the Daimler Buses and Daimler Financial Services divisions developed better than we had expected at the beginning of 2014. We had anticipated a slight improvement at Daimler Buses and stabilization at the prior-year level at Daimler Financial Services. We adjusted those assessments upwards as the year progressed in the context of our quarterly reporting.
The significant earnings improvement at Daimler Buses resulted primarily from increased unit sales of complete buses. The main factor behind the increased earnings at Daimler Financial Services was the very positive development of new business in combination with lower risk costs.
The special items affecting earnings in the years 2014 and 2013 are listed in table B.14.
|Special items affecting EBIT|
|In millions of euros|
|Impairment of investments in the area of alternative drive systems||-30||-174|
|Restructuring of sales organization in Germany||-81||–|
|Impairment of investment in Kamaz||-30||–|
|Restructuring of sales organization in Germany||-16||–|
|Reversal of impairment of investment in Fujian Benz Automotive Corp. Ltd.||+61||–|
|Restructuring of sales organization in Germany||-17||–|
|Restructuring of sales organization in Germany||-2||–|
|Sale of shares in RRPSH||+1,006||–|
|Measurement of put option for RRPSH||-118||-60|
|Remeasurement of Tesla shares||+718||–|
|Sale of Tesla shares and hedge of Tesla share price||-124||-23|
|Expenses related to EU antitrust proceedings||-600||-|
|Remeasurement and sale of remaining shares in EADS||-||+3,223|
Mercedes-Benz Cars posted EBIT of €5,853 million, which is significantly higher than the prior-year figure of €4,006 million. The division’s return on sales was 8.0% (2013: 6.2%). (See graphic B.15)
The development of earnings primarily reflects the ongoing growth in unit sales, especially in Asia, Europe and the United States. This was due in particular to the new S-Class in its first full year and the expanded range of compact automobiles. Mercedes-Benz Cars also improved its earnings as a result of better pricing and the efficiency program “Fit for Leadership”. Adverse effects on earnings resulted from expenses for the enhancement of products’ attractiveness, capacity expansions and advance expenditure for new technologies and vehicles. In addition, currency translation had a negative impact. EBIT also include impairments of €30 million recognized on investments in the area of alternative drive systems.
All the automotive divisions were also affected by the restructuring of Daimler’s own sales organization in Germany by a total of €116 million. In this context, we refer to the information provided in note 5 of the Notes to the Consolidated Financial Statements.
Daimler Trucks achieved EBIT of €1,878 million (2013: €1,637 million), which is significantly higher than the prior-year figure. The division’s return on sales was 5.8% (2013: 5.2%). (See graphic B.15)
Significantly higher unit sales in the NAFTA region and Japan made a major contribution to the earnings improvement in 2014. Lower warranty costs and the successful efficiency and growth program “Daimler Trucks #1” also had positive effects. Unit sales and EBIT were adversely influenced in 2014 by the weak economic situation in Latin America and Europe, as well as by the after-effects of the introduction of Euro VI emission regulations at the beginning of 2014. Currency effects and expenses of €149 million for workforce adjustments in the context of optimization programs in Brazil and Germany also had a negative impact. EBIT also includes an expense of €30 million from the impairment of the carrying value of the investment in Kamaz. An additional factor is that there was no longer a contribution to earnings from RRPSH following the execution of the put option.
Mercedes-Benz Vans posted EBIT of €682 million in 2014, a significant improvement on its prior-year earnings of €631 million. The division’s return on sales increased to 6.8% from 6.7% in 2013. (See graphic B.15)
Operating profit reflects the very positive development of unit sales, especially in Europe and the NAFTA region. Earnings were negatively impacted, however, by research and development expenditure for new products and by expenses for the market launch of the new V-Class multipurpose vehicle and the new Vito; currency effects had an additional negative impact on earnings. EBIT increased by €61 million following the reversal of an impairment previously recognized on an investment in the joint venture Fujian Benz Automotive Corporation (FBAC).
Daimler Buses significantly increased its EBIT to €197 million in 2014 (2013: €124 million). The division’s return on sales was 4.7% (2013: 3.0%). (See graphic B.15)
This earnings improvement resulted primarily from increased unit sales of complete buses and a positive product mix in Western Europe, as well as from further efficiency progress with “GLOBE 2013” and positive exchange rate effects. There was an opposing, negative impact from lower unit sales of bus chassis in Latin America. Although the economic situation in Brazil and Argentina was difficult and, as had been expected, the Turkish market contracted, profitability improved significantly compared with the previous year. Expenses for repositioning the division’s business amounted to €12 million in 2014 (2013: €39 million).
Daimler Financial Services posted EBIT of €1,387 million, significantly surpassing its prior-year earnings (2013: €1,268 million). The division’s return on equity was 19.4% (2013: 19.2%). (See graphic B.16)
This development was primarily due to the increased contract volume and the ongoing positive development of risk costs, whereby currency effects and additional expenses in connection with business expansion were more than offset.
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 income of €713 million (2013: €3,067 million), primarily related to our equity interests in RRPSH and Tesla in 2014. The sale of Daimler’s shares in RRPSH resulted in a gain of €1,006 million while the remeasurement of the put option resulted in an expense of €118 million. In connection with our investment in Tesla, the loss of significant influence on that company meant that the Tesla shares had to be remeasured, resulting in a gain of €718 million. The hedge of Tesla’s share price and the sale of those shares resulted in total expenses of €124 million. Items at the corporate level also include expenses of €600 million related to the ongoing antitrust investigations of European manufacturers of commercial vehicles by the EU Commission. In 2013, earnings were impacted in particular by Daimler’s exit from the former EADS shareholder pact in April 2013. This resulted in a gain of €3.2 billion, mainly due to the remeasurement of the shares following the loss of significant influence on EADS (€3.4 billion). In addition, until that date, items at the corporate level also included the proportionate earnings of the equity-method investment in EADS. Further information on the sale of the shares in RRPSH and Tesla and of the EADS shares in 2013 is provided in note 13 of the Notes to the Consolidated Financial Statements.
The elimination of intra-group transactions resulted in income of €42 million in 2014 (2013: €82 million).
The reconciliation of Group EBIT to profit before income taxes is shown in table B.18.
|Reconciliation of Group EBIT to profit before income taxes|
|In millions of euros|
|Amortization of capitalized borrowing costs1||-9||-4|
|Profit before income taxes||10,173||10,139|
|1 Amortization of capitalized borrowing costs is not included in the internal performance measure EBIT, but is a component of cost of sales.|