Annual Report 2016

EBIT

The Daimler Group achieved EBIT of €12.9 billion in 2016 (2015: €13.2 billion). (See B.12 and B.13)

Despite higher expenses in connection with Takata airbags and from the remeasurement of inventories, the Mercedes-Benz Cars division slightly improved on its prior-year earnings. This was the result of further growth in unit sales, especially in the SUV segment. Daimler Trucks did not achieve its high earnings of the previous year as a result of market-related decreases in unit sales in some key markets. The Mercedes-Benz Vans division increased its EBIT significantly as a result of higher unit sales. The Daimler Buses division achieved EBIT significantly above the prior-year level as well. At Daimler Financial Services, earnings increased slightly primarily due to the growth in contract volume.

The reconciliation of segment earnings to Group EBIT resulted in significantly lower income than in the previous year. The reconciliation was impacted in particular by expenses in connection with legal proceedings, by the impairment of the investment in BAIC Motor Corporation Ltd. (BAIC Motor) and by losses from currency transactions which are not allocated to business operations. The gain recognized on the contribution of 3.1 % of the shares of each of Renault and Nissan into the German pension plan assets had a positive impact on earnings.

EBIT adjusted for special items fundamentally constitutes EBIT excluding the impact of any unusual factors. They can also include such special items that have a significant effect on the comparison of EBIT for the reporting period with EBIT for the previous year, such as expenses from restructuring and from impairments. The special items affecting earnings in the years 2015 and 2016 are shown in table B.14.

Due to the favorable business development in most divisions, Daimler was able to exceed slightly its prior-year EBIT adjusted for special items of €13.8 billion, achieving €14.2 billion in 2016, which is in line with our expectations as stated in the Outlook section of Annual Report 2015. (See B.12)

B.12 EBIT by segment

  EBIT EBIT adjusted for special items
  2016 2015 16/15 2016 2015 16/15
In millions of euros   % change   % change
             
Mercedes-Benz Cars 8,112 7,926 +2 8,927 8,343 +7
Daimler Trucks 1,948 2,576 -24 2,053 2,742 -25
Mercedes-Benz Vans 1,170 880 +33 1,302 952 +37
Daimler Buses 249 214 +16 258 202 +28
Daimler Financial Services 1,739 1,619 +7 1,739 1,619 +7
Reconciliation -316 -29 . -36 -29 .
Daimler Group1 12,902 13,186 -2 14,243 13,829 +3

1 EBIT, the indicator of operating performance, comprises earnings before interest income and corporate income taxes. The reconciliation of the Daimler Group’s EBIT to earnings before income taxes is included in Note 33 of the Notes to the Interim Consolidated Financial Statements.

B.13 Development earnings

B.14 Special items affecting EBIT

  2016 2015
In millions of euros    
     
Mercedes-Benz Cars    
Expenses in connection with Takata airbags -480 -300
Expenses in connection with remeasurement of inventories   -238
Settlement in connection with a patent dispute -64
Restructuring of own dealer network -33 -64
Public-sector levies related to prior periods -121
Relocation of headquarters of MBUSA -19
Sale of real estate in the United States +87
     
Daimler Trucks    
Workforce adjustments -91 -58
Restructuring of own dealer network -14 -47
Sale of Atlantis Foundries -61
     
Mercedes-Benz Vans    
Expenses in connection with Takata airbags -83 -40
Workforce adjustments in Germany -38
Restructuring of own dealer network -11 -29
Relocation of headquarters of MBUSA -3
     
Daimler Buses    
Workforce adjustments -9
Restructuring of own dealer network -4
Sale of investment in New MCI Holdings Inc. +16
     
Reconciliation    
Expenses related to legal proceedings -400
Impairment of investment in BAIC Motor -244
Losses from currency transactions (not allocated to business operations)   -241
Contribution of shares in Renault and Nissan to pension plan assets   +605

The Mercedes-Benz Cars division slightly increased its EBIT adjusted for special items in 2016 and thus met the forecasts made in Annual Report 2015. The Daimler Trucks division’s EBIT in 2016 did not reach the prior-year level as forecast in Annual Report 2015. We adjusted those assessments downwards as the year progressed, as the division’s unit sales decreased faster than expected in some key markets. In addition, the European market situation featured very intense competition. The earnings of Mercedes-Benz Vans developed better than we had forecast at the beginning of the year. We had anticipated a slight improvement compared with the previous year. We adjusted those assessments upwards as the year progressed in the context of our quarterly reporting, as the division’s unit sales increased faster than expected. Due to the strong business with complete buses in the EU30 region, Daimler Buses achieved significantly higher EBIT than in the previous year and surpassed the forecast made in Annual Report 2015. Daimler Financial Services slightly increased its EBIT adjusted for special items and met the forecasts made in Annual Report 2015.

Mercedes-Benz Cars posted EBIT of €8,112 million in 2016, which is slightly above the prior-year figure of €7,926 million. The division’s return on sales was 9.1 % (2015: 9.5 %) (See B.15)

This positive development primarily reflects the increased unit sales of new vehicles. The main driver was the SUV segment. Another positive effect on EBIT resulted from a better pricing. Negative effects resulted from expenses for advance expen­diture for new technologies and vehicles. EBIT also includes expenses of €480 million in connection with Takata airbags. Further expenses of €238 million were recognized from the remeasurement of inventories and of €64 million for a settlement in connection with a patent dispute.

The automotive divisions’ earnings were also reduced by a total expense of €58 million from the restructuring of Daimler’s own dealership network (2015: €144 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 €1,948 million (2015: €2,576 million), which is significantly lower than the high prior-year figure. The division’s return on sales was 5.9 % (2015: 6.9 %). (See B.15)

The negative development of earnings was primarily the result of sharply decreased unit sales in the NAFTA region, Turkey, the Middle East, Latin America and Indonesia. Earnings were also reduced by the intense competition in Europe. The realization of efficiency and material-cost improvements and exchange-rate effects had a positive impact on earnings. EBIT also includes expenses of €91 million for workforce adjustments in the context of the ongoing optimization programs in Brazil.

Mercedes-Benz Vans achieved EBIT of €1,170 million in the year 2016, significantly higher than its prior-year earnings of €880 million. The division’s return on sales also increased significantly, to 9.1 % from 7.7 % in 2015. (See B.15)

EBIT reflects the very positive development of unit sales, especially in Europe, the NAFTA region and China, as well as efficiency improvements. On the other hand, expenses arose from advance expenditure for new technologies and vehicles. Expenses of €83 million resulted in connection with Takata airbags and of €38 million from a voluntary severance program at the Düsseldorf plant.

The Daimler Buses division’s EBIT of €249 million in 2016 (2015: €214 million) was significantly above the high prior-year figure; the division achieved a return on sales of 6.0 % (2015: 5.2 %). (See B.15)

The strong business with complete buses in the EU30 region, a good product-mix and positive exchange-rate effects more than offset the negative effects of weak demand for bus chassis due to the ongoing difficult economic situation in Latin America and lower unit sales in Turkey. Higher expenses from advance expenditure for new technologies and vehicles and cost inflation were partially offset by efficiency improvements.

Daimler Financial Services posted EBIT of €1,739 million in 2016, thus slightly surpassing its prior-year earnings (2015: €1,619 million). The division’s return on equity was 17.4 % (2015: 18.3 %). (See B.16)

This positive development was mainly the result of increased contract volume, but earnings were reduced by negative exchange-rate effects.

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 an overall expense of €333 million (2015: €79 million). This includes expenses of €400 million related to legal proceedings, the impairment of Daimler’s investment in BAIC Motor of €244 million and losses from currency transactions of €241 million (2015: €43 million). The gain of €605 million recognized on the contribution of the Renault and Nissan shares into the German pensionplan assets did not offset those expenses.

The elimination of intra-group transactions resulted in income of €17 million in 2016 (2015: €50 million).

The reconciliation of Group EBIT to profit before income taxes is shown in table B.17.

B.15 Return on Sales
B.16 Return on Equity

B.17 Reconciliation of Group EBIT to profit before income taxes

  2016 2015
In millions of euros    
     
Group EBIT 12,902 13,186
Amortization of capitalized borrowing costs1 -12 -10
Interest income 230 170
Interest expense -546 -602
Profit before income taxes 12,574 12,744

1 Amortization of capitalized borrowing costs is not included in the internal performance measure EBIT, but is a component of cost of sales.

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