Daimler Truck Hldg S/Adr

Good morning, ladies and gentlemen. This is Markus Poppe speaking. On behalf of Daimler Trucks, I would like to welcome you to our Q1 results global conference call. We are very happy to have you with us today, Karin Radström, our CEO, and Eva Scherer, our CFO. Karin's introduction directly followed by a Q&A session. The respective presentation can be found on the Daimler Truck Investor Relations website. Please note that this conference call will be recorded The replay of the conference call will also be available as an on-demand audio webcast in the investor relations section of Standard Truck website. I would like to remind you that this teleconference is governed by the safe harbor wording you will find on our published results documents. Please note, our presentation contains forward-looking statements that reflect management's current views with respect to future events. Such statements are subject and certainties. 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. Before we start, let me give you a quick reminder. Following the signing of definite agreements in June 2025 with the target to integrate Mitsubishi Fuzo and Hino into Archion Holding Company, the Mitsubishi FUSU subgroup was reclassified as discontinued operations and assets and liabilities held for sale starting in Q2 2025. Effective January 1st, 2026, the truck's Asia segment was no longer reported separately, and for capital market communication, we focused on continuing operations for business development, unit sales, and profitability. Our investment research activities, as well as free cash flow and liquidity, are presented on a combined basis, including both continuing and discontinued operations. With closing on April 1, 2026, our shares in the Mitsubishi FUSU subgroup were transferred into shares in Archeon, and as a result, are reported as an ad-accuracy participation from Q2 onwards. With that, let's jump into the results. Karin and Eva will walk you through how the first quarter came together, and after that, we'll open things up for analyst questions forwarded by the media. So, Karin, please, over to you.

Thanks, Markus, and good morning also from my side. As you may have seen, we had a first quarter which was on the soft side with low volumes in North America and continued tariff impact. At the same time, we are seeing really strong order intake and remain very confident as we look ahead for the remainder of the year. So with that, let me have a look at the key figures for the quarter. For the group, we generated 10 billion euros in revenue with an adjusted EBIT of around 500 million euros and a net profit of 149 million euros. Our balance sheet remains strong with net industrial liquidity of 7.1 billion euros. Furthermore, we continue to deliver on our strategy to become a more profitable and a more focused company with three topics to mention. Firstly, with the completion of the integration of Mitsubishi Fuso and Hino Motors into the newly established Archion Corporation on April 1st, we enabled that new company to unlock synergies, benefits from scale across products, technologies, and operations. As communicated, we will gradually reduce our ownership to 25%, generating a total cash inflow from the transaction between 1.5 and 2.0 billion euros. Within the next 12 months, we expect the free float to reach at least 35%, which is an important prerequisite for a prime market listing in Japan. Secondly, in addition, we announced in March that Toyota intends to join Cellcentric as an equal shareholder alongside Diamond Truck and Volvo Group. This represents a meaningful step forward for hydrogen technology. It brings together three global industry leaders with complementary strengths and improves our ability to accelerate innovation and scale fuel cell systems. This partnership underscores our strong confidence in hydrogen as a core pillar of zero-emission transportation, while at the same time, we maintain a disciplined approach to efficient capital allocation. Thirdly, given the current conditions in the electric commercial vehicle market in North America, we're adjusting our spending accordingly. We agreed with our Amplify Cell Technologies joint venture partners to defer the installation of manufacturing capacity. Limited construction will continue to ensure the joint venture remains well positioned for the future while maintaining flexibility at the market. Due to the delay of production start and ramp up, we recorded a non-cash partial impairment of 200 million euros in the equity results from Amplify in accordance with IFRS rules, which is reported as an adjusting item within EBIT. We had originally planned a contribution to the joint venture in a low triple-digit million range this year, So, overall, we will see a positive cash flow impact. Continuing with a look at the industrial business, revenue came down 14% year-over-year to 9.1 billion euros, and adjusted EBIT was down 55% to 460 million euros. The primary reasons for the decline was the lower profitability of trucks North America, where we saw very low unit sales along with significant tariff headwinds. We continued managing our overall cost base effectively and further reduced SE&A expenses. Research and development investments were also lower in the first quarter, but we expect higher spending for the remainder of the year. Now to the orders. Incoming orders, which rose by 50% to 114,000 units, shows that we have a great momentum with our products. Feedback, especially on our Actros L with the Pro Cabin, remains very positive. At the same time, unit sales were down 9%, totaling around 69,000 units for quarter one, resulting in a book-to-bill of 166%. Overall cancellation rates remain low, even with the heightened economic uncertainty related to the Middle East conflict. Turning to our zero emission portfolio, we sold around 700 battery electric trucks and buses in the first quarter, up by 26%. In North America, the Class 8 market totaled 50,000 units in the first quarter of 2026, representing a 23% year-over-year decline, reflecting historically low order demand in 2025 and in line with our expectation of a slow start in 2026. Our market share stood at 37.7%, making us, again, the clear market leader. Based on our strong order share, we expect our market share to improve as the year progresses. In Europe, the heavy-duty market expanded by 11% to approximately 80,000 units, largely driven by Poland, the Netherlands, Spain, and Germany. Against this backdrop, our heavy-duty market share increased a lot from 14.2% in Q1 2025 to 18.3% in Q1 2026, reflecting the strength of our competitive product portfolio and the successful launch of the Actros L at the beginning of 2025. As a result, we further reinforced our leadership position in Europe's medium and heavy-duty segments, achieving an overall market share of 18.5%. In zero emission vehicles, we led the market again, capturing 33% of the European heavy duty segment in the first quarter of 2026. While the overall adoption in Europe is still low at around 2% of truck registrations, this underlines our strong competitive position as the transition continues. I'll now hand over to Eva, who will walk us through the segments.

Thanks, Karen. As you mentioned, market conditions varied across regions, so let's start with a closer look at what it all meant for Trucks North America. At Trucks North America, revenue came down 29% year-over-year to around €3.8 billion, following a historically low-demand environment in 2025. Excluding a negative foreign exchange impact of roughly 450 million, revenue was lower by 21%. Adjusted EBIT came in at 209 million, leading to an adjusted return on sales of 5.4%. Unit sales fell 25% to the lowest first quarter level since 2010. Positive pricing and disciplined cost management helped mitigate the impact but could not fully offset substantial tariff headwinds and the pronounced volume decline. With an order intake of over 59,000 units, up 86% year-over-year and 13% sequentially, our growing backlog gives us confidence for the remainder of the year. The overall industry is showing discipline, and our customers are replacing their agent fleets despite continued macroeconomic uncertainty and higher fuel costs. Freight rates have improved by more than 20% year-over-year as freight capacity has exited the market. We are now seeing the full impact from Section 232 truck tariffs, resulting in a combined low triple-digit million-euro net tariff impact in the first quarter. Our application under the U.S. Content Program and the review of MSRP credits are still pending, with no confirmed impact on the effective rate at this time. Despite these factors, performance remains very solid and demonstrates resilience. Mercedes-Benz trucks generated revenue of €4.6 billion, a 4% increase year over year with an adjusted EBIT of €233 million, resulting in an adjusted return on sales of 5.1%. Order intake was strong. reaching around 49,000 units, representing a 33% increase compared to Q1 2025 and 4% sequentially. In Europe, profitability benefited from a strong sales performance and the strict implementation of cost-down Europe measures. This was partly offset by duplicate after-sales operation costs related to the ramp-up of the Global Park Center in Halberstadt, along with slightly negative net pricing. Moreover, the prior year quarter benefited from a mid-double-digit one-time warranty effect. In Latin America, volumes increased slightly, driven by strength in Chile, Colombia, and Peru, and market share gains in the medium-duty market in Brazil. Profitability declined year over year, driven by more challenging market conditions in Argentina. In India, volumes increased strongly in line with the market, supported by a favorable mix. Revenue of Daimler buses was at 1.2 billion euros, a 7% decline year-over-year, with adjusted EBIT of 107 million and a strong adjusted return on sales of 8.6%. Order intake reached around 5,900 units, representing a 25% decrease compared to Q1 2025, driven by the weaker markets in Latin America, however still resulting in a book-to-bill ratio of 119%. the strong European business keeps its positive momentum. Unit sales declined by 20%, mainly due to a weak market environment in Latin America and Mexico, where we primarily sell bus chassis. At the same time, our higher margin integral bus business in Europe slightly increased year over year. Even with strong performance in Europe, positive pricing and FX support, we could not fully offset the volume decline in the chassis business. However, despite lower volumes, we delivered a strong profitability, highlighting the improved resilience of the bus business. Adjusted EBIT for financial services decreased year-over-year from 55 to 39 million euros, driven by higher loss allowances and foreign exchange headwinds. As a result, adjusted return on equity decreased from 7.3 to 5.1% in the first quarter. A prolonged freight recession in North America, tariff-related impacts, and increased fuel prices due to the Middle East conflict have continued to weigh on customer cash flow. As a result, a growing number of customers are experiencing tighter liquidity in their business, also in Brazil and Mexico, which has translated into higher cost of risk as we are taking a prudent approach to provisioning. In North America, it will take time for higher freight rates to improve fleet margins that have been severely diminished after years of market downturn. Moreover, we are not adjusting for costs resulting from our ongoing restructuring initiatives to position our financial services business for improved returns in the future. Pre-cash flow of the industrial business of around negative 400 million euros was significantly lower than in the previous year, mainly driven by lower earnings and additional inventory build-up due to higher order intake. This was partly compensated by higher prepayments received from customers, increased trade payables and lower income tax payments. At the same time, our balance sheet remained very strong. Net industrial liquidity was at 7.1 billion euros, after deducting the negative free cash flow and a cash outflow of around 50 million, resulting from the share buyback program we initiated on March 16th. Now turning to our guidance. To date, we have only seen a limited impact of the Middle East conflict on truck demand and global supply chains. However, further developments will largely depend on the duration of the conflict and are likely to vary in severity across regions. The longer this situation remains unresolved and oil prices remain elevated, the higher the likelihood of inflationary cost pressures, supply chain disruptions, and softer truck demand. As of today, macroeconomic leading indicators point to a more resilient outlook in North America compared with a more cautious sentiment in Europe. As always, our guidance does not factor in potential impact from supply chain disruptions or adverse macroeconomic developments, particularly those related to the Middle East conflict. It also assumes that the current USMCA and tariff framework remain in place. We continue to expect the North American heavy-duty market to land between 250,000 and 290,000 units. with a pick-up in the second half of the year supported by replacement demand. For the EU30 market, we expect a range of 290,000 and 330,000 units. All segment-level guidance KPIs for 2026 remain unchanged. For Trucks North America in quarter two, we expect unit sales to be around 50% above first quarter levels, with profitability at the upper end of the full year guidance corridor. This does not consider reduction in tariff exposure in the second quarter. Based on our strong order intake and our expectation of a lower effective tariff rate under the U.S. content program in the second half of the year, we expect to deliver a full year return on sales adjusted at the upper end of our 6% to 8% guidance corridor. For Mercedes-Benz trucks, we expect group sales to increase sequentially by around 15% in the second quarter, in line with further market improvement in Europe. Profitability is forecasted at the lower half of the guidance corridor. For the full year, we confirm our 6% to 8% return on sales corridor with a strong improvement expected in the second half of the year. For Daimler buses, sales are expected to be around 30% above quarter one, and profitability is expected to be at the upper end of the guidance corridor. We also confirm our full year guidance corridor of 8% to 10% return on sales. Taking into account lower cash contributions to amplify sell technologies, we expect to be at the upper end of our full-year free cash flow guidance and forecast a strong recovery already in the second quarter.