Daimler Reports Loss of Nearly $4 Billion

| About: Daimler AG (DDAIF)

Daimler AG (DAI) lost €2.6 billion ($3.7 billion) or €2.63 ($3.67) per share in 2009, in sharp contrast to a profit of €1.4 billion ($2 billion) or €1.41 ($1.97) per share in the previous year. The loss was attributable to a 24% decline in unit sales to 1.6 million vehicles due to the global economic crisis (conference call transcript here).

Revenue dipped 20% to €78.9 billion ($110 billion); adjusted for exchange-rate effects, the decrease was 21%. EBIT (earnings before interest and taxes) in the year was minus €1.5 billion ($2.1 billion) compared to plus €2.7 billion ($3.8 billion) in 2008. Daimler expects to post an EBIT of more than €2.3 billion ($3.2 billion) for 2010.

Segment Performance

Mercedes-Benz Cars: This segment sold 1.09 million Mercedes-Benz, Maybach and smart for two cars in 2009, a decrease from 1.27 million units sold in 2008, due to a significant weakening of demand. Consequently, revenue fell by 14% to €41.3 billion ($57.6 billion). EBIT was minus €500 million ($698 million) compared to plus €2.1 billion ($3 billion) in 2008. The company anticipates an EBIT of more than €1.5 billion ($2.1 billion) for 2010.

Daimler Trucks: This segment reported a fall in unit sales to 259,300 vehicles from 472,100 vehicles in 2008. The decline in sales covered all the division's core markets including Europe, the U.S., Latin America and Japan. Revenue in the segment shrank 36% to €18.4 billion ($25.7 billion). EBIT was minus €1 billion ($1.4 billion) compared to plus €1.6 billion ($2.3 billion) in 2008. The company expects an EBIT of €200 million ($279 billion) for 2010.

Mercedes-Benz Vans: This segment sold 165,600 units, significantly lower than the year-ago level of 287,200 units. This has led to a 34% fall in revenue to €6.2 billion ($8.7 billion). Despite the drastic fall in unit sales, the division achieved a positive EBIT of €26 million ($36 million) compared to €818 million ($1.1 billion) in 2008. The company anticipates an EBIT of €250 million ($348 million) for 2010.

Daimler Buses: This segment sold 32,500 buses and bus chassis, a decline from 40,600 units in 2008. The decline in unit sales was attributable to weaker demand in Mexican and Latin American markets. Revenue dipped 12.5% to €4.2 billion ($5.9 billion). Nevertheless, the division achieved an EBIT of €183 million ($255 million) compared to €406 million ($566 million) in 2008. The company expects an EBIT of €180 million ($251 million) for 2010.

Daimler Financial Services: This segment was adversely affected by lower unit sales during the year. The new business fell 15% to €25.1 billion ($35 billion). The weaker new business and the sale of parts of the non-automotive portfolio in North America led to an 8% decrease in worldwide contract volume to €58.3 billion ($81.3 billion). However, the division achieved an EBIT of a meager €9 million ($12.5 million) compared to €677 million ($944 million) in 2008. The company anticipates an EBIT of at least €350 million ($488 million) for 2010.

Financial Position

Daimler had free cash flow of €2.7 billion ($3.8 billion) in 2009 despite the difficult market conditions. This was attributable to the development of inventories and trade receivables as well as the reduction in capital expenditures, which offset the negative effects from the segment's earnings.

In 2009, capital expenditures were reduced to €2.4 billion ($3.3 billion) from €3.6 billion ($5 billion) in 2008. However, Daimler expects to make a capital expenditure of €8.1 billion ($11.3 billion) in 2010 and 2011 due to the new requirements placed on its products.