Daimler earnings fall with US truck orders off 51% in 2019

Daimler headquarters building

German automaker Daimler AG (OTC: DDAIF), the parent company of Daimler Trucks, reported modestly higher sales and earnings for 2019 but said U.S. Class 8 truck orders fell 51% compared with a year earlier.

Overall truck sales fell 6% to 488,500 compared with 517,300 a year earlier. Revenue increased by 5% to €40.2 billion ($36.9 billion). Earnings before interest and taxes (EBIT) fell 11%, and return on sales was 6.1%, down 7.2%.

The North American business helped offset volume declines in Europe and Asia. But Daimler said higher upfront spending for new technologies, including automated trucks in North America, and the costs of reducing production to match the order slowdown, impacted earnings.

U.S. Class 8 orders dropped 20% in the fourth quarter as fleets continued to curtail orders following record bookings in mid-to-late 2018.

Corporate results

Daimler AG overall sold 3.34 million passenger cars and commercial vehicles, practically flat with 3.35 million in 2018. Revenue was up 3% at €172.7 billion compared with €167.4 billion a year ago.

In 2019, net profit weakened to €2.7 billion, or €2.22 a share, compared to €7.6 billion or €6.78 a share a year ago.

Full-year EBIT was €4.3 billion compared with €11.1 billion a year earlier because of expenses from settling emissions-cheating allegations, restructuring, and mergers and acquisitions including the purchase of Torc Robotics. Without the adjustments, adjusted EBIT was €10.3 billion.

In a press conference, Daimler executives declined to confirm a German newspaper report that it would cut 15,000 jobs by 2022. The company said its goal is to reduce costs by €1.4 billion a year on an ongoing basis.

“It’s a bundle of measures,” said Ola Källenius, chairman of the Board of Management of Daimler AG and Mercedes Benz AG. “It’s other things we can do [such as] working hour models.”

At the end of 2019, Daimler employed 298,655 people worldwide, essentially flat with 298,683 at the end of 2018. In the U.S., employment was down to 25,788 compared to 26,310 at the end of 2018, reflecting layoffs at two plants in North Carolina.

The company said it would propose at its April 21 annual meeting a reduction in its dividend from €3.25 to 90 euro cents per share so it can maintain total industrial liquidity above €10 billion.

“We need to keep the balance sheet of the company stable. It is important for retaining our credit rating,” Källenius said. “Ninety cents is a bit disappointing for shareholders and for us.”

Truck results

Retail truck sales fell 14% to 127,408 in the fourth quarter from 147,616 in the same period a year ago. For the year, retail sales of 487,514 were down 4% compared with 508,025 in the fourth quarter of 2018.

U.S. retail sales fell 9% to 40,107 in the fourth quarter versus the 44,105 sold in last year’s October-December quarter. Full-year U.S. sales rose 8% to 169,933 from 157,802 a year ago.