Mercedes Benz Group Ag

Welcome to the analyst conference call of Mercedes-Benz. At the request of our customers, this conference call will be recorded. A replay of the call will be available as an on-demand audio webcast in the investor relations section of the Mercedes-Benz website. The short introduction will be followed directly by a Q&A session. If you experience any difficulties during the conference, please press zero and the pound key on your telephone keypad to reach the operator. If you wish to ask a question after the presentation, please press nine and the star key on your telephone keypad. You will then hear the message, thank you for your participation, your request to speak is registered. When it is your turn to ask a question, you will hear the message, you are now in talk mode. If you would like to withdraw your question, please dial three and the star key. You will then hear the message, Your request to speak has been removed. I would like to remind you that this teleconference is governed by the safe harbor wording included in our published results document. Please note that our presentation contains forward-looking statements which reflect management's current views with respect to future events. Such statements are subject to various risks and uncertainties. If any of the assumptions underlying these statements prove to be incorrect, Actual results might differ materially from those expressed or implied. Forward-looking statements speak only to the date on which they are made. With that, I would now like to hand over to Christina Schenk, Head of Mercedes-Benz Investor Relations, Digital and Communications.

Thank you. Good morning, ladies and gentlemen. This is Christina Schenk speaking. On behalf of Mercedes-Benz, I would like to welcome you both on the telephone and online to our Q1 results conference call. I'm very pleased to have with me today Harald Wilhelm, our CFO. To allow more time for your questions, Harald will give a brief introduction and walk you through our financials. We will then move directly into the Q&A session. The corresponding presentation is available on the Mercedes-Benz Investor Relations website. And with that, I will now hand over to Harald.

Thanks a lot, Christina, and welcome, everyone. So very happy to take you through the highlights of the first quarter, which was another eventful quarter, geopolitically and for us as well. Let me get started with the execution of our strategy before I move then to the financials and the outlook. Our product ramp-up is gaining momentum. As outlined, we're executing the most comprehensive renewal and expansion of our product portfolio. The new S-Class, you certainly didn't miss this one, remains a cornerstone of our top-end strategy. And we didn't stop there. We also unveiled the new Mercedes-Maybach S-Class in China, particularly important and very successful in the Chinese market. In 2025, every second S-Class sold in China was a Maybach. This was complemented by the new EQS, now offering an 800-volt system with fast charging capabilities, more than 900 kilometers of range, and steer-by-wire technology, which is really cool. We continued the S-Class story on the SUV side, presenting the new GLS in the U.S., alongside the GLE and the GLE Coupe. Last week, the all-new electric C-Class premiered in Seoul, following the GLC, which is seen very strong demand. It is the second vehicle on our MBEA architecture and our first electric C-Class, and frankly, it looks pretty stunning. On the land side, the all-new VLE had its world premiere. Built on our new, highly flexible van architecture, it marks the beginning of a new era for the Vans division. And we will take this even further. Besides the upcoming VLS, we announced the Mercedes-Maybach VLS, offering true luxury and expanding our top-end portfolio further. And by the way, all of these vehicles come with MBUS, our own operating system featuring the latest entertainment stack point-to-point assisted driving, and much more. By the way, talking about MBUS, as previously emphasized, MBUS enables us to partner globally with the leading tech companies. Level 2++ is already on the road in China and is coming to the U.S. later this year. And we also go beyond as we work with robo-taxis with partners. We are further strengthening also our local-for-local strategy. In China, the all-new GLC long-wheel-based with China-specific entertainment at level 2++ was unveiled at AutoChina. GLC is closing the BEV white spot in our portfolio. And in the U.S., alongside the presentation of the new key products for this market, we announced investments of more than $7 billion until 2030, The U.S. is a strategic growth market for us where we are further strengthening our footprint. And with this, I would now turn to the financials on page four, looking at the group KPIs. First, the group revenue developed broadly in line with the sales development at CARS in the first quarter. The EBIT came in at a solid 1.9 billion. EPS stands at €49 billion. Free cash flow healthy at 1.9 billion. That brings us to a strong net industrial liquidity of almost 34 billion before obviously paying the 3.3 billion which we did earlier this month. Looking at the car sales, we ended the quarter with 419 units in line with expectation. The sales development was impacted by China. If you look at China, total sales increased by 5%. And top-end sales, particularly resilient in China, maintaining a global sales share of 15%. Core and entry were lowered due to China, while growing by 7% ex-China. And the global batch sales developed well, up 9%. In Europe alone, we recorded a growth of 34%. This is largely driven by the CLA, and obviously the remainder of the portfolio is currently ramping up. There's more yet to come. Looking at the car financials, the sales I explained already, the ASP in the first quarter was lower, but slightly up compared to quarter four. This also drives the revenue development. The EBIT adjusted is at 900 million euros, as expected. And the CFBIT adjusted stands at 3.4. Now let's have a look at the EBIT evolution, the EBIT bridge on the page seven a bit more in detail. In the quarter one, CARS delivered an EBIT adjusted of around 900 million and the return on sales adjusted of 4.1%, well within our full year guidance range of 3 to 5%. What are the main puts and takes on the walk? The volume structure in the net pricing is actually slightly negative. However, the bucket is lower overall, mainly due to the tariffs, product enhancements, lower China contribution, and a lower fixed cost capitalization. The FX, I think, is self-explanatory on the chart. On the industrial performance side, the underlying industrial performance is positive, driven by continued efficiency improvements. that more than offset headwinds from raw mats and higher depreciation following our numerous product launches. However, on top, Q1 was impacted by several one-timers, with negative items in the industrial performance on product-related measures and positive items largely in the other bucket. Overall, one-timers, however, were awash in Q1. Then on the SG&A and the R&D side, you see they were positive, reflecting our further efficiencies and having left the funding peak behind us. Turning to the cash, cars achieved a strong adjusted CF bid of $3.4 billion. How did we get there? From the $800 million of the EBIT, we generated significant working capital tailwind. That reflects our continued effort to improve the working capital, including a favorable inventory structure and improved payables, mainly related to the production ramp-up. A part of this should unwind over the course of 2026. We further see proceeds from net financial investments. That's mainly due to the continued sale of our retail outlets in Germany. Depreciation exceeded investments as we have passed the investment peak. Total investments are lower in line with our plan as flagged in February. Overall, the level reflects our continued focus on investing in technology and competitive products on the R&D side while also demonstrating a highly disciplined total capex approach. These positive effects were partly offset by a negative other bucket, which cash-outs related to restructuring charges of around 800 million euros, dealer provisions, as well as the adjustment for the BBAC at Accuracy Result. As a result, we recorded the fit of 2.6 billion. Adjusting for the special items, it's at 3.4. Looking on the band side, Sales volume came in at 80,000 units. In China, we saw a softer consumer demand for mid-size vans. Excluding China, vans were able to grow year on year despite a particularly competitive environment in the U.S. and Europe. E-van sales increased by almost 30%, lifting the global EV share to 8%. Revenue development is broadly flat. And on the EBIT, we have a look on the next page before quickly on the cash flow. The main driver of the CLBIT were the planned investments into the new van architecture. Investments are expected to peak this year, strategically preparing vans for the future. This thing is a good moment to remind you that this represents the largest product investment program in the history of our vans business. It underpins a highly attractive and scalable product pipeline, including the all-new VLE, VLS, and VLS MABA, alongside a broad range of private and commercial derivatives built on a highly flexible modular architecture. At the same time, we are completely remodeling our global production footprint with investments in Vittoria, Charleston, and Yavor, to enhance flexibility, efficiency, and competitiveness. Working capital was a headwind driven by temporarily higher inventories, as well as a higher value of stock from events. Now looking on the EBIT walk for Vance, Vance achieved an EBIT adjusted of $450 million, and once again delivered a benchmark double-digit return on sales of 10.1%. Let me guide you through the buckets, the volume structure pricing, is lower, reflecting a lighter product and market mix, negative net pricing, hardly offset by positive effects from an increased leasing portfolio. FX is a headwind, mainly driven by Turkish Lira, which was largely offset through pricing. Industrial performance is flattish, SG&A, R&D, and others are awash. Looking on the financial services side, We have migrated to the new setup, which is working well and is enhancing our competitive offering in the market, which is also reflected in a higher penetration rate in the first quarter. At the same time, we continue to sharpen our focus on the core financial services business, as evidenced by the signing of the outloan agreement and the divestment from Black Lane, both expected to complete later this year. New business volume declined by 4% to $13.1 billion, reflecting sales development and adverse effects. The portfolio stood at $130 billion at the end of Q1, broadly unchanged versus year-end 2025. Financial services delivered a strong performance in Q1, with a return on equity of 13.3%. Average adjusted increased by 44%. supported by continued positive trend in portfolio margin, improved cost efficiency, while at the same time, the cost of credit risk remained elevated, reflecting a weaker global economic outlook. Let's have a look at the group numbers. On the EBIT side, cars, vans, financial services, I explained already, that results in a solid adjusted group EBIT of 1.8 billion. We had some adjustments in the first quarter. Additional restructuring charges of €175 million for our NLPP personal cost reduction program and M&A adjustments mainly related to Aton following its reclassification as assets held for sale. With this, the group EBIT booked sits at €1.9 billion. On the cash flow, cars and vans I covered already. Cash taxes are positive due to refund related to 2025. Interest paid is negative due to seasonality of coupon payments and higher interest environment. Interest in income was positive with more than 100 million euros. And on the free cash flow on the industrial side altogether, this is at 1.9 billion. The adjusted figure is significantly higher at 2.8, mainly due to the NLP cash outs of almost 1 billion euros in the first quarter. On the nil bridge, page 14, by the end of the first quarter, the nil increased to close to 34 billion. That is a pretty comfortable level. Of this nil, we paid 3.3 billion as a divvy to our shareholders last week. That's the status on our share buyback program, our 2 billion program. It's in full execution. In Q1, share buybacks totaled 470 million euros. In total, as of today, as we speak, we have bought back shares worth more than a billion since inception of the program. Following the AGM, share buyback has accelerated significantly. And with regard to the DT stake, we continue to monitor market development and capitalize on opportunities as they emerge. Now, turning to the outlook and the guidance, Getting started with the divisional guidance for 2025, please consider the disclaimer regarding forward-looking statements at the end of this presentation in the relation to the outlook. Important to note, the war in the Middle East adds further uncertainty to an already high level of uncertainty in the global economic environment and automotive markets. The outlook... assumes no prolonged conflict with respect to potential impacts on material, raw material and energy prices, inflation and sales trend. Assumptions are based on today's regulatory framework and on the US-EU tariff rate expected to be reduced to zero now effective August 2026. On the car side, the sales guidance for 2026 We retain an overall constructive view with targeted growth ex-China. Global sales volume is expected to remain at prior year level. Product transitioning is impacting the sales volume as expected, with sales in Q1 being the lowest and building momentum in H2. XED share is unchanged. And with quarter one well within the guidance range, we continue to see adjusted return on sales between 3% to 5% as guided. Equally, PPE, R&D, and CCR remain unchanged. On the VANS side, I can also make it pretty short. The sales guidance and the XEV share are unchanged. We continue to see Adjusted return on sales is guided between 8% and 10%. No change to PPE, R&D, and CCR. And also on the financial services side, short and sweet, given the current interest rate volatility, we continue to see the full year guidance unchanged in the range of 10% to 12%. Looking at the group guidance, page 16, it follows obviously the same premises as the segment guidance. in line with the unchanged divisional guidance, all group guidance remain unchanged. Equally, on the free cash flow industrial guidance, this remains unchanged before additional proceeds from major M&A activity. And now turning a bit more to the outlook for the remainder of the year, what's ahead. Well, the 2026 ramp-up is in full motion. We see strong demand for all new electric models in Europe. That order intake has more than doubled compared to prior year's quarter, up by 107%. New models resonate well with our customers. The order books for the new CLA, the GLB, and the GLC are filled well into the second half of the year. TLA and GLC production are running as free shifts and additional Saturday shifts for the GLC. The S-class is now available to order in Europe. First deliveries are starting in second quarter in U.S. and China. This will follow in quarter three. So we also reskinned completely our large SUV portfolio with the GLS, the GLE, the GLE coupe, including AMG versions, and the order books on these ones will open soon. On the VLE, the order book is open in Germany. The rest of Europe will follow soon. And with this, we are confident that we can build on that momentum as our model ramp-up continues in quarter two, with momentum being built in H2. And last page, page 18, well, one of my personal highlights, the all-new Mercedes-AMG GT Fordo Coupe, which will be introduced in Los Angeles on May 19th. You should really block this in your calendar. will be our first model on AMG's electric high-performance architecture, AMG EA. This car will set new benchmarks and embody true AMG DNA. So very much looking forward to that one. Thank you for now. And with this, I hand back to Christina.