Mercedes Benz Group Ag

Welcome to the global conference call of Daimler. At our customer's request, this conference 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 the Daimler website. The short introduction will be directly followed by a Q&A session. If you want to ask a question, please press 0 and 1 on your telephone keypad. To remove the question, please press 0 and 2 on your telephone keypad. Again, for a question, please press 0 and 1 on your telephone keypad and 0 and 2 to withdraw. I would like to remind you that this teleconference is governed by the safe harbor wording that you find in our published results documents. Please note that 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. May I now hand over to Steffen Hoffmann, Head of Daimler Treasury and Investor Relations. Thank you very much.

Good morning, ladies and gentlemen. This is Steffen Hoffmann speaking. On behalf of Daimler, I'd like to welcome you to our Q3 results conference call. We are very happy to have with us today Harald Wilhelm, CFO of Daimler and Mercedes-Benz, and Jochen Goetz, CFO of Daimler Trucks and Buses. In order to give you maximum time for your questions, the two gentlemen will begin with an introduction directly followed by a Q&A session. The respective presentation, as always, can be found on our IR website.

Now I'd like to hand over to Harald. Thanks, Stefan, and good morning, everybody. We have quite a lot of material, so I will try to be rather quick maybe in rushing through it so that we have sufficient time for the Q&A. So let's jump right away to the key messages for the third quarter. Despite considerably lower production and sales due to the ongoing semi-shortage, we significantly improved our top-line quality at Mercedes-Benz cars and vans with better product mix and optimized pricing. Combining this with a tight grip on fixed costs, the result is a significantly lower break-even point and a higher robustness of the business. The good results combined with disciplined working capital and investments translate into a comfortable level of free cash flow and the net industrial liquidity and supports our financial flexibility. Furthermore, in terms of strategy execution, we have made progress throughout all divisions. At the International Auto Show in Munich, you have seen further family members of our Mercedes-Benz luxury full electric lineup. And on the truck side, we set another important step some weeks ago by starting the series production of the battery electric e-Actros. Within the past weeks, we reached further milestones of project focus. Backed by the strong shareholder support, we currently prepare for the next step of the spin-off, the Tracker Truck Capital Markets Day on November 11th, and the first trading day of the Daimler truck share before the end of this year. Let's jump now to the new reporting structure on page three. The group figures within our financial statements are now split into continued and discontinued operation. Continued operation contains mainly Mercedes-Benz cars, vans, Daimler mobility, and the reconciliation positions. Please bear in mind that also DMO is here, including trucks DMO for P&L. which will be successfully carved out or ramped down over time. Further details are described on page 11 in our interim report. The discontinued operations are defined as major line of business to be spun off. This contains mainly the industrial business, trucks, and buses, and is displayed as a separate single line item in the P&L in net profit covering EBIT interest and taxes. Group revenue and group EBIT in the P&L does not include discontinued operations from trucks and buses. For transparency and comparability reasons, however, we keep the Q3 segment reporting unchanged, as you will see on the subsequent pages. In Q4, the trucks and buses segment will be displayed in our reconciliation position, reflecting the structure post-spinoff. So what are the numbers? Page 4. Well, 578 thousand cars and commercial vehicles being sold that's 25 percent less than quarter three 2020 despite significant lower volumes revenues was about last year's third quarter q3 ebit increased by 17 to 3.6 billion scf of industrial business was 2.2 nil increased by uh 31 to 23.5 uh year to date And you can see also in light blue the impact from discontinued operations. Let's zoom on Mercedes-Benz cars and vans, page 5. We see a strong demand for our products in all markets, in particular electric and high-end Mercedes-Benz vehicles have robust growth rates. So sales evolution is a result of semi-shortage and not market demand. On the financial side, the exceptionally strong mix and favorable net pricing can offset the headwinds from semi-driven supply constraints and raw material increases. I will give you more color on this later. We are also working on our strategic implementation and transformation towards electric only. We are doing this by investing into BEF and ramping down ICE. Therefore, we announced to acquire an equity stake in the battery cell manufacturer ACC, to develop and build next-generation battery cells and modules in Europe, together with Stellantis and Total Energies, each partner holding 33%. On the ice, we're making another step in the powertrain transformation. We will transfer the development and manufacturing activities for next-generation compacted midsize transmission to our partner, Magna. We thereby reduce our in-house activities for conventional drive components in the coming years. The future of Mercedes is all electric, and we will be ready to offer our customers up to 100% cash by the end of the decade. At the International Auto Show, we presented new products and concepts that underline our focus on luxury EV and tech. Hence, we are very pleased with the early order intake for EQS at this time. Since we opened the books for the EQS on August 10th, European orders reflect similar level of demand as we have seen for the Mercedes-Benz S-Class. Feedback from the U.S., which is in the midst of launching the vehicle, is also very encouraging. And in China, we have not opened our books yet. On the numbers, page six, due to the semi-shortage, the sales at cars and vans dropped by 30%. Revenues, however, remained at about last year's level. EBIT adjusted 2.2, CFBIT 4.1, cash conversion 1.9. Page 7. As we reflect already, Q3 was impacted by the same shortage and that's the dent in production and sales. However, we have achieved a very strong top-line quality driven by the exceptionally favorable structure effects and improved net pricing. The very strong mix came mainly from S-class, GLS, and GLE. Improved net pricing for new and used cars with low discount levels came across all regions. FX effects from the Russian ruble and the US dollar affected the results negatively. On the industrial performance Q3, you see two headwinds that we have flagged earlier as well. First, higher raw material effects due to increased market prices. And second, production network disruptions due to the semi-shortage. Let's have a look at the fixed cost. The negative selling expense in the bucket here. is due to the year-on-year positive one-time effect that we had recorded in Q3 last year out of U.S. pension and health care plans. R&D came in with 155 million negative year-on-year, which reflects as guided for the full year an increase according to our technology roadmap. The general remark, I mean, on a fixed cost and a hat count, I would like to say that we are on track towards the commitments that we have laid out at the strategy update. Our fixed costs are approximately 15% below the 2019 level, and the indirect workforce in Germany has been reduced by more than 4,400, maybe even, full-time equivalents versus 2019. In the other lines, the most prominent effects are impairments due to the charge point mark-to-market valuations and the lower BBAC equity contribution, which is a direct consequence of the semi-driven supply constraints. On the cash flow, page 8, the CBIT report came in at 3.7, adjusted 4.1, leading to a cash conversion rate of 1.9. This is above our current market guidance, mainly because of the lower vehicle inventories and the BBAC dividend that was recorded in July. Working capital decreased by 1.2 billion, driven by low trade receivables and lower inventories, in particular due to the very low finished vehicles stock. The unfinished product bucket increased given the semi-shortages. Minus 2 to 8 net financial investments are mainly due to the other acquisition, which is part of our refocus strategy for high-performance EVs. As you can see, the net investments in PPE and intangible products Assets versus depreciation, amortization impairments is positive, reflecting our disciplined approach in terms of capital allocation. The other line includes mainly the adjustments of the BBC at equity result and the dividend from BBC. On the adjustments, we have payments with regard to legal proceedings and payments made in connection with the personal cost optimization program and our M&A transaction, YASA. With this, I hand over to you, Johan, for Donald Trucks and Buses.