Daimler Sees Lower Truck Profit

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Bloomberg  /  May 20, 2016

Daimler AG said its truck unit’s profit will be “significantly lower” this year than in 2015.

The company said the truck unit’s earnings before interest and taxes will decline as demand shrinks more rapidly than expected in North America and the Middle East, without giving a figure.

Daimler Trucks earned a record 2.7 billion euros (US$3.03 billion) on that basis last year.

“The situation of global truck markets has been challenging for several months and has recently got worse,” said Wolfgang Bernhard, head of Daimler Trucks.

The global market for Class 6 to Class 8 trucks will contract by about 15 percent in 2016, including declines of 20 percent in Brazil and 15 percent in Indonesia, the company said.

Daimler Trucks is the German company’s second-largest unit, behind Mercedes-Benz autos.

The truck unit plans to take a special charge against earnings of 100 million euros related to a voluntary severance offer for workers in Brazil.

 

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Continuation of contracting truck markets: Daimler Trucks changes its outlook for 2016

Daimler Press Release  /  May 19, 2016

• EBIT from ongoing business and unit sales to be significantly lower in 2016 than in 2015

• 2016 will nonetheless be one of Daimler Trucks’ most profitable years

• Weaker development especially in NAFTA region and Middle East

• Unchanged outlook for Group EBIT from ongoing business

The world’s major truck markets are in a period of sustained contraction. Daimler Trucks, the leading truck manufacturer worldwide, has therefore adjusted its outlook for this year. Daimler Trucks now expects EBIT from the ongoing business and unit sales to be significantly lower in 2016 than the very good levels of last year. In 2015, Daimler Trucks achieved the best EBIT in its history of €2.7 billion.

Profitability this year is to remain very high also after the adjusted outlook. Dr. Wolfgang Bernhard, Member of the Board of Management of Daimler AG and Head of the Daimler Trucks and Daimler Buses divisions, stated: “The situation of global truck markets has been challenging for several months and has recently got worse. Especially in the NAFTA region, but also in the Middle East, demand is weaker than previously expected. We have therefore adjusted our outlook for the rest of this year. Although the forecast is for lower numbers than in 2015, we continue to anticipate a high level of earnings in the full year. 2016 will be one of Daimler Trucks’ most profitable years, due not least to the successful continuation of our efficiency actions.”

In recent weeks, the situation in major markets has changed significantly. In the NAFTA region, Daimler Trucks is defending its clear market leadership with its strong product portfolio. At the same time, there has been no revival of orders received, especially in the heavy-duty segment (Class 8). The overall market for Class 6 to 8 trucks will contract by approximately 15% in 2016. This can be only partially offset by the market development in Europe. Although demand in Europe is significantly higher than last year, the competitive situation has become much more intense and is influencing market players’ pricing. Another factor is that the persistently low price of oil is having a sustained negative impact on demand in the Middle East.

Furthermore, the development of markets in Brazil, Indonesia and Turkey is negative. The outlook for those markets has been worsening since the beginning of the year and continues to worsen. The Brazilian market will contract by about 20%, now that the political and thus also economic situation there has deteriorated once again. The same applies to Indonesia, where Daimler Trucks anticipates a decrease of about 15%. Demand in Turkey will also be substantially lower than last year, due not only to purchases being brought forward to 2015, but also to very negative geopolitical conditions.

Against the backdrop of this development, Daimler Trucks will intensify the efficiency actions that are already being taken. In Brazil, further workforce adjustments will have to be made, for which Daimler Trucks has made a voluntary severance offer. In this context, Daimler Trucks anticipates expenses totaling up to €100 million as a special reporting item in 2016.

However, nothing has changed with regard to the medium- and long-term growth drivers and success factors for the key markets of Daimler Trucks.

“Along with managing volatile truck markets, we continue to pursue our strategy systematically. With our technologically leading position, global presence and intelligent platform concepts, we will take further determined measures also in the future,” stated Bernhard.

Daimler continues to assume that Group EBIT from the ongoing business will increase slightly in the year 2016.