Growth and uncertainty

Despite ongoing bottlenecks in the supply chain and headwinds in raw material prices, Daimler Truck Holding (Daimler Truck) continued its profitable growth course in the second quarter and was able to increase unit sales, revenue and adjusted Group EBIT. The company was able to increase Group unit sales in the second quarter of 2022 to 120,961 units compared to the previous year, an increase of four percent. Driven by positive unit sales, improved price enforcement, higher contributions from the aftersales business and positive exchange rate effects, Group revenue rose significantly by 18 percent to €12.1 billion. Daimler Truck continues to see a strong demand environment. The order backlog remains at a high level.

Group earnings break the billion mark

Adjusted Group earnings before interest and taxes rose by 15% to 1,010 million euros in the reporting period compared to 878 million euros in the second quarter of 2021. At 940 million euros, adjusted EBIT in the industrial business was around 16% higher than in the same period of the previous year. The adjusted return on sales amounted to eight percent.

Martin Daum, Chairman of the Board of Management of Daimler Truck: "We are in the middle of our first year as an independent company. I would like to take this opportunity to thank the Daimler Truck team worldwide for what they have achieved so far. With an EBIT of one billion euros in the second quarter, our results and efforts are a strong foundation on which we will continue to build. We now want to maintain this positive momentum for the second half of the year." Jochen Goetz, CFO of Daimler Truck: "Given the ongoing challenges in the supply chain, raw materials and energy prices, we can be satisfied with our Q2 results. Our financial targets for 2022 remain unchanged. Nevertheless, the current year will remain challenging, especially on the cost side. We are therefore continuing to focus on implementing our measures in all segments."

Mercedes-Benz segment with positive special effects

The Mercedes-Benz segment achieved EBIT of €512 million and an adjusted return on sales of 10.5%, which includes two positive special effects. One of these special effects includes a positive one-off, non-cash EBIT effect of around 160 million euros from an earlier than expected booking of license income from the localization of Mercedes-Benz Trucks in China. Daimler Truck had concluded a technology licensing agreement with its joint venture Beijing Foton Daimler Automotive (BFDA) in connection with the localization of Mercedes-Benz trucks for the Chinese market. The license agreement includes the use of defined intellectual property of Mercedes-Benz Trucks Research & Development by BFDA. In addition to the licenses, the increase in interest rates had a further positive valuation effect, leading to a higher discounting of non-current provisions.

Strong second quarter in North America too

Trucks North America achieved an EBIT of EUR 523 million and an adjusted return on sales of 10.2% and thus, as expected, realized a significantly stronger second quarter with an almost balanced price-cost development. Financial Services recorded a higher EBIT of EUR 71 million due to an improved interest margin in North America and an improved relative risk cost situation, resulting in an adjusted return on equity of 15.1. The Trucks Asia segment was severely affected by considerable bottlenecks in the supply chain and negative effects from the BFDA joint venture, which was impacted by a declining Chinese market. Daimler Buses reported a slightly negative contribution to the Group's overall result due to lower demand in the coach segment.

Driver shortage affects deliveries

Daimler Truck reported a free cash flow of minus 756 million euros in the second quarter due to temporarily higher inventories as a result of ongoing bottlenecks in the supply chain and deliveries of finished vehicles to customers impaired by driver shortages, as well as a contribution of 250 million euros to the pension fund as part of the spin-off and substantial tax payments that took effect in the second quarter.

Cautiously optimistic outlook for 2022

Daimler Truck's outlook assumes that the macroeconomic conditions for global demand for commercial vehicles will remain comparatively favorable in the second half of 2022. The limiting factor is still supply and not demand. Daimler Truck continues to anticipate revenue at Group level in the range of €48.0 billion to €50.0 billion in 2022. Daimler Truck expects the adjusted return on sales for the industrial business to remain unchanged at between seven and nine percent. The outlook for the Mercedes-Benz, Trucks North America and Daimler Buses segments for the full year 2022 remains unchanged compared with the first quarter. For the Trucks Asia segment, the full-year forecast for adjusted return on sales has been updated to between one and three percent, compared with the previous forecast of three to five percent. The Daimler Truck Financial Services segment now expects a higher return on equity of nine to eleven percent for the full year 2022.

Daimler Truck's outlook is primarily dependent on the further development of the war in Ukraine and its impact on the global economy as well as the development of the very high inflationary pressure and the associated interest rate hikes by central banks. Further macroeconomic and geopolitical developments and the Covid-19 pandemic also harbor an extraordinary degree of uncertainty. However, Daimler Truck expects supply bottlenecks to decrease compared to the first half of the year and no production stoppages due to the availability of gas.

The article appeared in materialfluss 8-9/22.