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Status: February 2, 2017 – Press-Information
On the basis of the expected market developments and the planning of the divisions, Daimler assumes that Group EBIT will increase again slightly in 2017.
Outlook: growth expected for unit sales, revenue and EBIT
“We want to increase our total unit sales in the automotive divisions in total. And our financial and mobility services also target further growth,” summarized Dieter Zetsche the outlook for this year. “We are on a path of stable growth, along which we will systematically continue.”
On the basis of the assumptions concerning the development of major automotive markets and the divisions’ planning, Daimler assumes that total unit sales can be slightly increased in the year 2017. Daimler also expects Group revenue to increase slightly this year. This is a reflection of the overall positive development of unit sales in the automotive divisions.
The divisions currently have very attractive and particularly competitive product ranges, which have been expanded and systematically renewed in recent years. Daimler therefore assumes that it will profit to an above-average extent from the slight growth in global demand for motor vehicles that is expected also in the year 2017, and will be able to strengthen its position in important markets. At Mercedes-Benz Cars, additional growth this year will be driven above all by the new E-Class models, the successful SUVs and the new convertible models. The other automotive divisions are also well positioned with their products, and Daimler Financial Services’ new business will profit from further growth in unit sales.
Against this backdrop, Daimler expects revenue growth for Mercedes-Benz Cars, Daimler Buses and Daimler Financial Services. Revenue at Daimler Trucks in 2017 should be in the magnitude of the previous year. Unlike the slight growth in unit sales expected at Mercedes-Benz Vans, the division’s revenue is likely to be at the prior-year level, as contract manufacturing of vans was discontinued in the fourth quarter of 2016.
In regional terms, the highest growth rates are expected in Asia and Europe, but business volumes should expand also in the other regions. In particular in China, Daimler has created the right conditions for further growth with new sales outlets, additional production capacities and a broader product range. But the growth in unit sales in China will have a disproportionately low impact on revenue growth, as the share of local production will continue to increase. The Chinese associated company Beijing Benz Automotive China (BBAC) is included in the consolidated financial statements using the equity method of accounting.
The anticipated growth in unit sales and revenue will have a positive impact on earnings in 2017. The foundations have been laid for a lasting high level of earnings with various programs for improved profitability, which were implemented in the years 2013 to 2015. At present, further measures are being taken in all divisions for the long-term and structural optimization of the business system. Daimler is standardizing and modularizing its production processes throughout the Group. In this context, Daimler is making intelligent use of vehicle platforms, allowing it to achieve further cost advantages. In parallel, it is pushing forward with digital connectivity: in all divisions and at all stages of the value chain – from development to production to sales and service. In this way, the Group is opening up additional scope to become even faster, more flexible and more efficient - to the benefit of the customers. There will be opposing effects, however, from the ongoing high expenditure for the model offensive, for innovative technologies for the digitization of products and processes, and for the expansion and modernization of the worldwide production facilities. As a result, advance expenditure aimed at securing a successful future will once again be higher in 2017 than in the previous.
On the basis of the expected market developments, the aforementioned factors and the planning of the divisions, Daimler assumes that Group EBIT will increase again slightly in 2017.
The individual divisions have the following expectations for EBIT in the year 2017:
- Mercedes-Benz Cars: significantly above the prior-year level,
- Daimler Trucks: slightly below the prior-year level,
- Mercedes-Benz Vans: significantly below the prior-year level,
- Daimler Buses: slightly above the prior-year level, and
- Daimler Financial Services: in the magnitude of the prior-year level.
The decrease in earnings anticipated at Daimler Trucks primarily reflects expenditure arising from the worldwide optimization of fixed costs. This is expected to result in a total expense of up to €500 million, mainly in the year 2017. This will be partially offset by income of approximately €250 million expected from the sale of real estate at the Kawasaki site in Japan. The Mercedes-Benz Vans division achieved very high EBIT and a high return on sales in 2016. Compared with the long-term average, the van division anticipates a very high level of earnings also in 2017. The main cause of the significant decrease compared with 2016 will be high advance expenditure for the renewal and expansion of the product portfolio.
Daimler intends to achieve a 9% average annual return on sales for the automotive business on a sustained basis. This overall figure is based on the return targets for the individual divisions predominantly achieved in 2016: 10% for Mercedes-Benz Cars, 8% for Daimler Trucks, 9% for Mercedes-Benz Vans and 6% for Daimler Buses.
The anticipated development of earnings in the automotive divisions will have a positive impact on the free cash flow of the industrial business in 2017. In view of repeated higher expenditure for new products and technologies, the free cash flow of the industrial business should be in the same magnitude as in 2016, and thus higher than the dividend distribution in 2017.
More detailed information can be found in the extensive Annual and Interim Reports as well as in additional data files and reporting formats.
This document contains forward-looking statements that reflect our current views about future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” ”can,” “could,” “plan,” “project,” “should” and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including an adverse development of global economic conditions, in particular a decline of demand in our most important markets; a deterioration of our refinancing possibilities on the credit and financial markets; events of force majeure including natural disasters, acts of terrorism, political unrest, armed conflicts, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates; a shift in consumer preferences towards smaller, lower-margin vehicles; a possible lack of acceptance of our products or services which limits our ability to achieve prices and adequately utilize our production capacities; price increases for fuel or raw materials; disruption of production due to shortages of materials, labor strikes or supplier insolvencies; a decline in resale prices of used vehicles; the effective implementation of cost-reduction and efficiency-optimization measures; the business outlook for companies in which we hold a significant equity interest; the successful implementation of strategic cooperations and joint ventures; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety; the resolution of pending government investigations or of investigations requested by governments and the conclusion of pending or threatened future legal proceedings; and other risks and uncertainties, some of which we describe under the heading “Risk and Opportunity Report” in the current Annual Report. If any of these risks and uncertainties materializes or if the assumptions underlying any of our forward-looking statements prove to be incorrect, the actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements since they are based solely on the circumstances at the date of publication.