Daimler AG Reports Strong Sales In Q3 2017 However Profitability Declines
Daimler AG reported its Q3 2017 results on October 20, 2017 and while the company registered a 9% increase in unit sales, leading to 6% year on year increase in revenues, its EBIT (earnings before interest and taxes) declined by 14% year on year in this quarter. Strong sales in this quarter reflect the strong product line up of the company which continues to attract customers. Below is a summary of the company’s revenues by division in Q3 2017:
The 6% overall increase in revenues in Q3 2017 was driven by an 8% increase in revenues in Europe and a 10% increase in revenues in China. The company expects a 2% increase in the global car market in 2017 and is well poised to capture this growth through its strong line up of products. The company expects significant growth in unit sales for all its divisions for the remainder of 2017.
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Daimler AG’s profitability in Q3 2017 was lower than expected, due to one-time items impacting the EBIT (earnings before interest and taxes) of its Mercedes Benz division. Below is a summary of the company’s EBIT by division in Q3 2017:
The 22% decline in the EBIT of the Mercedes Benz Cars division was primarily due to expenses for voluntary service activities in connection with a comprehensive plan for diesel engines, expenses relating to specific product recall, and expenses for new technologies as the company moves towards an electric future. Several of these are one-time items and the company expects the EBIT of this division to be higher than the previous year in 2017. Higher expenses for new products and raw materials and end of contract manufacturing impacted the profitability of the Mercedes Benz Vans division. Foreign exchange rates and cost inflation in Latin America were primarily responsible for the 42% decline in EBIT of the Daimler buses division.
Going Forward:
Daimler’s outlook for the remainder of 2017 remains strong and the company expects strong sales growth and a higher EBIT compared to the previous year. The company’s strong line up of products and nearly 10 new models of Mercedes Benz Cars lined up for a launch in 2018 are likely to drive its growth next year. China remains a strong region for the company where the share of locally produced vehicles is increasing steadily.
Daimler has initiated the first step towards strengthening its organizational structure and is preparing to create legally independent entities for its divisions. This new structure will enable the company to focus better on changing customer needs. However, necessary approvals for a divisional corporate structure are likely only by 2019.
While the Mercedes Benz segment disappointed with lower profitability in Q3 2017, we believe the company is on track to deliver strong results for the year 2017.