Daimler Truck Hldg Ag

Good morning, ladies and gentlemen. My name is Christian Herrmann. I'm head of investor relations and Daimler Truck. I warmly welcome you to our annual results conference. Thank you very much for joining us today. Today's presentation material can be found on the Daimler Truck investor relations website. On our request, as always, this conference will be recorded. The replay will also be available as an on-demand webcast in the investor relations section of the Daimler Truck website. We are hosting this conference today jointly for investors, analysts, as well as for the media community. Therefore, Jörg, I'm very happy to have you with me today.

Thank you, Christian, and a very good morning from my side as well. My name is Jörg Hove. I'm the head of global communications at Daimler Truck. Let me briefly tell you what to expect today. First, our CEO and interim CFO, Martin Daum, and Klaus Besler. And Klaus Baeser, our Vice President, Treasury and Tax and Acting Head of Finance and Controlling, will present our business results of the 2023 financial year and provide an outlook for 2024. This will take about roughly 40 minutes, and there will be a simultaneous translation into German. Afterwards, there will be two Q&A sessions, one for analysts and investors, and one for media representatives. Active participants in the Q&A calls already received their personalized access data with their registration. And now let's start with welcoming our speakers, Martin Daum and Klaus Baessler. Martin and Klaus, the stage is yours.

Thank you. Hello, everyone, and welcome to our annual result conference. In the next hour, we will give you a comprehensive overview of our business figures for the past year, and I would like to start with a series of numbers that we are particularly proud of. In 2023, our unit sales grew modestly by 1%, limited by supply constraints. Our group revenue grew strongly by 10%. Our adjusted group EBIT grew very strongly by 39%. And the free cash flow of the industrial business even grew by 61%. This means in 2023 Daimler Truck once more achieved truly profitable growth. And this again means with our performance in 2023, we made another big step towards unlocking the full profit potential of our great company. This is underlined by the following two figures. In 2023, Daimler Truck achieved an adjusted group EBIT of 5.5 billion euros and an adjusted return on sales in our industrial business of 9.9%. This marks not only a significant improvement compared to the prior year, but also a new record profitability for our company. We are therefore very pleased with our 2023 results and I would like to thank our entire Daimler Truck Team for the great work. However, I want to address one issue right away. We could have achieved even higher financial results if we would have engaged in opportunistic pricing. In 2023, demand often exceeded supply and we could have taken advantage of this situation. Yet we deliberately decided against it because we are convinced customer trust is key for the long-term success of a company. Therefore, we do not want to risk this trust. We rather want to strengthen it. Our very positive 2023 results are obviously due to several success factors. But in my view, one factor stands out. We have consistently been working on our challenges. You know that in recent years, some of our businesses were facing serious headwinds. Our bus business, for example, and our business in Brazil. Our management teams therefore closely analyzed these businesses and took the right measures to strengthen the product lineup and the cost position. Now this offer is paying off. Our bus business and our Brazilian business can now perform significantly better in any market environment. I can therefore clearly say, in 2023, all segments of our industrial business improved their profitability significantly. All segments are delivering. Trucks North America once again achieved a strong return on sales driven by higher unit sales, which could have been even higher without the existing supply constraints. Mercedes-Benz Trucks made further considerable brokers and, like Trucks North America, has already reached the profitability ambition we set for 2025. Tax Asia has significantly improved its performance towards the target level despite still facing adverse conditions in key markets such as China and Indonesia. Regarding Daimler buses, the figures clearly show bus is back. In the aftermath of COVID-19, we made this business even stronger and can now take full advantage of the coach market recovery. Financial services successfully established itself in 70 markets around the globe. Going forward, it can now leverage our industrial business to increase its profitability. So across our businesses, you see the same story again and again. Either our segments have already reached our 2025 profitability ambition or they are moving towards it with strong momentum. Now let me provide you with an update on all our self-help measures and its three main components. First, let's talk about the development of our service revenue. We are making further brokers. Between 2019 and 2023, we have achieved 18% growth by leveraging our existing after-sales business and by starting and growing new service opportunities. We are confident in achieving our growth ambitions of 25% by 2025, which will make our business less cyclical and Daimler Truck more resilient. We are fully on track here. Let me give you one specific example. In Europe, own retail is an important pillar of our strategy. And just today, we celebrate the opening of our own retail facility right here in Stuttgart. The new site is perfectly prepared for the future of transportation right from the start with high-voltage workshop equipment and all the requirements for repair and maintenance of hydrogen-powered vehicles. Second, a key lever to increase our resilience, the development of our fixed cost. By the end of 2022, we achieved a reduction of 8% compared to 2019. However, by the end of 2023, this figure deteriorated to only minus 6% versus 2019. The main reasons for this were headwinds coming from spin-off related IT spending. To be very clear, we are not satisfied with our brokers and we are working hard to get back on track. The fixed cost task remains a challenge. The spin-off is more expensive than anticipated. But we are working relentlessly to make Daimler Truck more efficient. We believe the money is spent wisely to create a more efficient standalone process landscape. Consequently, our ambition remains the same, a fixed cost reduction of 15% between 2019 and 2025. And third, the development of CapEx and R&D. As announced at our Capital Market Day, we have a very clear plan to grow our business significantly between 2025 and 2030. To execute this plan, we are now ramping up our investments in new businesses like battery cells. To reiterate, these investments are fully integrated in our active portfolio management approach. They must have a clear business case and attractive returns on capital. Even with these additional investments, We achieved a reduction of 3% by the end of 2023 compared to 2019. On a more like-to-like comparison with the 2019 scope excluding these investments and the extraordinary high inflation in excess of 2%, we have reduced capex and R&D by roughly 12%. We continue to strictly prioritize zero-emission technology, large profit pools, and return on capital employed. Therefore, we have increased our R&D spending for zero-emission technology and other additional businesses. We are maintaining our overall spending discipline to ensure we do not jeopardize the growth opportunities in our business in the future. Now let's have a quick look at the development of our key markets in 2023. The North American heavy duty market increased year over year by 7% to 331,000 units, a very robust development and a very high level. Due to significant supplier constraints in the US, particularly in the second half of the year, we could not leverage this market growth as much as we wanted to. Consequently, our market share decreased from 40% in 2022 to 39.1% in 2023. In 2024, we expect the markets to slightly decrease from this high level by minus 3 to minus 16. At the same time, we are confident in increasing our market share, especially in the vocational segment with our all-new Western Star trucks. Our order intake for 2024 looks very promising. The European heavy-duty market saw an even stronger increase in 2023, rising 15% through 342,000 units. However, our market share has decreased year over year, dropping from 20% in 2022 to 19% in 2023. In 2024, the market volume in Europe is expected to increase by minus 12 to minus 24 percent, a slightly bigger decline than in North America. As reported in January, group unit sales increased from 520,000 units in 2022 to 526,000 units in 2023, despite supply issues in key regions. The Trax North America segment contributed to this increase with a 4% rise to 195,000 units. Trax Asia saw an increase of 3% to 161,000 units. And Daimler Buses experienced a strong sales increase of 9% to 26,000 units. Only the Mercedes segment saw a drop in sales by 5% to 159,000 units, attributed to a weak market development in Brazil following the Euro 6 introduction. Unit sales in the fourth quarter of 2023 decreased from 155,000 units in Q4 of 2022 to 140,000 units, a drop of almost 10%. This decline was primarily due to supply chain issues in North America and market weakness in Indonesia. The overall order situation in 2023 saw a significant decrease of 18% year-over-year on group level. This decrease is attributed to the fulfillment of pent-up demand in our major regions throughout 2022 and 2023. Consequently, the current order situation reflects the clear signs of a normalization, as indicated in our last disclosure call for the third quarter of 2023. Customers are now ordering the vehicles when they need them, rather than reserving slots far in advance. Nevertheless, we are satisfied with the current order intake for the running Q1 and the following Q2. For North America, we are almost sold out for the first half of the year. At Mercedes-Benz, we are sold out for the first quarter and we are able to adjust production with our existing flexibility measures if needed. With that, I would like to hand over to you, Klaus, for a deep dive into our financials.

Thank you, Martin. Also a warm welcome from my side to our full year 2023 disclosure. Now let's have a look at our financials for the group and the segments. Revenue on group level increased year over year by 10% to €55.9 billion in 2023. Adjusted Group Avid showed a strong increase of 39% to 5.5 billion euro, while Group Avid rose even higher by 48% to 5.2 billion euro. The most significant year-over-year increase within the key figures was seen in the free cash flow of the industrial business, which rose by 61% to 2.8 billion euro in 2023. As a result, net industrial liquidity increased from €7.5 billion at the end of 2022 to €8.3 billion at the end of 2023, despite our ongoing share buyback program. Revenue of the industrial business rose by 8% to €53.2 billion in 2023 EBIT adjusted increased significantly to 5.3 billion euro, with adjusted return on sales reaching 9.9%, up 230 basis points from the previous year. In 2023, Drax North America achieved an adjusted EBIT of 2.9 billion euro and an adjusted return on sales of 12.3%. Pricing was the main positive driver, supported by volume and mix to a lesser extent. FX contributed positively to the 2023 result, mainly driven by the strong Mexican peso. Material cost efficiencies improved year over year. Negative impacts came from supply chain interruptions that caused significant production inefficiencies. Inflation-related increases in personal costs continue to weigh on EBIT performance in 2023. In Q4, performance at Drox in North America was mainly impacted by the negative volume by mixed effects, which could not be compensated by the positive contribution from pricing. After sales also had a negative impact as customer fleets were largely renewed in the past two years, resulting in an expected temporary decrease in demand for parts. Despite these headwinds, we achieved a strong return on sales of 12%. For Q1, we expect lower volumes due to the typical seasonal production patterns as the pipeline gets refilled after the holiday shutdown. Nevertheless, we expect a margin in Q1 on a similar level as in Q4, sitting well in the guidance corridor. Mercedes-Benz came in with an adjusted return on sales of 10.2% on the back of an adjusted EBIT of 2.2 billion euro. Year-over-year EBIT performance benefited significantly from pricing and a strong after-sales result. Inflation-related cost increases in materials were negatively impacting the Mercedes-Benz segment's EBIT. Negative effects year-over-year included also the China licensing fees, which had positively impacted 2022 results and a normalization of the used truck business. The recent Q4 was a very strong quarter for Mercedes-Benz, particularly compared to Q4 of 2022. Pricing again was the major driver. For Q1, we anticipate normal seasonal effects with the production pipeline filling back up at the beginning of the year. Unit sales in Q1 are expected to remain similar or slightly lower compared to Q1 last year, with a mixed shift from Europe to Brazil, resulting in expected margins around the lower end of the guidance range. A bit adjusted for our drugs Asia segment was 330 million Euro, with an adjusted return on sales of 4.7%. Overall, the performance of our Asia business was mainly impacted by cloudy market conditions, including a slightly better but still low Chinese market and the dampening effect of the upcoming presidential elections in Indonesia. Pricing was the main positive contributor, followed by an improved after sales business. Also, showing a significant improvement, the still severe market conditions in China led again to a negative ad equity result of our Chinese joint venture BFDA, which negatively impacted Truxx Asia profitability. A highlight in 2023 was the growth and strong performance of our India business. throughout the entire year, we clearly benefit from the market trend towards more sophisticated drugs. Cost pressures compared to last year were driven by effects and inflation-related cost increases, particularly in material and personal costs. Given these headwinds, the 4.7% adjusted return on sales for Drugs Asia indicates a strong performance of the segment given the cloudy market environment in Asia. Q4 2023 was influenced by positive net pricing that included a catch-up of inflation-related pricing measures implemented in the previous two years. Regarding 2024, we expect at least for the first half of the year that the Asian markets remain weak. Given the weak markets in Q1, volume is expected significantly below previous year Q1 and margins will be around the lower end of the guidance range. After delivering break-even performance in 2022, Daimler buses continued its recovery story in 2023, coming in with a significantly improved EBIT adjusted of 240 million and an adjusted return on sales of 4.7%. Significantly higher unit sales had a strong positive impact on EBIT, driven by the ongoing recovery of the European coach market and increased sales in the city and in the urban markets, a strong market demand in Latin America, and a pre-buy effect due to the planned Euro 6 introduction in Mexico in 2024. Significantly improved net pricing, increased contribution from the after-sales business, and positive effects from FX, especially from a strengthening Mexican peso, also boosted EBIT. The full year 2023 performance at Daimler Buses clearly demonstrates that the ongoing strict and very successful cost work is paying off. Q4 performance for Daimler Buses was strong, driven by the similar factors that drove 2023 year over year performance. Q1. as subsequent quarters in 2024 is expected to reflect a typical seasonal performance pattern at our Daimler bus segment with a gradual improvement over the coming four quarters. Now let's have a look at the EBIT performance on group level. As already highlighted, adjusted group EBIT increased significantly year over year by 39% to 5.5 billion euro. The biggest positive contributor was pricing, making up by far the biggest part in the volume price mix bucket. Mix and after sales also had a positive impact. Positive pricing performance was necessary to offset higher inflation-driven costs, which almost entirely made up the industrial performance bucket. General admin expenses and R&D costs had an increased negative year-over-year impact, primarily due to the higher than expected IT and inflation-driven personnel costs. A significant portion of these additional IT costs is still driven by the upgrade of the IT systems following our spin-off. The others bucket was positively impacted in 2022, about 150 million Euro from an increase in discount rates related to provisions. And we now have seen a partial reversal effect in 2023. The transition from EBIT adjusted to EBIT includes mainly negative effects from spin-off related costs classified as impacts from M&A. This results in an EBIT of 5.2 billion euro. At our spin-off, we clearly stated every segment must deliver and all our segments are delivering. All of them contributed positively to the increased industrial business result. Trucks North America and Mercedes-Benz delivered improvements of over 500 million each. Trucks Asia and Daimler Buses also made strong contributions with improvements of 159 and 199 million respectively. The recon line, where we book our group participations and our investments in Autonomous, showed a year-over-year plus of €76 million. Overall, return on sales adjusted of the industrial business reached 9.9%, on the back of a significantly increased EBIT adjusted of €5.3 billion. The return on sales of 9.9% marks an important step for our industrial business as we are getting closer to our margin ambition for 2025 of over 10% in sunny market conditions. Our financial services segment showed a significant year-over-year increase in its new business of 20%. due to the ramp up in Europe, as well as increasing penetration rates in the second half of the year, mainly in North America, in a challenging market environment. Also, contract volume showed a significant increase of 17% from 24.2 to 28.3 billion euro by the end of 2023. Main drivers were the retail business in North America, major market ramp up in Europe and the wholesale business in all regions. Financial services achieved an EBIT adjusted of €211 million, resulting in an adjusted return on equity of 9.1%. Cross-profit was positively impacted by a positive volume effect and an overall favorable cost of risk development based on globally good credit performance and pandemic recoveries. Higher costs were driven by the first full year of phase two markets and higher project spending in Europe in conjunction with integration of these new markets. The underlying quality of our portfolio remains solid with cost of credit risk below eight year average despite regional and segment specific heterogeneous developments. Cash generation in 2023 was exceptionally strong despite a change in working capital of minus 1.4 billion Euro, mainly driven by higher inventories and receivables. Net investments exceeded depreciation and amortization by approximately 600 million Euro This was caused by the increased need for investments in future transformational technologies and in new businesses, especially in emission-free powertrain and autonomous driving technology. So, for the full year 2023, cash flow before interest and tax for the industrial business was strong at almost 4 billion Euro. The adjusted cash conversion rate remains strong at 0.8. Free cash flow of the industrial business was 2.8 billion euro. Adjusted free cash flow of the industrial business increased significantly by more than 67% versus 2022, reaching 3.3 billion euro. Net industrial liquidity consequently increased to 8.3 billion euro. Net profit surged in 2023 by 44% to nearly 4 billion Euro. Consequently, earnings per share increased by a similar 3,24 Euro in 2022 to 4,62 Euro in 2023. As mentioned earlier, free cash flow of the industrial business came in with 2.8 billion Euro, Based on this very solid cash performance, management will propose a dividend per share of €1.90 at our upcoming Annual General Meeting on May 15th. The second dividend payment of Daimler Truck as a standalone company highlights our commitment to maintaining a strong balance sheet, sticking to our capital allocation principles and keeping up a high cash conversion to support a sustainable dividend to our shareholders while meeting all the investment needs to navigate transformation of our company. Our current share buyback program that started in August last year further demonstrates our commitment to return excess liquidity to shareholders. That's it from my side on the financials for 2023. Back to you, Martin.

Before I walk you through the outlook for the full year 2024, please keep in mind that our outlook is subject especially to further macroeconomic and geopolitical developments. As we mentioned during our last Q3 disclosure call, we expect normalizing market conditions for 2024. This means a slight decline in heavy-duty markets for North America and Europe. Reasons for the normalization include the persisting challenging economic conditions and the absence of catch-up effects from pent-up demand that was exceptionally high during the previous two years. For the full year 2024, we consequently anticipate a range of 280 to 320,000 units in North America for the heavy-duty market, which translates into a decrease versus 2023 of minus 3 to minus 16%. And we expect a range of 260,000 to 300,000 units for the European heavy-duty truck market, a decrease versus 2023 of minus 12 to minus 24%. Now, let's have a first look at the financial guidance for 2024. Group revenue is expected in a range of 55 to 57 billion euro, which is the same guidance range as last year. For EBIT adjusted and for EBIT reported, we anticipate a stable development on prior year level. R&D costs and investments in PP&E are expected to increase slightly year over year. For our industrial business, we guide unit sales in a range of 490,000 to 510,000 vehicles and revenues in a range of 52 to 54 billion euro. Despite a slightly decreased unit sales and revenue guidance compared to last year, we expect the return on sales adjusted in a range of 9 to 10.5%. we remain committed to our promise of improved resilience and more stable results. Free cash flow is expected to slightly increase. As a reminder, this translates into an increase between 10 and 25% in our definition. In summary, based on our current expectations, 2024 should result in a robust development compared to 2023 and thus again in a very solid year for Daimler Truck, despite headwinds from the markets. On segment level, we expect for Trucks North America unit sales in a range of 180,000 to 200,000. This reflects a normalization of demand as pent-up demand that fueled the market in previous years is fulfilled, returning to the normal replacement cycle. Despite the lower market, we expect a stable development of adjusted return on sales in a range of 11% to 13%. For Mercedes-Benz, we expect unit sales in a range of 140,000 to 160,000 units. We anticipate an adjusted return on sales that should come in for Mercedes-Benz in a range of 8.5 and 10.5, despite the expected market decline in Europe driven by the macroeconomic environment. Tax Asia's unit sales are anticipated to come in within a range of 130,000 to 150,000. On this background, adjusted return on sales is expected to be in a range of 3% to 5%. For Daimler buses, unit sales range is guided at 23,000 to 28,000 units and adjusted return on sales at 5% to 7%. The comeback of the bus business continues. Financial services is expected to generate new business volume of 11 to 13 billion euro due to the increasing operative business in Europe and South America. Adjusted return on equity should increase and live is in the range of 9 to 11%. Regarding the equity capital endowment of all our financial services companies to meet tightened regulatory rating requirements and to support Daimler Truck Group rating, the equity ratio steering of Daimler Truck Financial Services from previously 9% will be adjusted towards approximately 10%. Consequently, we will inject up to an additional €350 million of capital into financial services to meet this target. Reconciliation should be at the same level in 2024 as in 2023. Towards the end of our presentation, let me take a step back and give you the bigger picture. You know our two strategic roles to lead profitability and to lead transformation. In the past minutes, our focus was on profitability. Now it is important to me to briefly touch on our second strategic goal. Because currently, there are a multitude of challenges that concern us in Germany, in Europe, and around the world. In this situation, we must not lose sight of the number one global priority of our times, mitigating climate change. I therefore want to appeal very clearly at this point. We have absolutely no time to lose and must act consistently. In society, in politics and certainly in our business. At Daimler Truck, that is precisely what we are doing. We have aligned our strategy to lead the sustainable emission-free transport for the future. And we are successfully executing this strategy. In 2023, we sold more than 3,400 zero-emission trucks and buses, almost four times as many as in 2022. We got orders for almost 4,600 zero-emission vehicles, more than twice as many as in the year before. The numbers therefore continue to increase, which is positive. But we all need to be aware, and I do not say this for the first time, the mass market will only shift towards zero-emission vehicles if there is prosperity for most use cases and if there is a comprehensive charging infrastructure. To add momentum, we are in intense discussions with policymakers and energy companies, and we have started key projects together with partners. There is no doubt that the future of transportation will be emission-free. And I am convinced that it will pay off to lead this way. We therefore keep broadening our zero-emission product portfolio. By the end of 2023, we had 10 zero-emission product lines in serious production. And in 2024, we will hit the next major milestone. We will launch our Mercedes-Benz e-Actros 600, a battery electric truck with a range of 500 kilometers. This means with our E-Actros 600, we will start to decarbonize the long-haul segment, and this is the segment that really matters to mitigate climate change. The Swiss company Holcim already intends to attend a total of 1,000 units of our E-Actros 600 to its fleet. In the next years, we will complement our battery electric vehicles with hydrogen-powered fuel cell vehicles, particularly for long-haul use cases. Let me wrap it up with our big picture regarding profitability. As we can see, we have already come to quite some way on our journey of unlocking our full profit potential. 9.9% adjusted return on sales in our industrial business in 2023 means great progress compared to the previous years. But this is not the end of our journey. Far from it. Next, we are heading for our 2025 profitability ambition that we fully stick to. Based on this very solid profitability level, we will put a stronger focus on growth. In the second half of this decade, we aim for 40-60% revenue growth, while at the same time further increasing our return on sales. And if both revenue and return on sales increase, the operating profit increases even more significantly. I am therefore very confident about Daimler Truck going forward. I am fully convinced that the best years are yet to come. Thank you very much. Now we are looking forward to your questions. Our Q&A will start shortly. Bye. Thank you. Thank you. Thank you. Thank you.

Good morning, ladies and gentlemen. On behalf of Daimler Truck, I would like to welcome you to the analyst and investor Q&A session of our annual results conference with Martin Daum and Klaus Baesler. You have probably all joined our presentation prior to this Q&A session. Just a quick reminder, all documents, including the annual report, are available on the Daimler Truck investor relations website. Later today, you also will find a more comprehensive roadshow presentation on that site. Now, before we start, the operator will explain the procedure.

Welcome to the Daimler Truck Global Conference Call. At our customer's request, this conference will be recorded. The replay of the conference will also be available as an on-demand webcast in the investor relations section of the Daimler Truck website. I would like to remind you that this teleconference is covered by safe arbor wording you will find in our published results documents. Please note our presentations contain forward-looking statements that reflect management's current views with respect to future events. Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Forward-looking statements speak only to the date on which they are made. We would like to draw your attention to the fact that all participants are in listener status and that the conference has been recorded. If you would like to ask questions, please press the star and one keys on your touch-tone telephone. If you would like to withdraw your question, please press star and two on your telephone. If you require the assistance of an operator during the Q&A session, press star and zero on your telephone. We will now start with the question and answer round. I would like to hand over to Christian Herrmann.

Thank you very much for that explanation. Ladies and gentlemen, you may ask your questions now. Please introduce yourself with your name and the name of the organization that you are representing. And as always, please ask your questions in English, and as a matter of fairness to all others, please limit the number of questions to a maximum of two. So we get started, and the first question goes to Klaas Bergelind from Citi.

Thank you. Hi, Martin and Klaus. Klaus at Citi. So my first question I had was on the embedded market share gains in the full year guide. That's North America down only slightly versus market down 10% at the midpoint. I guess that's Western Star. But Mercedes-Benz is down 6% versus market down 18% midpoint for Europe. We obviously have Brazil recovering. But in light of the weak orders from Mercedes-Benz now in the fourth quarter, and with your market share in Europe going backwards by three percentage points, Martin, I'm trying to understand a bit how you should think about your outperformance from here for Mercedes-Benz. Thank you.

Lars, I'm not sure I got all the problems. The market share of North America in 2023 was certainly impacted by that supply issues we had in the fourth quarter. Otherwise, I'm pretty confident we would have been above the 40%. Therefore, going forward, the more than 40% guidance we give is, in my opinion, very well achievable. And the production and the order intake, in my opinion, is pointing in that direction. On the European side, we'll have to see in the development that in 2022 another competitor had significantly problems with his output due to supplier issues, which then normalized in 2023. So for me, this is rather a technical reaction. I see our development in Europe in the next year going alongside the market in plus minus something is always happening. There are always some tweaks and bumps and on the other side headwinds, which then can give you but more or less going together with the market.

Yeah, so I assume limited expense. I mean, I can understand that North America, you're pushing a Western star, but still limited expense. Your unit sales are down 6%, market Europe 18% down at the midpoint, which is, yes, a quite strong recovery in Brazil embedded into your guidance. Is that how we should look at it, or? Yeah, that's my question, really.

I mean, if you look backwards to the 2023 number, there's always a slight difference between sale and market share. Market share is retail registered while sales, when it leaves our facilities and goes to our sales partners. So there could be something out of that. Then certainly you are fully right. You have the Brazil issue. Brazil in 2024 will be stronger. So I could see here something where we guide the European market, but on the other side, with Brazil being a significant business for the Mercedes truck. So that is the mix. But basically, in Europe, it's a development together with the market in Europe, what we expect.

Yeah. Thank you. My second question I had was on the implied ASPs. I mean, your U.S. sales guide is 500,000 midpoint, I think makes sense. But ASP is well ahead of expectations out there. Obviously, you will have Brazil recovering against Europe falling. That's negative for mix. So this must really be the aftermarket side. and also very solid price realization. If I look at pricing, I think Klaus said after the 2.8 billion of volume and price mix on slide 12, by far was the positive pricing, which is pretty material. So can I ask you, Martin, what is your carryover on pricing here for the first half? And what do you think you can do on pricing for your orders here in the beginning of the year? Thank you.

First of all, pricing was last year mainly due to the inflation we had in all areas, starting with wages, continuing with logistic and energy costs, and ending with material costs. So a lot of the pricing was inflationary and sometimes even catch-up we have to do to previous years. So that part is definitely carrying on. What we never did last year, especially not in North America, was what I call the opportunistic pricing, that we misused the strong market to pump up prices for the last year 10,000 trucks we still had open slots for because we are very much focused on long-term contracts, long-term relationship with customers, and we see that paying off in 2024. So I don't see There is not so much room for further price increase, but carrying on the 2023 level is, I would say, realistic. However, I would say every sale is a free decision, and that's the fun of the business. So it's negotiation. But it's ultimately, for me, the strength of the product, the strength of the service network, the reliability of the product. And we see it in one product where we really invested at the right time. That is on the bus coach side where we invested in a complete new coach bus, etc., for Europe in the midst of the crisis. And it's now paying off because now bus is back and we have the best product out in the market.

product can then carry the price and the customer is still absolutely happy going with our product a quick final one promise to be quick on the fixed cost reduction minus six versus speaking to some target i think you were minus eight last year you're joining for a very solid margin massive expense Is this what you see, Martin, when you're into the second half, that you can sort of run a bit harder there on the fixed cost side? Because the margin was certainly better than I thought for looking at your guide. Thank you.

I mean, the fixed cost is a huge bucket of all different impacts. I would say the biggest one, especially if I compare 2022 with 2023 was the increased spending we had on IT. We have the duty to separate here completely from our old sister company, Mercedes, and we decided deliberately if we do it, we do it right and go for a new system and not just copy old systems. And that costs, and especially in this area, we have significant cost and price increases as well. That costs more than we initially thought. Certainly, higher investments, higher efforts in R&D cost us as well, but fixed cost is a continued important task and it's one of the tasks where we are not yet done and sufficient because we need that resilience for the for the for the years ahead of us thank you thank you class the next question goes to daniela costa from goldman

Hi, good morning. Thanks for taking my questions as well. I have two. The first one is regarding sort of the CARB regulations that are being introduced now in California. And next year, I understand they're setting another four or five state final deadline, 2027. Can you help us think about when do you start to see these and how significant it could be as a contributor, especially for your 25 vision? And then the second question, obviously, sort of like Mercedes last week, was quite outspoken about their intentions for the Daimler stake. You have a buyback, increased dividend, but still a lot of very cash generative and a lot of cash in the balance sheet left. Can you remind us, like from here, how should we think about capital allocation for the medium term? Thank you.

Danila, thanks for your questions. I would say we are well prepared for the 2027 CO2 regulation as well as everything from CARB. That certainly brings more technology in the truck, makes the truck more expensive. So we might see in 2025 and 2026 a pull forward impact. It's strange sitting here and worrying about 2027 or 2026. We have a great position. We have great products. We are prepared for any regulation. So I am absolutely confident that we will master any reaction of the markets to that. And certainly, if we see in 2025 and 2026 a pull-forward effect, We'll take it and go from there. But the bigger question is for me, how will the U.S. economy continue? Will it be 25, 26, another strong year like the U.S. economy is one of the strongest economies we have worldwide in 23 and in 2024? And I have no clue how they hear the politics develop then after the elections. So we'll have to see. But I feel ourselves very well prepared for any scenario. I can't talk at all about Mercedes. You have to ask this question in their call. On the buyback of our side and the cash generation, yes, we are far from done with our share buyback program. Potentially, Klaus, you can give the details where we are today. We definitely go through that program. We have a clear allocation. We increased our dividend in 2024 for 2023. We will continue to generate cash. We will be a strong company. But that is what we always said. Daimler Truck is an absolutely cool company, and we continue with that. And once we are through with the one program Klaus is talking about, we will definitely have to invest, and we want our shareholders to participate. And with both things, I think we have enough funds to satisfy those needs. Klaus, but over to you.

Yeah. Yeah, thank you, Martin. Daniela, thanks for your question. I mean, very clear. I mean, we are a very cash-rich company at this point in time with a high cash generation. We talk about cash conversion rate of 0.8, 0.9 as well for the future. That means we will sit on quite some cash. And what we have therefore announced at the last Capital Market Day already last summer is that we like to get a little bit more flexible when it comes to dividend. We opened up the the range we want to distribute to the shareholders from 40 to 60%. The 60 or the opening up towards the 60 honestly is more meant to basically keep dividends stable as well when results might not going up or not as good as we would wish in order to keep the dividends stable so we would take a little bit more out of the net income. And the other thing is that we have actually started already a quite aggressive, from our point of view, Shire buyback program for such a young company. I think we announced on a valuation of 25 billion, I have to admit, last summer, to buy back 2 billion within two years, which is 8% of the capital, which is really, from our point of view, A lot, and from today's perspective, I mean, we do not look at this share buyback program as a one-off, but first of all, we go through the current one, and I said two billion in two years, we have split that into one billion in one year, and another stage, another billion in the second year, which might then end in the summer of 2025, and currently we are in the middle of the first stage, And I have bought back in the meantime roughly 600 million, basically a little bit more than half of the first round, or a quarter of the entire program.

Thank you for the call.

Thanks, Daniela. And the next question goes to Nikolai Kemp from Deutsche Bank.

Yeah, good morning. Nikolai Kemp here from Deutsche Bank. First of all, congrats to a very strong 2003 investment. to question from my side and also take them one by one. First of all, on the guidance, it just looks very ambitious. And can you walk us through the different building blocks here? I mean, volume, probably slightly down, pricing, a bit of tailwind, input cost, how should we think about that?

I mean, first of all, Nikolai, thanks for your assessment of our results. Yes, we are proud of it, but we are not by far not done. And therefore, that is our reflection of our 2024 guidance. If we say it looks ambitious, That was when someone told us in 2020 when we had our first, or 21, when we had our first pre-spin-off capital market day, they told us we are ambitious. Yes, we are ambitious. We were ambitious. We are ambitious. And we will continue to be ambitious. If you look at our capital market day last year in Boston announcements, they said we want to grow the company further. It will be more difficult in 2024 than in 2023, without doubt, but we are not afraid of. We will lose volume. That is clear. And that is resilience means we show that we can come up with the same results in a more... uh in with more headwinds uh than in 2023 and that is all reflected in that uh steady with lower volume same result announcement but honestly that is that what we promised you three years ago that is what we are working hard to get there now if i walk you through the building pops volume will go down Pricing, I don't see further tailwinds, but as I've said, we avoided opportunistic pricing in 2023, so I'm confident we can keep it through 2024. The input costs, very difficult to check. If they go down, they will come with a kind of a delay into our P&L. We will have further cost pressures next year as well. But we have a lot of areas where we can increase the efficiency of how we do things. So even if the costs go slightly up, the pricing will stay stable, the volume goes down, then the rest has to come out of efficiency or out of great products with high quality and the efficiency of working hard on the products we have.

Great, thank you. Just one quick follow-up on the Mercedes fixed cost or industrial fixed cost target. How could that split between this year and next year to achieve the 15% reduction in fixed cost?

Let me take that one. Nikolai, regarding the fixed costs, we have shown that we actually did not even pause, we fall back, which is not good, was not the intention, and we take it very serious from there to get better, and we have, earlier today, already confirmed a minus 15 target for 2025, and the plan is that we basically halve the gap this year towards that, Target of 15, basically, when you have to get from minus six, it's a 10-ish, minus 10-ish, which the planning is saying at this point in time, and this is what we are going for.

Okay, understood. Thank you. So the next in line is Miguel Borrega from BNP. Miguel.

Hi, good morning, everyone. Thanks for taking my questions. The first one on Mercedes-Benz and maybe a follow-up to what you just said, Martin, about keeping prices stable. So I just wanted to challenge that assumption a little bit. What is different this time and what sustains that price-cost spread? You already mentioned the European market is going to be weaker. There's a negative mixed effect from Brazil. and raw materials, namely steel prices, are down. So, why wouldn't your customers demand lower prices?

First of all, every customer wants lower prices. Every supplier wants higher prices. And this is what it's called negotiations. And therefore, we have sales guys. And therefore, we have purchasing guys. And therefore, we always talk about full packages. Don't forget that we will increase our service revenue with good margins further. So it's a full mixed bag. But a lot of the price increases... We won't increase our pricing in 2024. A lot has spilled over from the last years and potentially, I have to go back now in history, remember the first quarter in 2022 where the cost increases hit us a lot. where the cost went up much faster than we could bring up the pricing. Now, from the other side, we have the backlog. In some areas, very strong backlogs. So we can then work off that backlog, and we know the pricing is there. And the new truck businesses, as I said, no more increases, but on the other side, good products that provide the customer a high value and therefore can command the respective price.

Very good. And then on the fixed cost reductions, what is there left to deliver? You basically have two years to deliver an additional 8% fixed cost reduction. Is this evenly split or a little bit more back and loaded? And I know this is a sensitive topic, Martin, but you had an ambitious target to reduce headcount since the IPO, but numbers have been relatively flat. Can you maybe share some color there, please?

I mean, this is by far the most positive, the most difficult one task ahead. As you said, we have to continue to work on it despite a lot of demands and despite a clear path for growth. How that works all together is something we have to figure out. But one thing is absolutely where we are today. where we are not going backwards number one we will and have to keep our profit targets even in more tougher environments and you mentioned it yourself in your first question yeah we have to show and we want to show and we will show you that 2024 we can have that resilience which in the past was sometimes not necessarily our key trade and fixed cost plays a big role into that and secondly We will do everything to keep this ambitious growth target we have for the second half of the decade, build of a solid profit foundation. And for that, we have to be more nimble, especially when it comes to SG&A or what we do on our production sites in the future. And therefore, we work on that. And here, 2024 is a very key year. year to balance the headwinds, the targets of resiliency, and on the other side, the preparation for future growth and bring that into a mix that does not harm the profits at all. This is the most difficult task, and this is where all our teams are working diligently on, and this is certainly a topic we will talk in the future a lot when we meet again in calls or in capital market days.

Great. And then one quick follow-up to what you just said on Euro 7 regulation. Can you share some color on the additional investments and whether that will change in any way your margin? Thank you very much.

No, I mean... Euro 7 was the hot topic of 2023. The initial draft of the law would have required a lot of absolutely unnecessary additional equipment, technology into the truck. Our customers had to pay for this very little impact on environment. ultimately rationale prevailed. We are able to reduce NOx emissions, nitrogen oxides emissions significantly. So Euro 7 will bring to the environment, to the public, cleaner trucks than already today very clean trucks, but with no unnecessary, let's say, equipment on the truck. So the necessary testing and development requirements are in our budgets reflected, always well reflected, so going forward are reflected. I don't see that Euro 7 will... And then Euro 7 comes fairly late into the market, so I won't see much... break here with euro seven because it's an evolutionary going on uh if people are really familiar with the meta we are already at the moment at euro six year so that is not the initial euro six we had about 10 years ago and euro seven is an evolutionary continuation of what we started so it's not for me an inflection point which brings the market upside down

Thanks, Miguel, for your question. The next in line is Jose Azumendi from JP Morgan. Jose.

Thank you, Christian. Hi, Mark and Klaus. Congrats on the strong results and strong guidance for 2024. Just two follow-ups, two questions, please. On Mercedes-Benz, are there any additional structural measures that you can take within the brand to improve the shelf of the market and revenues? Or are you largely done with the measures you implemented a couple of years ago and you have managed to close the gap to your peers? And second, I'm trying to understand a bit better this fixed cost reduction. I guess IT cost reduction is a substantial burden still for Mercedes-Benz brand. So can you comment maybe on either the timing of the IT cost reduction coming down? I guess it's more 25 than 24. And maybe the magnitude of the margin impact. That will be great. Thank you.

I mean, first of all, one of the biggest measures, and here we really did all the homeworks, was to turn Brazil completely around. Secondly was to re-establish the quality of our product. This is a clear check mark. Third is to work on the cost. This is a continuous and ongoing work where the teams of Mercedes-Benz are really on a track. Does this include additional structural measures? I would say if the measure is so big that I would call it structural, I definitely wouldn't announce it in an analyst call. And everything else, We could call it structural, but I call it more evolutionary going forward. We have to reduce our cost on the variable side, on the efficiencies in the plants as well as especially on the SG&A field, and we go with that. IT, I would say that is certainly something more on the 2025 when we see ultimately the benefits of it, but this is a longer journey.

Thank you. Thanks, José. The next question goes to Shaquille Kirunda from Wong Stanley.

Hey, guys. It's Shaquille from Wong Stanley. Congrats on a great result, and thanks for taking my question. So, I understand that Mercedes-Benz' result was driven by strong pricing in Q4, but can you shed some light on what drove the timing of that? You know, why did this become particularly visible in Q4 versus the rest of the year, and how should we think about that going forward?

I mean, Shaquille, first of all, it was not just pricing. As I said, it was Brazil. It was a very strong aftermarket business. It was... Hey, we had a pretty messy production situation for a very long time. Once you clean up here and go back to more normal, normal is good for production because it allows you more efficiency there. So there were a lot of things that came to fruition in the fourth quarter. And then I would say I would do it like I said 12 months ago. I recommended everyone where we had a not so good fourth quarter. I ask everyone to balance off third and fourth quarter for a half year. And I would say this year we potentially to avoid a similar situation like last year. We had potentially a little bit more overcautious when we looked for potential end of the year problems or bookings, take the second half. This is very good guidance of the strengths of Mercedes-Benz, not just the fourth quarter, which is always good to be on that side and then on the other side. I remember the discussions we had at that table 12 months ago was a little bit more difficult.

Got it. Thank you very much. And then you raised an interesting point about not maximizing pricing on an opportunistic basis. Can you shed some light on the ways you expect that to pay off in 2024?

I mean, it definitely pays off in the U.S. where we have a huge portion of our sales goes to large customers. And here we are continuing. It pays off. that they don't take now advantage of opportunistic situations this year. So in my opinion, it balances off. But the basic is always never use the opportunity, but build your pricing upon the strengths of the product and the value the product brings to the customer. That is the core of how we did it in the last years, which was a key for the success for many, many years. And it will be a strong foundation for the years to come in those markets. And it makes us pretty confident for 2024.

Thank you very much. And just my last question. Can you tell us a little bit about the building blocks that go into your 2024 North American market outlook? How much do you factor in a soft landing or infrastructure expenditure from the IRA and the IIJA or even a pre-buy effect?

I mean, we see a shift in the North American market. And everything I say now is nuances. So it's not that drop, not that what we would call catastrophic decline or so. The on-highway business is softer. But this is good for us because it frees up capacities which we haven't had in 2023 on the vocational side. The vocational market, which goes into construction, which goes into utilities, which goes to bodybuilders, was strong and is strong, and now we can participate because we have the production slots. Our factory in Cleveland, North Carolina, that four years ago was 100% on-highway tractors, will be 2024 100% vocational Western Star trucks, and we are looking where we can add additional capacity potentially to follow that up. Medium duty is strong. We have a good lineup there. So I would say overall. But as I said, it's nuances where we can now react with our product portfolio to the market. We are almost sold out for the first half. We certainly, there's always, and I said that in my speech, there are always macroeconomic outlooks. U.S. economy is going strong. This is a solid trend. country that did a lot of things right in the last couple of years and its benefit in 2024 about it, how that will develop in the second half, this is one of the uncertainties. And we have to see and deal with it however what it gets. Normalization, as I said in Q3, means you don't have that 12-month outlook where I could say, guys, we are basically sold out or every slot we have is already dedicated to a customer. So no worries. Volume will come as long as we have supplies. This is not the case. Almost sold out for first half in North America means we still have to sell a full half year of trucks into an economy. We don't know how it develops and we have to see how it is. But we will get it from the newspaper, and you'll get it out of the newspaper as well. But the product and the company is there.

Thank you very much, Martin.

So next in line is Jonathan Day from HSBC. Jonathan.

Yeah, good morning. Thanks very much for taking my questions. I've got a couple. I was firstly on the pricing, just wondering, I mean, you talked about – not increasing prices in 2024, but you also talked about some pricing spillover effects. And I was just wondering if you could give us a sense of how those progress over 2024, those spillover effects. That's my first question.

I would like to talk about that topic further down the road. If I say we are not increasing pricing, then that means for every customer listening who pays a higher price in 2024 to 2023, I now make the job for the sales guy much more difficult. Yeah, pricing is where people sometimes ask me how much cost a truck and I answer back how much costs a house. And there are things in the house which gets cheaper over the years and there are other things when you build something which gets more expensive. And so is pricing. Pricing ahead of time and speculating. We have hundreds of people that's going option pricing and base model pricing and pricing for segments and pricing for markets and pricing for different countries. Jonathan, just take what I say. We expect that when we say overall stable, that always includes some segments that go up, that includes some segments that go down, that includes for Europe some markets where we have currency headwinds, and it certainly includes markets where we have currency tailwinds. That is very complex. You have to take our word. We see the margins we make on trucks in 2024 stable to 2023. And the rest we have to work hard on to make it happen. And we'll certainly talk about that when we present half and full year results.

Great. Thank you. And second question, just coming back to the U.S. and the vocational market, I was just wondering if you could remind us a bit of the profitability differential of the U.S. vocational trucks versus the on-highway trucks.

It's again how much costs a house. They are small, what we call baby aid vocational trucks. They are heavy loaded trucks for the oil fields. It's a mixed bag. We have fleet businesses. We have bodybuilder deals. I would say it's the same. It's good markets. We are very well positioned on the on-highway side. And I will say And we are the newcomer on the vocational side, so we will increase our position there and we'll increase our profitability there.

Yeah. Okay, great. Thank you.

The next question is for Virginia Montozzi from Bank of America. Virginia.

Good morning. Just a quick one from me. Can you give us just a little bit more color in terms of the market share that you think for vocational, especially for 2024 and kind of the driver there?

Virginia, I For my entire life, to announce market share gains only energizes competition. That's at least what happens to us. Anytime a competitor goes out and says he wants to take market share away from us in certain areas, especially when it comes to on highway in the U.S., it's the best doping for our teams. I don't want to energize our competitors. So we just work hard and then celebrate the successes.

Okay, thank you.

And then we have a question from Steven Reitman from Societe Generale. Steven.

Yes, good morning. Thank you for taking my question. And again, congratulations on the results and the guidance. I'd like to look a little bit at the zero emission field. And obviously, you showed a pretty big percentage increase, but on a relatively small number, 3,443 vehicles. I'd like you to maybe see your views on the state of the market, really. Do you think some of the hype or the excitement that was pushing the market, you know, this zero emissions is following the trend we're seeing in the passenger car market as well as the reality can sink in about TCO and the inability to do the job until the technology significantly improves or prices come down. Thank you.

I mean, Stephen, for me, to ultimately move the entire industry from diesel to zero emission is a historic undertaking, which needs a lot of elements. And I call it always a magic formula, three items, create products, from the OEMs, TCO, parity, and the working infrastructure. When I came out with the first speech about those threes about four years ago, I was saying, and at the moment, every single one is zero. And by the way, those three factors are combined like a multiplication, one factor zero, the entire equation is zero. Four years ago, all four are zero. The product from the industry, not just from us, but from our competitors as well, but especially from us, are not any longer zero. As I said in my speech, we have 10... Complete product lines out. That's far more than any startup can promise. They have a pointed one truck only prototype-like pre-production level. We have 10 complete product lineups from the e-canter, which, by the way, is the best e-truck money can buy, to... the E-Actros 600 and to our city bus here in Europe, all absolutely fine, highly praised trucks by the trade press, by our customers. Number one. And we have a lot more as prototypes, as test vehicles, as we have shown on the hydrogen side in our pipeline. This will not be the problem. Then it comes, I go to infrastructure. Infrastructure is the biggest challenge and therefore we are on this two-legged strategy because charging can't do the job. Already today in a lot of markets, the biggest limitation is that our customers can't get the high power charging we know. And at the moment we talk, for example, in Europe only about 300 kilowatt charging, but we have to get to 700 or one megawatt charging. charges which are not available yet. So this has to be built and the clock is ticking because 2030 is the year where it has to be. Therefore we are on hydrogen, on green hydrogen, at a price of about 450 euros per kilogram. That is not available today. So we work diligently with proven players in that field, whether it be Linde, with whom we opened up a liquid hydrogen filling station in Wörth, or whether with Abu Dhabi, with Mubadala, to look to get the green hydrogen exports coming from the Persian Gulf to Europe at a competitive price. All that floating in, Then comes TCO, and TCO is only solvable, and I think this is the biggest wake up in other industries, that zero emission will be more expensive. It can be TCO better, but then we need a price on diesel. And in Germany, and I know that this is a big burden on our customers, we have now a CO2 pricing in the toll when you run trucks on public highways. And I see that other European countries are following that direction. So running diesel trucks will become more expensive. then still be TCO positive. I tried now to put an entire evening-filling sermon or multi-day series into five minutes of answer. I can only recommend, I have multiple podcasts out, Transportation Matters, about that issue, where you can deep dive. I'm fully convinced that by the end of the decade, will have a significant higher amount of zero-emission vehicles that we sell to our benefit, that our customers buy to their benefit, and where the entire society is benefiting for significantly reduced CO2 emissions.

Thank you. Will you be able to share with us maybe your best guess of what the absolute volume of your sales might be at any particular times?

If you write me down the price of energy and the availability, the number of megawatt charges we have in Europe and the United States, the price of energy the customer has to pay at those megawatt charges, the amount of hydrogen that is landed annually, from the Middle East in Europe is produced in the United States and the price of hydrogen. If you write me down those four numbers and really bet your fortune on it that they are right, then I give you an exact number how much battery and how much fuel cell. The rest is a sliding factor in between, depending on applications, on range of the trucks. And we have to prepare in this uncertain world for a lot of scenarios. And I tell you, we are prepared in our strategy. And we'll certainly, next Capital Market Day, whenever that is, we will certainly deep dive more on that. But rest assured, we spent a lot of brain energy, and we are very flexible for whatever outcome.

Sounds fair enough. Thank you.

Thank you, Stephen. I think we have time for one more question, and that would go to Frank Biller from LBBB.

Yes, hello. Thanks for taking my question. There's also one left here. The one is on autonomous driving. I haven't heard anything about autonomous driving within this call. Maybe you can give us an update what's going on in Daimler truck and hear the time progresses.

The reason why you haven't heard anything in the call is because we were focusing on 2023 and 2024. And certainly, autonomous is part of our investment. It's part of our investment in the future. Therefore, in the figures you've seen, autonomous is included. We make very good progress on that. It's one of the huge strategic topics and opportunities. that can really reshape the industry. I have a feeling we are very well positioned there. And when we have more strategic oriented meetings, we definitely will talk a lot of autonomous and you'll see more in 2024. We had a couple of really good press coverage last year and we will have more to tell about our progress and we progressing very well. with our subsidiary torque, with our redundant chassis, and most importantly for me, in the collaboration with our large customers in the United States. And there will be a lot of exciting news in 2024 as well on that topic.

So nothing changed here from the speeding time? It's not slowing down like some car companies do?

No, it's not slowing down. It's diligent work. It's a grinding work of getting things done, the hardware going, the censoring going, the software stacks going. and look for all the crazy edge cases, we call it, that can happen out there on the roads, driving truck on the road, simulating different scenarios. Exciting stuff, could talk hours about it, but you'll hear more about that during the year.

Okay, thanks a lot and congrats to the figures.

Thank you. Thank you. So before we conclude, I would like to say one thing. First of all, I have to say thank you, Klaus, for being really a good steward in the last nine months. It was a pleasure working with you together. He will stay with the company, so it's now not his farewell, but it's his last time here on the podium. But we all know why Klaus had to step in despite his job as a treasurer, is because of Jochen Goertz passing away in the mid of 2023. And I tell you, really, it still touches me at that moment. I would have loved to give these numbers, extraordinary numbers, out together with Jochen, because he was working for that more than 8% return on sales, for that more than $4 billion in EBIT, as hard, as emotional, as energized as I did. And it's a shame that I'm alone here. Sorry. I want to dedicate that year to Jochen as well.

Martin, thank you very much for taking the time. Thank you for the great words at the end as well. And that's the end of the Q&A sessions, ladies and gentlemen. Thanks for participating. Thanks for joining us today. As always, investor relations remains at your disposal afterwards throughout the day and also the next weeks. For the ones who want to follow the media Q&A, this will start in a couple of minutes. To all of you, have a great day. Take care and thank you. We look forward to talking to you soon. Thanks. Thank you.

Thank you. So, Thank you. Thank you. Thank you. so so Thank you. . . . . . . you Thanks for watching! Thank you. Thanks for watching! Thank you.

Good morning, everyone. Welcome to this media Q&A conference call on our full year 2023 results. On this conference call, I would like to welcome Martin Daum, CEO and Interim CFO of Daimler Chuck, as well as Klaus Beessler, Vice President, Treasury and Tax, Acting Head of Finance and Controlling. This morning we published our press release and all relevant documents on our website. I assume that most of you have followed today's presentation and the analyst conference call just prior to this media Q&A. Martin Daum will now briefly explain the most important facts and figures of this year, 2023. And following this, we will look forward to your questions. So, Martin, please go ahead.

Very briefly, we can summarize it. We had with 2023 a record year with 5.5 billion in profitability and which results in 9.9% return on sales. Both numbers absolutely track records for Daimler trucks historically. And for me, what I'm most pleased of is that every single unit delivered towards that result. It was not the heroism of one single area. It was everyone participating. And therefore, thanks a lot to all employees who worked diligently to get to that. Second most important message we gave this morning in our press conference was that we are confident that despite headwinds, we will give robust results in 2024, meaning we have the confidence to repeat, despite much adverse environment, the 2023. It's not just a one-time event. It should be continuous, what you can expect from Daimler Truck.

Okay, thank you, Martin. Ladies and gentlemen, we will now begin with the Q&A session. I will address the questioners by name, but please be so kind to also introduce yourself and state your media outlet at the beginning. Take your time for your questions and ask them slowly and clearly. Let me just mention a few housekeeping notes. This whole call is conducted in English, so please be so kind to ask your questions in English as well. The operator will now explain the procedure for registering your questions.

Ladies and gentlemen, welcome to the Q&A session of Daimler Truck Holding AG. We would like to draw your attention to the fact that all participants are in listener status and that the conference has been recorded. If you would like to ask questions, please press the star and 1 keys on your touch-tone telephone. If you would like to withdraw your question, please press star and two on your phone. If you require the assistance of an operator during the Q&A session, please press star and zero on your telephone. We will now start with a question and answer round. I would now like to hand over to Jörg Hohe.

Thank you very much. And there's already the first question. And we start with Robin Wille from DPA, German Press Agency. Go ahead, Robin.

Yes, good morning. I hope you can hear me. Robin Wille, Deutsche Presseagentur. One question regarding the sales in view of the difficult economic conditions. You're talking about the normalization of the markets in terms of sales in 2024. Just to be clear, is this sales level now the, let's say, new normal? over the next few years or to what extent can we expect an increase here again? And if so, to what extent? Thank you very much.

First of all, Mr. Wille, in my long years in trucking, there was never normal. It was always an up and down. So normal is basically the change is normal. What I meant with normalization is that we had an absolutely abnormal situation in 2022, 2023 out of two reasons. Number one, we had... always disruptions on the supply side, therefore couldn't deliver what the customers wanted, therefore had an order backlog far ahead. So we were sometimes at the time of the year basically sold out for the full year. That is absolutely abnormal. Now we are back to normal, and I'll explain normal in a second. And I think it's not coming back so fast so far, and I don't know even if I want it to come back. Normal means that a customer orders a truck and expects that he gets a truck about one or two months then in the future, and that is where we are. That means we sell trucks. Sales guys are talking, negotiating, closing it. We give it to the production, plan for an efficient production, and then we deliver the truck to the customer latest three months later. And that is where we are today. We do that on a slightly lower level than last year. Last year was a record level in a lot of markets. Those slightly lower means, again, normal. And it could be less and it could be more than in the years to come. But we have that flexibility built into our business system. We call it resilience when it goes to the downside, and we call it capacity and flexibility when it goes to the upside. And I think we have proven that we can manage the upside. 2024 is now the proof point that we are similarly capable of managing the downside.

Okay. Thank you, Martin. The next one with a question is Wilfried Eckeldorner from Lomberg News. Wilfried, go ahead.

Yes, hello, and good morning. I have a couple of questions. I hope you can hear me all well. I have a couple of questions on the outlook for 2024. I just wanted to know, yeah, a lot of analysts are actually – thinking that especially in the second half of the year, the demand for commercial vehicles will decline sharply. I just wanted to know how far your current order book will actually take you into that year. So when do you actually see really orders going down? And the next thing I wanted to know is, As you're trying to hike profitability, you actually wanted to save costs, 15% costs till 2025 with cuts also with research and development. Is that actually possible right now as you're trying to invest into – or as you're investing into e-mobility and electric trucks? That would be my two questions. Thanks.

Okay, question one. Certainly normalization, as I said, means you are not sold out. We are almost sold out for the second quarter in North America. We still have quite a few openings in Europe and in other areas which we can and will fill. Therefore, it's very difficult to have an outlook for the full year. I don't agree necessarily that we will see a sharp decline. I would say it will continue throughout the year and I feel with our guidance for the entire market well in line with other players in the market as well as this institute uh institutes that research uh the talking uh the the tracking markets so this minus 10% to 15%. You have seen it. It's always for us full world market, individual countries. So you have it in the material, which you find on our website, which we have shown earlier. You see the bandwidths we see during the year. And I, at the moment, there is no reason for us not to believe that the ultimate result will be somewhere in that bandwidth. Secondly, when we talk about cost efficiency, I mean especially we have to focus on production and SG&A, on the investments we do in product projects. and plant equipment, whether battery or fuel cell or autonomous, we definitely have excluded that from our targets and have to put them on top because we want to prepare our company for the next decade. And yes, there we have to invest. But if you don't save on the one side, you can't invest on the other side. And therefore, both things are true and has to be done.

Okay, next one is Ilona Wissenbach from Thomson Reuters. Go ahead.

Yes, good morning. On the fixed cost reduction, I also had a question. I mean, there's still a big gap to bridge. And when you mentioned SG&A, does that mean headcount, further headcount reduction, or what in general does it mean for headcounts? And the other question was on the zero-emissions vehicles. You mentioned earlier what all has to fall in place to get to cost parity and to make it attractive. And three years ago, you predicted TCO parity for BES by 2025 and for fuel sale 2025. Okay, first of all, Mrs. Wissenbach,

I never said that cost parity is in 2025. It increased my blood pressure three years ago. It still increases my blood pressure. And I tell everyone, if anybody talks about cost parity, I tell everyone, look, and I told it to journalists and to politicians and to customers, look at the fine print. If there are subsidies, if the price of energy drops below 20 cents per kilowatt hour, if we have CO2 costs built into either diesel or toll, then we could see a cost parity. But it's if, if, if, if, and then it's a mathematical model, and then it depends how long you drive every year. what loads you are carrying, in which countries you are driving. This is a really complex one. So I warn everyone, mutton down stands not, and you see my blood pressure is up. It's TCO parity is far too complex to be used in a headline. Electric truck. And fuel cell trucks will be more expensive forever than diesel trucks. A. B, it all depends on the price of energy. An analyst earlier asked me what will be the share of fuel cell trucks versus battery trucks. I said, give me the price of electric energy and give me the price of hydrogen and diesel. Expanding it now to cost parity with diesel, give me the price of diesel and CO2 in 2025, in 2027, in 2030. And it's very easy then to calculate for your particular truck use case. And there are myriads of use cases out. I can calculate which one is better for you financially. So, so much about the word cost parity. And now I calm down again and hope...

Mr. Daum, I'm sorry for your blood pressure. Andreas Gorbach presented this three years ago. Then that was one thing that was already...

Then if Andreas Gorbach said it, he certainly had a lot of fine print on his slide that he presented. And if you put all fine prints together, I know Andreas Gorbach can calculate extremely well. Then for that conditions, the TCO would be there. So but back to us. We are here back. So we are back to normal. So sorry for that. But, you know, this is a topic I'm talking so many times about it. It's all about price of energy, availability of energy, and the truck will be more expensive. Now back to our vehicles. The cost parity is achievable if we have the infrastructure in place. And in my opinion, we have to put a price on CO2. Without that, it's not achievable. But the German government has already did a very important step with a toll, a road toll for trucks. And I see other European countries like Denmark or France copying this principle. So I would say with this with this instrument, we can see prosperity as long as we have cheap hydrogen, where we work diligently on it, and as long as we have cheap green energy. And that is still, in my opinion, by the way, the biggest challenge for our society, much bigger than for us producing great e-vehicles. About HotSim, it's not a firm order. There is a huge difference between firm orders and intentions. HotSim has the intention, and we have that let off intent sign, so it's more than just an idea, and we will deliver the first trucks very early, but then it goes certainly, we start in the second half with the start of production of the E-Actros. So this certainly is an order that will cover a couple of years. And when it's firm and firm, and we only, when you see orders from us, we mean always orders that we can deliver in the next 12 months. So the majority of those thousands are not yet in our order book, but will be in the times when they come. By the way, that applies to every, especially on startups where you see very high numbers, but it shows that this company is really willing on the one side to go emission-free, and secondly, values great products with high quality and trust our promises. So this is something which really, really energizes and excites us.

And headcount reduction?

No, that's not headcount reduction. It's more efficiency. I would say that the biggest one is IT. IT is not headcount. IT are costs we pay to service providers, and that is certainly something we have to work hard on it. Continued efficiency on production side means that you do a higher program with the number of people you have today or that you use natural fluctuation. And we are at the moment, and you see that in other reports in the situation, especially in Germany, that the social demographics help a lot. We have more people going into retirement than people joining the workforce. So it actually helps us to continue our output efficiencies alone from that side are very important. We are not talking about the releasing of people.

Okay. Next one in the line is Joachim Herr from Börsen Zeitung. Joachim, go ahead.

Good morning, gentlemen. Three quick questions, please. The first one, are there still supply bottlenecks, especially what is the situation at your Mexican supplier, Maxion in Magusa? Have there the problems in the production of essential frame elements been resolved, or will it also have an impact on sales, let's say, in the first quarter or in the first half of this year? The second one, what about the impact of the higher IT costs due to the spin-off from Mercedes-Benz? Will there be also an impact, let's say, in the next few months? And the last one, the share price is rising sharply today and has already risen significantly in recent days, recent weeks. Do you know if there are investors, for instance funds, which have recently stepped in? Thank you.

Mr. Herr, The first one is easy. Yes, the supplier situation in Mexico improved significantly over the fourth quarter. It's always difficult to say the problem is over. Normally, if I say that, I jinx it, and then it comes up again. But it's much better than it was four weeks ago. Four weeks ago, it was much better than it was in October, November. October, November was potentially the worst quarter. So I would say here the worst is over. The supply situation is still, I mean, it was in the last years. And I hope that we don't see anything coming up. The market softening, everyone reduces slightly. The production program helps. But you never know what will happen there. But for the moment, first quarter, I don't see any bigger impact as I speak today on March 1st. But we still have... 20 workdays to go. But I'm positive on that. The IT costs are completely covered in our results. They are covered in our 2023 results, as we have shown, and they are completely accounted for in our 2024 outlook. you can say without them our results would have been better, but I hope with them our company will be better in the future and we'll have far more efficient end-to-end processes than we had in the past. And then about the share price, I tell you, I always thought in the past that our shares The strength of our company and the excitement we inside the company have was not reflected correctly. So I'm really glad that the world sees and says congratulations to our efforts. But, you know, I am neither an analyst nor an investor guider. So I just look at the price and be happy that the world gets a message that we are a great company.

Okay, thanks, Martin. Next one is Daniel Zwick, Welt am Sonntag. Daniel, go ahead.

Hello, good morning. I have another question on the transformation to electric vehicles. You already mentioned the conditions for this transformation, and you also talked about the political decisions and the political framework that is, of course, very important. If you look to the U.S., in America, there's a certain probability that Donald Trump could return to the White House. If this happens, would that mean that you have to write off all investments in electric vehicles that you did up to now?

First of all, I'm no political expert, and who wins the presidential election and what the winner will do next year, you have to ask the respective persons. But regardless what comes, there are, for me, a lot of certainties. Number one, we have a good diesel product. Number two... We strongly believe and can only recommend to the world to stick to the Paris Accord. We have to fight climate change. We have to move over. We have a lot of regional regulations in the US, like California and so on, that are not so easy to be overturned by federal regulations. So I see a continuous demand for zero-emission vehicles regardless of what government there is. No, and we don't have to write off. Why? Because we have a very flexible ramp-up in production. Then we don't ramp up as much. But I fear more out of the whole thing the uncertainty on the infrastructure side, where you don't have so much flexibility. Either you have a multi-gigawatt or megawatt, and I don't know in what... Potent terawatt gigawatt megawatt high voltage power lines. You don't build just one and then you build it down. This is a huge undertaking. You don't build up a liquid hydrogen electrolyzer and liquefaction industrial park, which is more like a refinery today for oil. You don't do that just to switch it on and off. It's a little bit more easy here on our truck side. And I can always remind you, and we benefited greatly, especially on the city bus side in Mannheim with that, that we build our trucks on the same line. I can build Mannheim 100% diesel or I can build 100% electric and anything in between. My production guy now gets crazy about me because he needs at least a couple of months to preparation, but those things don't come overnight. But we have that built-in flexibility both in our investments to come to react to different political scenarios. But I can only urge... And that is not just the Donald Trump issue in North America. That can happen in Europe. There are parties who negate climate change, who want to turn back the Paris Accord. I can only warn, human mankind will pay for that. Therefore, we are completely committed here at Daimler Trucks to support the fight against climate change. Thanks, Martin.

And for the last question, we have Alexander Jungert from Mannheimer Morgen. Alexander, go ahead.

Hi, and thank you for having my quick question. You pay a profit sharing of 7,000 euros for each truck employee. How much money do the PAS employees get this time? Thank you.

First of all, the profit sharing is part of our agreement we have with the unions for Daimler-TRAG AG in Germany. We have in many other countries, in many other entities, complete different agreements. And the agreement is always a complex bag. I can't pick out just one element and then mimic it and compare it with others. The bus employees in Mannheim are part of the Evobus group, and I know that the Evobus management and the representatives there are discussing the share for the 2023 results. And I'm not here to announce it when it's agreed. Then you certainly will read it in the newspaper or you get it through a press release from our side. But it will be it will be part of the entire package we initially agreed or over long years agreed with the workers' representatives of Evobus. Yes. Here is a number on the table, but the number is not yet public, so it's not here to announce any profit sharing on Evobus.

I would say as soon as we have it, we put it to you at an instant, okay? Okay, thank you. Thank you very much. That was the last question. We've reached the end of our Q&A session. Thank you very much for taking part in this event. If you have any further questions, please do not hesitate to contact the Daimler Truck Communication Team. And I wish you all a good day. Thank you very much again. Until next time. It was a pleasure.