Overall Assessment of the Economic Situation
In the opinion of the Board of Management, the Daimler Group’s economic situation is thoroughly satisfactory at the time of publication of this Annual Report. In recent years, we have implemented our strategy effectively and with great determination. This already led us onto a stable and profitable growth path in the year 2014, along which we progressed further in 2015. We significantly increased our revenue, unit sales and earnings – although we were confronted by difficult conditions in some markets. With new products and tailored services, we performed better than our competitors in many areas, allowing us to increase our market share. At the same time, we strengthened our leading position in key technologies with pioneering innovations, and systematically pushed forward with the digitization of the Group at all levels and in all divisions.
Awards for our innovative strength, for our attractiveness as an employer and for our new products and services are indicators of the positive momentum we now have. The appeal of our core brand Mercedes-Benz was significantly enhanced worldwide as a result not only of new and especially attractive products but also of outstanding quality. This allows us to address new markets as well as new and younger customer groups. For this purpose, we make use also of digital forms of customer contact and new sales formats, for example with the new Mercedes me sub-brand.
We significantly increased our unit sales by 12 % to 2.9 million passenger cars and commercial vehicles despite difficult conditions in some major markets. Thanks to numerous new and successful products, Mercedes-Benz Cars and Mercedes-Benz Vans set new records for unit sales and Daimler Trucks also achieved a small increase, although the market situation in two key markets (Brazil and Indonesia) was extraordinary difficult. Only Daimler Buses did not quite match its unit sales of the previous year due to the market weakness in Latin America. Driven by the positive development of the automotive business, the Daimler Financial Services division also expanded significantly in the reporting period. The Group’s revenue therefore also grew significantly – by 15 % to €149.5 billion. Adjusted for exchange-rate effects, there was an increase of 9 %.
We made significant progress in 2015 also in terms of the profitability of our business. Operating profit (EBIT) from the ongoing business of €13.8 billion was 36 % above the prior-year level ( €10.1 billion). This was primarily due to the Mercedes-Benz Cars and Daimler Trucks divisions, but Mercedes Benz Vans and Daimler Financial Services also significantly increased their EBIT. At Mercedes-Benz Cars, the return on sales from the ongoing business for the first time reached the division’s target of 10 %, and Daimler Financial Services’ return on equity of 18.3 % was once again above its target (17 %). We laid a cornerstone for this positive development with the efficiency programs that we implemented in all divisions in recent years. By the end of 2014, we achieved a total contribution to earnings of approximately €4 billion through sustained improvements in cost structures as well as additional business activities. The full impact of these programs was reflected for the first time in the year 2015. In addition to these measures with short-term effects, we are implementing fundamental initiatives for the long-term and structural optimization of business systems in all divisions.
As a result of the positive development of earnings, we once again achieved a very good return on net assets of 21.6 % (2014: 18.8 %). We therefore once again earned substantially more than our targeted minimum return on capital employed (8 %). This is reflected by our value added, which increased very significantly to €5.7 billion (2014: €4.4 billion).
In line with the ongoing high level of earnings, we continue to have very sound key financial metrics. At year-end, the Group’s overall equity ratio rose to 23.6 % (2014: 22.1 %) and the equity ratio of the industrial business was 44.2 % (2014: 40.8 %). The net liquidity of the industrial business increased to €18.6 billion (2014: €17.0 billion), although we made an extraordinary contribution of €1.2 billion to the pension fund assets in Germany and the United States and applied €0.7 billion for the acquisition of the digital mapping business HERE. At €5.9 billion, the free cash flow of the industrial business – the parameter we use to measure financial strength – was once again higher than in the previous year after adjusting for special items (2014: €5.2 billion), and is thus significantly higher than the proposed dividend distribution.
We want our shareholders to participate appropriately in the earnings achieved by Daimler in 2015. At the Annual Shareholders’ Meeting on April 6, 2016, the Board of Management and the Supervisory Board will therefore propose an increase in the dividend to €3.25 per share (prior year: €2.45). With this decision, we are also expressing our confidence about the ongoing course of business. The dividend distribution will thus rise to €3.5 billion (prior year €2.6 billion), which is by a large margin the highest amount paid out in the Company’s history.
The generally very positive business development strengthens our financial basis on a broad front and thus improves our ability to invest substantial amounts to secure our successful future and to finance those investments from our own resources. In the year under review, we invested more than €13 billion in property, plant and equipment, associated companies and joint ventures, research and development for new products, new technologies and digitization, and the expansion of our global production network. And even higher amounts are planned for the coming years.
The high levels of research and development expenditure in recent years are already paying off. This is shown not only by our current business development, but also by the fact that we are playing a pioneering role in key technologies that are crucial for the future of individual mobility. This applies to powertrain technology, traffic safety and digital connectivity, and in particular also to autonomous driving. Two milestones were the research vehicles F 015 Luxury in Motion and Vision Tokyo in the area of passenger cars. In the area of trucks, we have official approval in both the United States and Germany for road tests of our Highway Pilots. (See Autonomous driving) The components from our research and test vehicles are gradually being applied in series production. Partially autonomous driving is therefore already reality for our cars and our trucks. And we will go one step further with the new E-Class, which will be launched in the spring.
We once again demonstrated our technology leadership in 2015 in the fields of fuel efficiency, safety and vehicle connectivity. With innovative powertrains and highly economical model versions, we reduced the average CO2 emissions of the cars we sell in the European Union to 123 grams per kilometer. We thus achieved the goal we had set of 125 g/km by 2016 ahead of time. This was due in particular to our highly efficient new models as well as our first four plug-in hybrids. (See The best of both worlds)
A key element of our growth strategy is the systematic digitization of our products and processes – in all divisions, along the entire value chain and with a focus on the customer. The intelligent networking of the entire value chain enables us to shorten the development processes and to make production processes more flexible and marketing and sales processes more direct. New patterns of thought and action are required for the digital transformation at the Group. Our goal is to combine the speed and risk culture of the digital industry with Daimler’s perfection and innovative strength.
We are extremely well positioned for the upcoming challenges with our growth strategies, our digitization offensive and the high levels of investment in the future of the Group. We are on a stable growth path, which we will continue to follow systematically. We therefore look to the coming years with great confidence and continue to aim for further profitable growth.