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A 22% Profit Jump for Mercedes-Benz Parent Daimler AG

By John Rosevear – Feb 4, 2016 at 1:30PM

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Mercedes-Benz sales remain very strong around the world. That drove Daimler to a big profit gain in the fourth quarter and a record 2015.

The compact Mercedes-Benz GLA-Class crossover has been a big seller in the U.S. and China. Image source: Daimler AG.

Mercedes-Benz corporate parent Daimler (DMLR.Y -6.13%) (DDAI.F -5.67%) reported its fourth-quarter and full-year 2015 financial results on February 4. The company said its fourth-quarter earnings before interest and tax (EBIT) rose 22% to 3.46 billion euros ($3.83 billion). Revenue rose 13% to 40.4 billion euros.

The key numbers for 2015
Here are the highlights of Daimler's fourth-quarter and full-year 2015 financial results. All financial numbers are in euros, as noted. 

Image source: Daimler AG

The story behind the numbers
Simply put, Mercedes-Benz sales are booming all around the world.

Unit sales in Daimler's Mercedes-Benz Cars division rose 16% last year, passing the 2 million mark for the first time ever. Its EBIT in the fourth quarter rose 18% to 1.97 billion euros. Strong sales of new models, including the C Class sedan and the compact Mercedes-Benz CLA and GLA, and higher sales of Mercedes' crossover SUVs generally, were key to the gains. Improved pricing and some favorable foreign-exchange moves also helped boost results, the company said in a statement.

Daimler has five business divisions, but Mercedes-Benz Cars is the biggest earner of the five, meaning its success played a major part in the company's overall good result. 

Image source: Daimler AG

Daimler's truck, bus, and van divisions were all hurt to some extent by difficult market conditions in Latin America, where key regional markets (Brazil and Argentina in particular) are suffering from deep recessions and local inflation. 

What management had to say
"2015 was a good year for Daimler," CEO Dieter Zetsche said in a statement. "We know from experience: Getting to the top is hard, but staying at the top is even harder. That's our ambition: Daimler belongs at the top on a sustained basis."

The development of earnings at the Daimler Group over recent years clearly shows that our strategy is working and that we are growing profitably," said CFO Bodo Uebber in a statement. "We increased our EBIT from the ongoing business by over a third compared with 2014; compared with 2010, our earnings have actually almost doubled. And revenue has increased by more than 50% in the past five years."

Zetsche noted that the company is spending aggressively on research and development as it pushes to develop new technologies like driverless cars and advanced electric drivetrains. He said the company will spend an average of 7.2 billion euros a year on research and development in 2016 and 2017, following its 6.6 billion euro expenditure in 2015. 

Looking ahead: Guidance for 2016
Daimler said it expects unit sales, revenue, and EBIT to all be higher in 2016 versus 2015, with sales at a new record level -- but the year-over-year increases may be small. The company is optimistic about the Chinese market, which it expects to "expand significantly" in 2016, but growth in the U.S. and Western Europe is expected to be "slight."

It also said its planned boost in research spending means 2016's free cash flow will be "significantly lower" than the 5.9 billion euros it generated in 2015. 

John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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