Daimler AG (DAI)
Q4 2009 Earnings Call Transcript
February 18, 2010 9:00 a.m. ET

Executives

Michael Muhlbayer – Head of Daimler Investor Relations and Treasury
Dieter Zetsche – Chairman and Head of Mercedes-Benz Cars
Bodo Uebber – Chief Financial Officer
Andreas Renschler – Head of Daimler Trucks

Analysts

Arndt Ellinghorst – Credit Suisse
John Lawson – Citigroup
Horst Schneider – HSBC
Jochen Gehrke – Deutsche Bank
Christian Breitsprecher – Oppenheimer Research
John Buckland – MF Global Securities
Christina Church – Barclays Capital
Adam Jonas – Morgan Stanley
Adam Hull – WestLB
Daniel Schwarz – Commerzbank
Thierry Huon – Exane BNP Paribas
Aleksej Wunrau – BHF-Bank
Ranjit Unnithan – J.P. Morgan
Jose Asumendi – RBS Group
Max Warburton – Sanford Bernstein

Presentation

Operator

Welcome to the Global Conference Call of Daimler. At our customer''s request, this conference will be recorded. A replay of the conference call along with presentation slides will be available as an on-demand audio webcast in the Investor Relations section of the Daimler Website. A short introduction will be directly followed by a Q&A session.

(Operator instructions) May I now hand over to Dr. Michael Muhlbayer, Head of Daimler Investor Relations and Treasury. Thank you very much.

Michael Muhlbayer – Head of Daimler Investor Relations

Good afternoon. This is Michael Muhlbayer speaking. On behalf of Daimler, I would like to welcome you to our full-year presentation. We are very happy to have with us today, the Chairman of the Board of Management and Head of Mercedes-Benz Cars, Dr. Dieter Zetsche; the CFO, Bodo Uebber; and the Head of Daimler Trucks, Andreas Renschler.

In order to give you maximum time for your questions, Dr. Zetsche will begin with his short introduction directly followed by Q&A. Before we start, I have a couple of admin details. I would like to remind you that this call is governed by the Safe Harbor wording that you will find in our published documents. Please note that our presentations contain forward-looking statements reflecting management''s current views with respect to future events. These forward-looking statements can be identified by expressions like assume, anticipate, believe, estimate, expect, intend, may, plan, project and should. These statements are subject to many risks and uncertainties, examples of which are set out in the Safe Harbor wording in our documents and are also described in our most recent Form 20-F, under the heading ''Risk Factors''. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by these statements. Forward-looking statements speak only to the date they are made.

Now, I would like to hand over to Dr. Zetsche.

Dieter Zetsche – Chairman

Gentlemen, good afternoon and welcome to our analysts and investors call. We would like to start with a very brief summary of our results. Economic terms, 2009 was the most challenging year of the recent decades. This is also reflected in our results. Although, we improved from quarter-to-quarter, our EBIT was minus 1.5 billion for 2009 and our net profit was even lower at minus 2.6 billion. Given this unusual situation, the Board of Management has proposed to the Supervisory Board, by way of exception, that Daimler refrain from paying any dividends for the past business year. This proposal reflects only the business developments and the earnings situation in 2009. It does not have any implications for our business expectations for the current year. You can assume that we will once again pay a dividend for the business year 2010.

Although our figures for 2009 were disappointing, it’s clear that 2009 was not a lost year for Daimler. In the course of the past year, we became significantly more efficient. Even though the markets remained weak, we increased our sales as the year progressed, particularly in the fourth quarter. Above all, we''ve introduced measures that will enable us not only to successfully cope with the long-term transformation of our sector, but also to shape it from a leading position. Last year, at our annual press conference, I said that we wanted to improve our performance quarter-by-quarter. We''ve kept this promise. In the third quarter, we returned to profitability and in the fourth quarter, we further improved our ongoing business operations.

At Mercedes-Benz Cars, full-year EBIT decreased from positive 2.1 billion to minus 0.5 billion. Our car division continuously improved its earnings during the year and returned to profitability in the second half of 2009. This positive development was primarily based on the market success of the E-Class and S-Class. Our new E-Class in particular is a big success. In fact in 2009, the sedan was the world market leader by far. In Germany, our market share was 56%. In Western Europe, it was 31%, and in the US, it was 26%.

EBIT at Daimler Trucks declined from the prior year''s positive 1.6 billion to minus 1 billion, due to the sharp drop in unit sales. In view of the prevailing environment, we believe that this was a very respectable result, with our efficiency enhancing measures at increasing effects at Daimler Trucks as well in the course of the year. Operating profitability stabilized in the second half of the year, although it was still slightly negative. Still, there''s been a noticeable upswing here as well. Compared to the first half of the year, incoming orders increased by 59% in the second half.

Let''s now turn to Mercedes-Benz Vans. Here too, our relevant markets experienced a massive decline in our Vans division, even though gaining market share couldn''t impact the general market trend. Nevertheless, Mercedes-Benz Vans were in the black in 2009; EBIT totaled 26 million Euros for the full year. Thanks to cost adjustment and a slight pickup in demand, Mercedes-Benz Vans reached breakeven in the third quarter. In the fourth quarter, we earned 126 million Euros, more than compensating for the losses we sustained in the first half of the year. Our buses were somewhat less affected by the economic crisis. Daimler Buses was in the black in each quarter of the year. The Daimler Buses division posted EBIT of 183 million Euros for the full year. No other bus manufacturer in the world was more profitable than Daimler in 2009.

Daimler Financial Services achieved the breakeven point with EBIT of 9 million in 2009. Higher cost of risk was the main reason for the decrease compared to 2008. Although the number of credit default increased, the total number remained within the anticipated range. Our risk management policies are working. These upward trends are confirmed by the development of the free cash flow from our industrial business operations, which benefited from our successful management of working capital and strict cost discipline. Free cash flow from industrial business increased from minus 3.9 billion in 2008 to plus 2.7 billion last year. In total, the net liquidity of our industrial business operations increased from 3.1 billion at the end of 2008 to 7.3 billion at the end of 2009.