Cash flows

Cash used for/provided by operating activities (see table B.24) amounted to €0.2 billion in 2015 (2014: cash outflow of €1.3 billion) and was affected in particular by the implementation of our growth strategy. New business in leasing and sales financing was €3.3 billion above the high level of the prior-year period. Positive effects resulted from profit before income taxes, which improved by €2.5 billion to €12.7 billion (2014: €10.2 billion). Furthermore, there were impacts from the higher tax refunds in 2015 from the final tax assessment of the previous years. In addition, contributions to pension funds were lower than in 2014. The prior-year period was affected by cash outflows of €2.5 billion for the extraordinary contribution to the German pension fund assets, whereas in the reporting period, the extraordinary contributions in Germany and the United States amounted to €1.2 billion.

B.24 Condensed consolidated statement of cash flows

  2015 2014 15/14
In millions of euros     Change
       
Cash and cash equivalents at beginning of period 9,667 11,053 -1,386
Cash provided by/used for operating activities 222 -1,274 +1,496
Cash used for investing activities -9,722 -2,709 -7,013
Cash provided by financing activities 9,631 2,274 +7,357
Effect of exchange-rate changes on cash and cash equivalents 138 323 -185
Cash and cash equivalents at end of period 9,936 9,667 +269

Cash used for investing activities (see table B.24) amounted to €9.7 billion (2014: €2.7 billion). The change compared with the prior-year period resulted primarily from acquisitions and disposals of shares in companies. The prior-year period included proceeds of €2.4 billion from the sale of RRPSH shares. Furthermore, the sale of shares in Tesla and the termination of the related share-price hedge led to a cash inflow of €0.6 billion. On the other hand, the reporting period was affected in particular by the capital increases carried out at our financial investments and the acquisition of shares in the digital mapping business HERE in December 2015. Cash used for investing activities also reflects the increased investments in intangible assets and property, plant and equipment. Furthermore, negative effects resulted from acquisitions and disposals of securities in the context of liquidity management. Those transactions led to a net cash outflow in 2015, whereas disposals of securities were higher than acquisitions in the previous year.

Cash provided by financing activities (see table B.24) amounted to €9.6 billion (2014: €2.3 billion). The change resulted almost solely from the renewed increase in financing liabilities. There were opposing effects from increased dividend payments to the shareholders of Daimler AG and to minority shareholders of subsidiaries.

Cash and cash equivalents increased by €0.3 billion compared with December 31, 2014, after taking currency translation effects into account. Total liquidity, which also includes marketable debt securities, increased by €1.9 billion to €18.2 billion.

The parameter used by Daimler to measure the financial capability of the Group’s industrial business is the free cash flow of the industrial business (see table B.25), which is derived from the reported cash flows from operating and investing activities. The cash flows from the acquisition and sale of marketable debt securities included in cash flows from investing activities are deducted, as those securities are allocated to liquidity and changes in them are thus not a part of the free cash flow.

B.25 Free cash flow of the industrial business

  2015 2014 15/14
In millions of euros     Change
       
Cash provided by operating activities 11,735 7,539 +4,196
Cash used for investing activities -9,936 -2,887 -7,049
Change in marketable debt securities 1,897 -195 +2,092
Other adjustments1 264 1,022 -758
Free cash flow of the industrial business 3,960 5,479 -1,519

1 The effects from the financing of the Group’s own dealerships, which are reflected in cash provided by operating activities, are eliminated under other adjustments.

Other adjustments relate to additions to property, plant and equipment that are allocated to the Group as their beneficial owner due to the form of their underlying lease contracts. Furthermore, adjustments are made for the effects of financing dealerships within the Group. In addition, the calculation of the free cash flow includes those cash flows to be shown under cash from financing activities in connection with the acquisition or sale of interests in subsidiaries without loss of control.

The free cash flow of the industrial business amounted to €4.0 billion in 2015. The cash outflow of €1.2 billion for the extraordinary payments in the context of pension and health care benefits in Germany and the United States reduced the free cash flow of the industrial business. Furthermore, the acquisition of shares in the digital mapping business HERE had an influence of €0.7 billion. Adjusted for these special effects, the free cash flow of the industrial business amounted to €5.9 billion (2014: €5.2 billion).

At the beginning of 2015, we expected a free cash flow in a significantly higher amount than the dividend payment of €2.6 billion, but significantly lower than in the previous year as a result of the intensified level of investments. Due to the positive business development in the course of the year 2015, we successively increased our free cash flow forecast during the reporting period. With consideration of the acquisition of HERE and the extraordinary contribution to pension plan assets in the fourth quarter, the free cash flow in the reporting period was lower than in the previous year. Adjusted for these material special items, the free cash flow of the industrial business amounted to €5.9 billion and significantly exceeded the amount of €5.2 billion in the previous year.

The increase of €0.7 billion to €5.9 billion in the free cash flow adjusted for special effects reflects the positive business development, and was primarily the result of higher profit contributions from the automotive divisions. Opposing effects resulted from the higher increase in working capital, defined as the net change in inventories, trade receivables and trade payables. In addition to the higher capital increases carried out at our financial investments, the free cash flow of the industrial business was especially reduced by higher investments in intangible assets and property, plant and equipment. Higher tax payments were another factor.

The net liquidity of the industrial business (see table B.26) is calculated as the total amount as shown in the statement of financial position of cash, cash equivalents and marketable debt securities included in liquidity management, less the currency-hedged nominal amounts of financing liabilities.

B.26 Net liquidity of the industrial business

  Dec. 31, 2015 Dec. 31, 2014 15/14
In millions of euros   Change
       
Cash and cash equivalents 8,369 8,341 +28
Marketable debt securities 6,999 5,156 +1,843
Liquidity 15,368 13,497 +1,871
Financing liabilities 2,612 3,193 -581
Market valuation and currency hedges for financing liabilities 600 263 +337
Financing liabilities (nominal) 3,212 3,456 -244
Net liquidity 18,580 16,953 +1,627

To the extent that the Group’s internal refinancing of the financial services business is provided by the companies of the industrial business, this amount is deducted in the calculation of the net debt of the industrial business. At December 31, 2015, the Group’s internal refinancing was of a higher volume than the financing liabilities originally taken on in the industrial business due to the application of the industrial business’s own financial resources. This resulted in a positive value for the financing liabilities of the industrial business, thus increasing net liquidity, so the net liquidity of the industrial business exceeds the gross liquidity presented here.

Compared with December 31, 2014, the net liquidity of the industrial business increased from €17.0 billion to €18.6 billion. The increase mainly reflects the positive free cash flow of €4.0 billion. Opposing effects resulted from the dividend payments to the shareholders of Daimler AG ( €2.6 billion) and to minority interests of subsidiaries ( €0.3 billion). Positive exchange-rate effects were partially compensated by capital increases in financial services companies and led in total to an increase in net liquidity of €0.5 billion.

Net debt at Group level, which primarily results from the refinancing of the leasing and sales-financing business, increased compared with December 31, 2014 from €70.1 billion to €82.4 billion. (See table B.27)

B.27 Net debt of the Daimler Group

  Dec. 31, 2015 Dec. 31, 2014 15/14
In millions of euros   Change
       
Cash and cash equivalents 9,936 9,667 +269
Marketable debt securities 8,273 6,634 +1,639
Liquidity 18,209 16,301 +1,908
Financing liabilities -101,142 -86,689 -14,453
Market valuation and currency hedges for financing liabilities 583 270 +313
Financing liabilities (nominal) -100,559 -86,419 -14,140
Net debt -82,350 -70,118 -12,232
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