With lucrative models like the EQS, Daimler makes a record profit.
(Photo: imago images/Arnulf Hettrich)
Munich The G-Class is sold out, AMG is at an all-time high, the luxury brand Maybach is more popular than ever: things are going splendidly for Mercedes-Benz at the moment. The Stuttgart carmaker is being overwhelmed with orders and, despite the corona crisis and lack of chips, can look back on an absolute record year. The shareholders should now also benefit from this. You will receive the highest profit share in the more than 136-year history of the brand with the star.
Specifically, the shareholders of Mercedes-Benz Group AG are to receive a dividend of five euros per share. The board of directors and the supervisory board of the Dax group proposed this on Thursday. If the shareholders agree, they will receive a total of 5.35 billion euros for the past financial year. For comparison: Mercedes granted its shareholders the highest dividend to date in 2017. At that time, 3.9 billion euros were paid out.
The record payout that is now possible is an expression of an overall strong balance sheet. A good three months after the spin-off of the truck and bus business (Daimler Truck), the Swabians are shining with unprecedented profitability. The return on sales is an impressive 12.7 percent, the operating profit (EBIT) has more than quadrupled to 29.1 billion euros. The bottom line is that the former Daimler AG earned around 23.4 billion euros. That is an increase of 484 percent.
However, this record result is positively overstated due to a one-off effect. The deconsolidation of the commercial vehicle business resulted in a valuation gain of 9.2 billion euros in the fourth quarter of 2021. After deducting this effect, Mercedes’ adjusted operating profit is still a whopping 19.2 billion euros. That’s more than double what it was in 2020.
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In general, Mercedes has divided its annual financial statements into continuing and discontinued operations. Accordingly, the Swabians achieved sales of 134 billion euros without the key figures of Daimler Truck, which now operates as an independent company on the stock exchange. That is an increase of around ten percent. Net income from continuing operations shot up from four to more than eleven billion euros.
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“2021 was a year of strategic progress for Mercedes-Benz,” explained Mercedes boss Ola Källenius. Three numbers would clarify this transformation. “Consolidated sales of our top-end models increased by 30 percent, sales of electric passenger cars increased by 64 percent and our adjusted EBIT grew by 105 percent. That shows the potential of our team and our brand,” emphasized Källenius.
The Swede is also confident for the year 2022. The manager expects that car sales will only increase slightly as a result of the ongoing semiconductor bottleneck. But sales of high-end brands such as the S-Class are expected to increase disproportionately by more than ten percent. For the car division, Källenius is forecasting an adjusted return on sales of up to 13 percent this year.
Tight austerity program at Mercedes is having an effect
When it comes to small vans, however, Mercedes is a little more cautious. Although sales of the vans are expected to increase slightly, the adjusted return on sales will be a maximum of ten percent. In the finance division Mercedes Mobility, which benefited from high used car prices in 2021, the Stuttgart-based company expects the return on equity to fall from the most recent 22 to a maximum of 18 percent. The reason for this is the expected normalization of the so-called credit risk costs and slightly higher market interest rates.
“In addition to the focus on cost efficiency and supply chain management, three strategic priorities are now in the foreground: scaling our electric offensive, accelerating our car software plans and further expanding our luxury business,” says Mercedes frontman Källenius.
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In fact, the Group can already report significant progress in many areas compared to previous years. Thanks to a tight savings program, Mercedes’ fixed costs have fallen by a good 16 percent since 2019. The average turnover per vehicle has risen to 49,800 euros. That is a quarter more than three years ago.
Unlike his predecessor Dieter Zetsche, who always strived for new sales records and has therefore expanded the model range into all segments, Mercedes boss Källenius doesn’t care about the sales crown at all. The Scandinavian consistently trims the brand for returns. The prices for the series are gradually being raised and unprofitable models such as the B class are being sorted out. In order to increase the overall contribution margin, the sale of particularly profitable makes is being promoted. In short: Mercedes is building more SUVs and fewer compact cars.
The changes in the product mix are striking. For example, Mercedes only sold 2.05 million cars last year. That is a drop of five percent compared to 2020. At the same time, however, sales of the S-Class luxury sedan shot up by 40 percent – to 87,000 units. The G-Class off-road vehicle is even sold out in Germany until 2024. The demand is immense. Last year alone, Mercedes sold almost 42,000 of the 2.5-ton colossus.
AMG at an all-time high
The sports car subsidiary AMG also reports a new all-time high with 146,000 vehicles sold. Of course, Maybach reports the highest growth among the sub-brands. Sales increased by more than 50 percent to around 16,000 units. In China alone, Mercedes sells around 900 S-Class sedans in the particularly posh Maybach version every month. Customers have to pay at least 169,000 euros for such a luxury vehicle in this country.
Mercedes is also making progress with the electric offensive. The new flagship EQS is particularly popular. Orders for the model are already at 20,000 units. The EQE, the electric counterpart of the E-Class, is also coming onto the market this year. This should boost electrical sales. By the end of the decade, Mercedes intends to sell almost exclusively electric cars. The motto is: “Electric first”, everything under power.
But there are also a number of risks along the way. The group still lives mainly from the sale of diesel and petrol engines. And it’s unclear whether Mercedes can really maintain its high margins if the lucrative six- and eight-cylinder engine business disappears. Mercedes are already struggling with the increased raw material costs. Daniel Schwarz, analyst at the investment bank Stifel, expects additional costs for the Stuttgart-based company of 1.4 billion euros in 2022.
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