Banker´s Day India
Dr. Michael Mühlbayer Head of Investor Relations & Treasury
Investor Relations & Treasury – Dr. Michael Mühlbayer
Q3-2012 Results
Daimler Strategy
1
2
Agenda
Mercedes-Benz Cars Strategy 3
Daimler Trucks Strategy 4
Financing Strategy 5
Investor Relations & Treasury – Dr. Michael Mühlbayer 2
Highlights in Q3 2012
(+1%)
(+2%)
(+3%)
528,600
345,400
119,100
Group sales
Sales record at Mercedes-Benz Cars
Further sales increase at Daimler Trucks
First jointly produced Auman truck rolled off the assembly line in China
Sales start of the new urban delivery van Mercedes-Benz Citan
Market launch of the new A-Class and the new CLS Shooting Brake
Market launch of the first BharatBenz trucks in India
Start of production of Mercedes-Benz Antos distribution truck
Investor Relations & Treasury – Dr. Michael Mühlbayer 3
Accelerating economic slowdown in the course of Q3 2012
Stronger headwind for world economy, mainly in Western Europe and in important emerging markets
Accelerating downward trend of the Western European car and van markets
Demand for medium and heavy trucks in Western Europe affected by heightened uncertainty
Growth of truck sales in the North American market slowed down
Brazilian market for commercial vehicles did not show the expected turnaround so far
Investor Relations & Treasury – Dr. Michael Mühlbayer 4
Key financials
Q3 2011 Q3 2012
Revenue 26.4 28.6
EBIT
as reported 2.0 1.9
from ongoing business 2.1 1.9
Net profit 1.4 1.2
Earnings per share (in euros) 1.21 1.03
Net liquidity industrial business (2011: year-end) 12.0 8.2
Free cash flow industrial business -0.8 -0.2
- in billions of euros -
Investor Relations & Treasury – Dr. Michael Mühlbayer 5
Mercedes-Benz Cars: Effects from higher unit sales compensated by investments for future growth
Mercedes-Benz Cars
Sales increase
Positive net pricing
Foreign exchange rates
Enhancement of product attractiveness
Higher expenses amongst others for new technologies, new products and additional capacity
Discounting of non-current provisions
EBIT Q3 2011
EBIT Q3 2012
1,108 975
- 133 8.0%*
6.4%*
* Return on sales
- in billions of euros -
Investor Relations & Treasury – Dr. Michael Mühlbayer 6
Balanced sales structure - Unit sales in thousands -
Mercedes-Benz Cars
Q3 2011
Rest of world
Germany
USA
China
337
Western Europe excl. Germany
345
Q3 2012
14%
21%
20%
22%
23%
18%
16%
22%
23%
21%
Investor Relations & Treasury – Dr. Michael Mühlbayer 7
- Unit sales in thousands -
Mercedes-Benz Cars
Unit sales increase mainly driven by M- and B-Class
Q3 2011
337 345
Q3 2012 19
75
109
51
68
18
78
106
55
58
smart
C-Class
E-Class
S-Class
A-/B-Class
SUV segment
23 22
Investor Relations & Treasury – Dr. Michael Mühlbayer 8
Mercedes-Benz Cars
Product highlights
SLS AMG Coupé Electric Drive
New A-Class CLS Shooting Brake
New GL-Class
9 Investor Relations & Treasury – Dr. Michael Mühlbayer
Daimler Trucks: Effects from higher unit sales in NAFTA and Asia compensated by costs from product offensive - in millions of euros -
Daimler Trucks
EBIT Q3 2011
EBIT Q3 2012
555 507
- 48
7.3%* 6.3%*
* Return on sales
Sales increase in NAFTA and Asia
Lower warranty costs
Foreign exchange rates
Lower unit sales in Brazil and Western Europe
Costs related to product offensive
Discounting of non-current provisions
10 Investor Relations & Treasury – Dr. Michael Mühlbayer
Sales increase driven by business in NAFTA and Asia - in thousands of units -
Daimler Trucks
Q3 2011
Rest of world 116
Asia
119
Q3 2012
14
35
13
43
14
16
33
17
35
15
Western Europe
NAFTA region
Latin America
11 Investor Relations & Treasury – Dr. Michael Mühlbayer
Lower level of order intake in all major regions - in thousands of units -
Daimler Trucks
Q3 2011
107 95
Q3 2012
12
24
12
32
15
15
28
17
35
12
Asia
Western Europe
NAFTA region
Rest of world
Latin America*
* Due to the business model, incoming orders in Brazil correspond with unit sales.
Investor Relations & Treasury – Dr. Michael Mühlbayer 12
Product highlights
Daimler Trucks
Mercedes-Benz Antos Freightliner Coronado
BharatBenz trucks Fuso Canter Eco Hybrid Auman truck
13 Investor Relations & Treasury – Dr. Michael Mühlbayer
2012 expectations for EBIT from ongoing business
This guidance is based on the most recent market expectations and exchange rate environment. Risks exist in light of a difficult economic environment and volatile markets.
Around €4.4 billion
Around €1.7 billion
Around €650 million
Around minus €80 million
Around €1.3 billion
We expect Group EBIT for FY 2012 of around €8 billion based on the following divisional EBIT:
This guidance reflects a significant slowdown of major markets and intensified competition since Q2 2012.
14 Investor Relations & Treasury – Dr. Michael Mühlbayer
The operating performance in Q4 2012 will be driven by:
• Weaker European markets • Support of dealer network in China • Higher unit sales driven by new compact cars
• Weaker than expected European and Brazilian markets • Slowdown of demand in NAFTA • Expenses related to the start of business in India and China
• Weak Western European markets continue to impact business • Higher unit sales due to Citan launch
• Normalization of cost of risk
• Lower unit sales due to weak Western European and Brazilian markets • Charges of around €40 million for business repositioning
15 Investor Relations & Treasury – Dr. Michael Mühlbayer
Mercedes-Benz Cars: Mid-term financial performance
To achieve 10% RoS in 2013 has become more challenging based on current market developments. We continue to target a RoS of 10% on average, however, from a later starting point.
Challenges
• Worsened economical environment • Market demand weaker than expected • Increasing competition in core markets • Model changeover of key products; meaningful profit
contribution from successor models as of H2 2013 • China business structure • Continued investments in our growth strategy
Opportunities/Management initiatives
• Strong growth momentum based on new models • Implementation of China strategy • Fit for Leadership: targeted benefits
of €2.0 billion by the end of 2014
Strategic return target: Return on sales of 10% on average
16 Investor Relations & Treasury – Dr. Michael Mühlbayer
Mercedes-Benz Cars: Mid-term financial performance
Flight path towards benefits Key levers
• Sales growth and positive pricing from new models
• Implementation of China strategy
• Material costs – earlier achievement of net-zero approach
• Production costs – accelerated hours per vehicle (HPV) initiative
• Reduction of fixed costs • Reduction of R&D and capital expenditures
12/2012 12/2013 12/2014
Cost reduction
€2.0bn
Additional top-line effects
We aim to achieve a significant portion of cost reduction by 2013
17 Investor Relations & Treasury – Dr. Michael Mühlbayer
Daimler Trucks: Mid-term financial performance
To achieve 8% RoS in 2013 has become more challenging based on current market developments. We continue to target a RoS of 8% on average over the cycle, supported by DT#1, however, from a later starting point.
Challenges Demand in core markets still below normal-year level Market recovery in 2012; 2013 slight market growth potential,
but still below pre-crisis level Recovery in 2012 slowed down by sovereign debt crisis; 2013
market without improvement and still significantly below pre-crisis level
Instable market development; impacts from economic slow-down and introduction of EURO V put 2013 market development at risk
Growth due to reconstruction measures and governmental subsidies after the earthquake expected to decline in 2013
2013 market expected to be still below 2011 level
Increasing competitiveness in core markets
Opportunities/Management initiatives Accelerated recovery of core markets (e.g. Europe, Brazil, China)
Realization of measures defined under DT#1
Strategic return target: Return on sales of 8% on average over the cycle
NAFTA
Europe
LA
Japan
China
18 Investor Relations & Treasury – Dr. Michael Mühlbayer
Daimler Trucks: Mid-term financial performance
Top-line
Cost reduction 70%
30%
€1.6bn
2012 2013 2014
We aim to achieve a significant portion of cost reduction by 2013
• Sales push • Closing of global white spots • Aftersales push • Remanufacturing growth
• Fixed costs • Material costs • Production costs • Warranty and quality costs • Platform scale/portfolio optimization
Flight path towards benefits Key levers
19 Investor Relations & Treasury – Dr. Michael Mühlbayer
Mercedes-Benz Cars: Fit for Leadership
2013 2015 2016
Growth Strategy Mercedes-Benz 2020
2012 2014
"Fit for Leadership"
Structural Optimization
Profit Optimization
Program set-up addresses all levers on functional & cross-functional level 1 3 2 2020
20 Investor Relations & Treasury – Dr. Michael Mühlbayer
Core elements of the MBC China strategy
2008 2009 2010 2011 2012
Mid-term
• Extension of attractive product portfolio
• Dealer professionalization and expansion of network
• Ensure China-specific product and market requirements through further extension of local R&D capacity and competence
• Reduction of material costs/expansion of “Chinese Supplier Base”
• Expansion of production capacity
• Further increase dealer network – average 50 new dealers per year
• New product launches (M-Class and B-Class)
• Full availability of locally produced GLK
• Continue to strengthen brand/ product positioning through marketing & PR platforms
• Setup of new Regional West Office in Chengdu (4 regions’ build-up completed)
• Leasing company established
• Share increase MB China (Daimler 75%/LSH 25%)
Measures in 2012
• Expand dealer network from 207outlets in 2011 to approximately 260 in 2012 Network Development
MBC Retail Performance (units in thousands, incl. smart)
152.5
198.5
147.3
68.5
38.8
+9% vs. 09/11
YTD09
Investor Relations & Treasury – Dr. Michael Mühlbayer 21
Looking beyond 2012
All divisions will consistently implement their initiatives to further enhance efficiency and realize further optimization potentials.
We will optimize our business model and better exploit our potential in China.
In 2014, Mercedes-Benz Cars will have a significantly younger model lineup than today.
At Daimler Trucks, the product offensive and the regional launches will be completed in 2014.
22 Investor Relations & Treasury – Dr. Michael Mühlbayer
Q3-2012 Results
Daimler Strategy
1
2
Agenda
Mercedes-Benz Cars Strategy 3
Daimler Trucks Strategy 4
Financing Strategy 5
23 Investor Relations & Treasury – Dr. Michael Mühlbayer
Daimler‘s identity as an automotive pioneer is fueled by leading technologies, strong brands and global reach
Brand Technology leadership Market leverage
Cars Trucks Buses Vans Services
24 Investor Relations & Treasury – Dr. Michael Mühlbayer
Daimler corporate strategy: Four central themes
Develop new markets
Lead in „Green“ and Safety
Shape mobility concepts
Strengthen core business
25 Investor Relations & Treasury – Dr. Michael Mühlbayer
Q3-2012 Results
Daimler Strategy
1
2
Agenda
Mercedes-Benz Cars Strategy 3
Daimler Trucks Strategy 4
Financing Strategy 5
26 Investor Relations & Treasury – Dr. Michael Mühlbayer
Leadership -- a state of mind
1 32 1 32Mercedes-Benz 2020
Investor Relations & Treasury – Dr. Michael Mühlbayer 27
Four levers of Mercedes-Benz 2020
Brand Product
Sales Profit
Investor Relations & Treasury – Dr. Michael Mühlbayer 28
Brand: “The Best or Nothing”
Mercedes-Benz is the most valuable premium automotive brand worldwide and Europe's most valuable brand overall
Investor Relations & Treasury – Dr. Michael Mühlbayer 29
Products: SUV Offensive - Our new GLK-Class
Investor Relations & Treasury – Dr. Michael Mühlbayer 30
Products: SUV Offensive - Our new GL-Class
Investor Relations & Treasury – Dr. Michael Mühlbayer 31
Products: Our new SL-Class
Investor Relations & Treasury – Dr. Michael Mühlbayer 32
Products: Mercedes-Benz Concept Style Coupé
Investor Relations & Treasury – Dr. Michael Mühlbayer 33
More to come: At least 10 additional model series by 2015 Compact
Mid-Size
Full-Size
Large
SUV
Investor Relations & Treasury – Dr. Michael Mühlbayer 34
Sales: At least 1.6 million cars in 2015 – sales leadership in 2020
Mercedes-Benz sales forecast [million units – without smart]
1.28
2011
>1.5
2014e
>1.6
2015e
Best sales*
2020e
1.28
2011
>1.5
2014e
>1.6
2015e
Best sales*
2020e
*Within automotive premium segment; schematic representation
Investor Relations & Treasury – Dr. Michael Mühlbayer 35
Products: Delivering on responsibility
6.0 ML 250 BlueTEC 4MATIC E 300 BlueTEC HYBRID SLS AMG E-CELL
4.2 0
Fuel consumption combined in l/100 km
Investor Relations & Treasury – Dr. Michael Mühlbayer 36
Products: CO2- Emissions in 2011 300
270
240
210
180
Jaguar
199
BMW**
151
0Audi
151142
MBC*
153
120
VWPorsche
150
227
CO2-E
miss
ions (
g/km
)
6.1 l
159
Volvo
30
New cars registered in Germany
* Mercedes-Benz Cars incl. smart and excl. Vans ** BMW incl. Mini
Source: Federal Motor Transport Authority (KBA); auto, motor und sport 5/2012
Investor Relations & Treasury – Dr. Michael Mühlbayer 37
Profit: Common vehicle architectures and module strategy enable efficient use of resources
Investor Relations & Treasury – Dr. Michael Mühlbayer 38
Profit: Strong improvement at New Generation Compact Cars, S-Class and C-Class
Former A/B NGCC
New GenerationCompact Class
S-Class
BR 221 BR 222
C-Class
BR 204 BR 205
EBIT Lifecycle Performance Development
Investor Relations & Treasury – Dr. Michael Mühlbayer 39
Profit: Mercedes outperforms competition in initial quality and long term quality dependability
Investor Relations & Treasury – Dr. Michael Mühlbayer 40
Profit: By 2015 two flexible manufacturing networks will be established
We will be more flexible:
• Within products across plants
• Within plants across products
• Within architecture across plants and products
Investor Relations & Treasury – Dr. Michael Mühlbayer 41
Financial Outlook and Targets
▸ Strategic Return Target 10% RoS on average
▸ Capital and cost discipline Milestones: CapEx Ratio ~7% / R&D Ratio ~6%
▸ Flexible footprint and productivity improvement Milestone: HPV 30h in 2015
▸ Sales leadership Milestones: >1.5 in 2014 / >1.6 in 2015
▸ Technology leadership Milestone: 125 g CO2 / km fleet average in 2016
Investor Relations & Treasury – Dr. Michael Mühlbayer 42
Q3-2012 Results
Daimler Strategy
1
2
Agenda
Mercedes-Benz Cars Strategy 3
Daimler Trucks Strategy 4
Financing Strategy 5
43 Investor Relations & Treasury – Dr. Michael Mühlbayer
Truck industry offers positive dynamics
Short-term
Mid- term
• Market growth in NAFTA and Japan
• Challenging market in Brazil
• Low visibility in Europe
• Continuing market volatility
• 3.6% p.a. growth, increasing relevance of BRIC
• Convergence of emission regulations
• TCO increasingly relevant for customers
• Vehicle upgrading – "Modern Domestic" becoming biggest segment
• Structural growth of high margin aftersales business
1
2
3
4
5
44 Investor Relations & Treasury – Dr. Michael Mühlbayer
Sustainable industry growth of 3.6% p.a. expected until 2020 across cycles driven by global GDP growth
1.0
3.0
0.0
MDT/HDT market1
(Million registrations)
2.0
+3.6% p.a.
’20
3.6
+2.6% p.a.
’19
3.4
’18
3.3
’05
2.0
’041
2.1
’03
2.0
’02
1.9
’01
1.8
’00
1.8
’17
3.4
’16
3.2
’15
3.1
’14
3.0
’13
2.9
’12
2.8
’11
2.6
’10
2.1
’09
1.9
’08
2.2
’07
2.5
’06
2.3
3.5
2.5
1.5
0.5
4.0
Stable past Crisis Growth
RIC (Russia, India, China) Rest of World Triad + Brazil 1. 11 TOP OEMs considered
+5.0%
+2.5%
+5.0%
1
Growth p.a. '11-'20
RIC growth
Triad + Brazil recovery
45
By 2015 – most of the truck world will have reached advanced emission technology levels allowing for global engine scale
2
46 Investor Relations & Treasury – Dr. Michael Mühlbayer
TCO increasingly relevant as key driver for customer decisions
3
Source: Bundesverband Güterkraftverkehr, Logistik und Entsorgung; Trucker's Report 47 Investor Relations & Treasury – Dr. Michael Mühlbayer
Technology dynamics will lead to significant vehicle upgrading
4
48 Investor Relations & Treasury – Dr. Michael Mühlbayer
Industry profits expected to further shift from vehicle to high margin aftersales business
5
49 Investor Relations & Treasury – Dr. Michael Mühlbayer
Global Excellence has brought Daimler Trucks to a new level – foundation laid
Future Product
Generations
Growth and Market
Exploitation
Management
of Cycles
Operational
Excellence
Global Excellence Pillars Achievements so far
Flexibility Measures
BRIC Expansion
Efficiency Programs
Global Platform Roll-out
Next phase
Global Excellence
Strengthen global industry leadership
50 Investor Relations & Treasury – Dr. Michael Mühlbayer
Flexibility Measures: Strong progress in increasing DT's flexibility in production plants
Flexibility Measures
Wörth, Mount Holly NC, Kawasaki
+30% units/year
-30% units/year
Workforce flexibility • Flexible working hours • Flexible shift models
Flexible cycle time • 430 300 units/day
51 Investor Relations & Treasury – Dr. Michael Mühlbayer
Further flexibility in global production network Selected facility flexibility across 27 sites
Flexibility Measures
52 Investor Relations & Treasury – Dr. Michael Mühlbayer
Efficiency programs achieved sustainable improvement
Efficiency Programs
53 Investor Relations & Treasury – Dr. Michael Mühlbayer
BRIC expansion: Excellent global coverage of Triad and Brazil – RIC coverage implemented in 2012
BRIC Expansion
54 Investor Relations & Treasury – Dr. Michael Mühlbayer
Global platform roll-out: Foundations laid to reap benefits of global scale
Global Platform Roll-out
55 Investor Relations & Treasury – Dr. Michael Mühlbayer
Best products for our customers and regional operations
Global Platform Roll-out
56 Investor Relations & Treasury – Dr. Michael Mühlbayer
We have defined a clear roadmap for Global Excellence to strengthen our global leadership position: DT#1
57 Investor Relations & Treasury – Dr. Michael Mühlbayer
DT#1 targets 1.6 bn € benefits – via Excellence Programs in our operating units and cross-business initiatives
58 Investor Relations & Treasury – Dr. Michael Mühlbayer
Stringent portfolio review: to optimize our business structure and ensure top performance
Stringent portfolio review
59 Investor Relations & Treasury – Dr. Michael Mühlbayer
Platform and module strategy to fully leverage commonality for powertrain and vehicles
Global scale realization
60 Investor Relations & Treasury – Dr. Michael Mühlbayer
Financial Outlook and Targets
▸ Strategic Return Target 8% RoS on average over the cycle
▸ Our vision No. 1 in the global truck industry and sustainable leadership in profitability. DT#1 targets benefits of 1.6 B€, coming from Sales / After Sales Push, variable / fixed cost reduction and platform/module rollout
▸ Sales leadership Milestones: 500k in 2013 / 700k in 2020
▸ Technology leadership We offer the best products in terms of TCO and fuel efficiency, globally.
61 Investor Relations & Treasury – Dr. Michael Mühlbayer
Q3-2012 Results
Daimler Strategy
1
2
Agenda
Mercedes-Benz Cars Strategy 3
Daimler Trucks Strategy 4
Financing Strategy 5
62 Investor Relations & Treasury – Dr. Michael Mühlbayer
Key balance-sheet figures
Daimler Group Dec. 31, 2011 Sept. 30, 2012
Equity ratio 26.3% 26.1%
Gross liquidity 11.9 16.3
Industrial business
Equity ratio 46.4% 45.2%
Net liquidity 12.0 8.2
- in billions of euros -
Investor Relations & Treasury – Dr. Michael Mühlbayer 63
Funding Sources Financial Liabilities as of September 30, 2012
In billions of €Current
Non-current
Total
Bonds 6,5 28,1 34,7
Bank Loans 12,3 8,7 21,0
ABS 2,8 2,1 4,9
Commercial Paper 2,1 0,0 2,1
Account Deposits 8,8 2,9 11,7
Other 0,7 0,5 1,3
Total 33,2 42,4 75,6
Investor Relations & Treasury – Dr. Michael Mühlbayer 64
Increase in contract volume due to growing automotive business - in billions of euros -
Daimler Financial Services
12/31/2011 9/30/2012
Europe (excl. Germany)
Americas
Africa & Asia/Pacific
Germany
71.7
17.0
14.2
30.6
9.9
77.5
17.5
15.8
32.7
11.5
Investor Relations & Treasury – Dr. Michael Mühlbayer 65
80% of profits are generated after the production phase – financial services account for a large share of these profits. Financial services however requires the majority of the Groups‘ funding volume. 10% 20% 35%
35% Production and Sales
Financial services (financing, leasing, etc.)
After-sales (service, spare parts)
Pre-owned- vehicles
Source: IXIS Securities, Mercer, Booz Allen Hamilton, Arthur D. Little 2006
Automotive value chain
Investor Relations & Treasury – Dr. Michael Mühlbayer 66
Financial Services Portfolio Q3 2012: € 77.5 billion
Europe 34 bn.
in billion €
Americas 34 bn. AAP 12 bn.
Investor Relations & Treasury – Dr. Michael Mühlbayer 67
Funding policy Daimler is committed to insure a strong Financial Flexibility through a balanced mix of
Solid cash position Committed credit facilities without any covenants Pool of receivables readily available for sale
Further Diversification of Funding Sources and Instruments to ensure thereby continued access to markets. General applied Funding Principles:
1. Liquidity matched funding 2. Interest rate matched funding 3. Currency matched funding 4. Country matched funding
68 Investor Relations & Treasury – Dr. Michael Mühlbayer
Capital market programs:
144a / RegS Documentation for US offerings Local Programs established in Mexico, Argentina, South Africa, Thailand und Japan
In future: India, China, Korea, Brazil and others to be added, when capital markets open and funding requirements justify the effort
Euro MTN Program (35 bn EUR, multi currency and multi issuers)
Worldwide access to capital markets
Investor Relations & Treasury – Dr. Michael Mühlbayer 69
Bond Issuances in 2012 by currencies
70 Investor Relations & Treasury – Dr. Michael Mühlbayer
Group’s rating position
S&P: A- stable A-2
Moody’s: A3 positive P-2
Fitch: A- stable F2
DBRS: A (low) stable R-1 (low)
An A rating at all rating agencies
Current Ratings:
Daimler target:
71 Investor Relations & Treasury – Dr. Michael Mühlbayer
Investor Relations & Treasury – Dr. Michael Mühlbayer 72
Disclaimer
This document contains forward-looking statements that reflect our current views about future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” “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 worsening of the public debt crisis in the eurozone; a deterioration of our funding possibilities on the credit and financial markets; events of force majeure including natural disasters, acts of terrorism, political unrest, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates; a shift in consumer preference towards smaller, lower margin vehicles; or a possible lack of acceptance of our products or services which limits our ability to achieve prices as well as to adequately utilize our production capacities; price increases in 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 of companies in which we hold a significant equity interest, most notably EADS; 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 govern-mental investigations and the conclusion of pending or threatened future legal proceedings; and other risks and uncertainties, some of which we describe under the heading “Risk Report” in Daimler’s most recent Annual Report. If any of these risks and uncertainties materialize, or if the assumptions underlying any of our forward-looking statements prove incorrect, then our 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. Any forward-looking statement speaks only as of the date on which it is made.
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