Mercedes-Benz Q2 Profit Increase Driven by Strong Demand and Favourable Model Mix

Rhea-AI Summary

Mercedes-Benz Group demonstrated strong Q2 2022 performance with a 7% revenue increase to €36.4 billion and an 8% rise in adjusted EBIT to €4.9 billion, despite a 7% fall in sales due to semiconductor shortages. The adjusted Return on Sales for Mercedes-Benz Cars reached 14.2%. The company continues to plan for an all-electric future, boosting electric vehicle sales significantly by 134%. Outlook for 2022 has improved, with revenue and EBIT now expected to be ‘significantly above’ prior-year levels. However, free cash flow decreased by 34% to €1.4 billion due to supply-chain bottlenecks.

Positive

• Revenue increased 7% to €36.4 billion.
• Adjusted EBIT rose 8% to €4.9 billion.
• Adjusted Return on Sales for Mercedes-Benz Cars at 14.2%.
• Electric vehicle sales increased by 134%.
• Outlook for revenue and EBIT improved to ‘significantly above’ prior-year levels.

Negative

• Sales fell by 7% due to semiconductor shortages.
• Free cash flow decreased by 34% to €1.4 billion.
• Adjusted Return on Equity in Mercedes-Benz Mobility declined to 17.1%.

• Desirable products: Strong demand across Europe, U.S. and China with high order backlog; favourable net pricing and model mix
• Solid profitability: Adjusted Return on Sales (RoS) at Mercedes-Benz Cars in Q2 reaches 14.2% (Q2 2021: 12.8%), 10.1% at Mercedes-Benz Vans (Q2 2021: 11.4%) and an adjusted Return on Equity (RoE) of 17.1% at Mercedes-Benz Mobility (Q2 2021: 24.0%)
• Strategy on track: Despite a semiconductor-induced 7% fall in sales, revenue at Mercedes-Benz Cars up 8% and adjusted EBIT up 20%
• Resilience enhanced: Mercedes-Benz reduced gas consumption in addition to managing the semiconductor shortage and COVID-related logistics restrictions
• Transformation milestones: European production network for passenger cars readied for reshaped all-electric product portfolio; EQE sales started and EQS SUV production ramped up
• Outlook raised: Mercedes-Benz Group revenue seen “significantly above” prior-year level and Group EBIT now seen “slightly above” prior-year level; Free cash flow of the industrial business now seen “at prior-year” level; Mercedes-Benz Cars adjusted Return on Sales (RoS) for 2022 seen at 12% to 14%

STUTTGART, Germany--(BUSINESS WIRE)-- Mercedes-Benz Group AG (ticker symbol: MBG) achieved strong second-quarter financial results, thanks to sustained demand for luxury vehicles and premium vans, a good model mix, enhanced pricing power and ongoing cost discipline. As a result, the adjusted Return on Sales at Mercedes-Benz Cars rose to 14.2% in the quarter and reached 10.1% at Mercedes-Benz Vans, despite the COVID lockdowns, the ongoing semiconductor supply-chain bottlenecks and war in Ukraine.

“The team at Mercedes-Benz delivered another strong quarter in an uncertain environment. We are enhancing our vigilance and resilience to manage increasingly complex macroeconomic and geopolitical challenges. At the same time, we have good reasons to remain confident, with ongoing strong demand, a fresh vehicle portfolio and further key product launches this year,” said Ola Källenius, Chief Executive Officer of Mercedes-Benz Group AG.

Group revenue rose by 7% to €36.4 billion (Q2 2021: €34.1 billion) and adjusted EBIT increased by 8% to €4.9 billion (Q2 2021: €4.6 billion) as the company’s focus on Top-End Luxury vehicles, battery electric vehicles (BEV) and premium vans as well as a relentless focus on costs, helped to offset lower sales and higher raw material costs.

In the wake of heightened geopolitical tensions following Russia’s attack on Ukraine, Mercedes-Benz has sought to safeguard supply chains and to maximise the potential for reducing or substituting the use of natural gas in vehicle production. For example, Mercedes-Benz has established that in Sindelfingen, where the EQS, S-Class and Mercedes-Maybach are produced, the paint shop could operate without gas supply in an emergency mode. Mercedes-Benz sees a gas reduction potential of around 50% in Germany without impact if regional pooling is possible. The company’s long-term goal is to switch from gas to electricity and other renewable energy sources.

In addition to making Mercedes-Benz more weatherproof against geopolitical and macroeconomic headwinds, the company continues to transform at full speed towards an all-electric future. For example: in June, the Mercedes-Benz VISION EQXX beat its own efficiency record and drove more than 1,200 kilometres on a single charge under real-world conditions. The EQS SUV was presented and the EQE was launched in the market. And that’s after Mercedes-Benz, in consultation with its employee representatives, recalibrated its European production network for passenger cars to manufacture its reshaped product portfolio focused on luxury electric vehicles.

Mercedes-Benz Group*	Q2-2022	Q2-2021	Change 22/21	YTD2022	YTD2021	Change 22/21
Revenue**	36,440	34,124	+7%	71,298	67,006	+6%
EBIT**	4,622	4,374	+6%	9,851	9,075	+9%
EBIT adjusted**	4,939	4,561	+8%	10,240	9,005	+14%
Net profit/loss**	3,198	3,139	+2%	6,784	6,609	+3%
Free cash flow (industrial business)**	1,417	2,161	-34%	2,633	3,458	-24%
Free cash flow (industrial business) adjusted**	2,069	2,483	-17%	3,279	4,988	-34%
Earnings per share (EPS) in EUR	2.91	2.84	+2%	6.17	6.02	+2%
* from continuing operations ** in millions of €

Investments, free cash flow, liquidity

The free cash flow of the industrial business in the second quarter amounted to €1.4 billion (Q2 2021: €2.2 billion), as semiconductor bottlenecks and supply-chain disruptions led to a build-up of unfinished stock. The adjusted free cash flow of the industrial business was €2.1 billion (Q2 2021: €2.5 billion). The net liquidity of the industrial business as of June 30 amounted to €19.1 billion (end of 2021: €21.0 billion). The Group’s investments into property, plant and equipment amounted to €0.8 billion in the second quarter of 2022 (Q2 2021: €1.0 billion). Mercedes-Benz Cars invested €0.7 billion in property, plant and equipment (Q2 2021: €0.9 billion) and Mercedes-Benz Vans invested €0.03 billion (Q2 2021: €0.03 billion). At group level, research and development expenditure in the second quarter amounted to €2.2 billion (Q2 2021: €2.4 billion).

Divisional results

Mercedes-Benz Cars

Mercedes-Benz Cars sales amounted to 487,100 vehicles in the second quarter (Q2 2021: 521,200). Net pricing improved and the product mix remained favourable, helping to lift revenue by 8%, the adjusted EBIT by 20%, and the adjusted Return on Sales to 14.2%, despite a 7% drop in sales. Strong demand could not be fulfilled due to semiconductor and logistical challenges, causing unit sales in the Top-End Luxury segment to slightly decrease to 75,500 vehicles (Q2 2021: 77,900). Mercedes-Maybach posted a record quarter and S-Class sales remained very strong. Unit sales of Core Luxury vehicles exceeded those of the prior-year quarter and reached 272,600 vehicles (Q2 2021: 266,200) while 139,100 vehicles (Q2 2021: 177,100) from the Entry Luxury segment were sold during the same period. For Mercedes-Benz, the switch to electric vehicles in this segment is gathering pace, with electrified Mercedes-Benz Passenger Cars (BEV and PHEV excl. smart) amounting to 57.600 vehicles in Q2 (+16%). Fully electric vehicle sales without smart more than doubled to 25.200 (+134%).

Mercedes-Benz Cars	Q2-2022	Q2-2021	Change 22/21	YTD2022	YTD2021	Change 22/21
Sales in units	487,100	521,200	-7%	974,100	1,060,100	-8%
- thereof xEV	63,600	59,400	+7%	137,600	121,700	+13%
- thereof BEV	31,300	20,700	+51%	58,600	39,100	+50%
Revenue*	26,999	24,974	+8%	52,835	48,898	+8%
EBIT*	3,792	3,021	+26%	8,063	6,811	+18%
EBIT adjusted*	3,833	3,201	+20%	8,076	6,716	+20%
Return on Sales (RoS) in %	14.0	12.1	+1.9%pts	15.3	13.9	+1.4%pts
Return on Sales (RoS) adjusted in %	14.2	12.8	+1.4%pts	15.3	13.7	+1.6%pts
Cash Flow Before Interest and Tax (CFBIT)*	2,393	2,290	+4%	4,240	4,558	-7%
Cash Flow Before Interest and Tax (CFBIT) adjusted*	2,948	2,495	+18%	4,628	5,442	-15%
Cash Conversion Rate adjusted	0.8	0.8	-	0.6	0.8	-
* in millions of €

Mercedes-Benz Vans

At Mercedes-Benz Vans, second-quarter unit sales remained close to prior-year levels with 100,100 vehicles worldwide (Q2 2021: 98,400). Sales in the commercial sector rose slightly to 83,000 units while the private vans with 17,200 unit sales, remained at the prior–year level. Adjusted EBIT reached €0.4 billion (Q2 2021: €0.4 billion) thanks to strongly improved net pricing, which helped to partially offset higher raw material prices and production inefficiencies, caused mainly by semiconductor shortages. However, customer demand for electric vans, especially in the commercial sector, rose by 84% to 3,500 units driven by the eSprinter and eVito. Mercedes-Benz Vans significantly strengthened its small van portfolio with the start of customer deliveries of the new T-Class in Q2, resulting in sales of 912 units and with the new Citan, available since last year.

Mercedes-Benz Vans	Q2-2022	Q2-2021	Change 22/21	YTD2022	YTD2021	Change 22/21
Sales in units	100,100	98,400	+2%	188,600	186,800	+1%
Revenue*	4,107	3,669	+12%	7,794	7,067	+10%
EBIT*	382	432	-12%	730	722	+1%
EBIT adjusted*	414	418	-1%	880	746	+18%
Return on Sales (RoS) in %	9.3	11.8	-2.5%pts	9.4	10.2	-0,8%pts
Return on Sales (RoS) adjusted in %	10.1	11.4	-1,3%pts	11.3	10.6	+0.7%pts
Cash Flow Before Interest and Tax (CFBIT)*	254	201	+26%	632	-95	-
Cash Flow Before Interest and Tax (CFBIT) adjusted*	333	299	+11%	770	485	+59%
Cash Conversion Rate adjusted	0.8	0.7	-	0.9	0.7	-
* in millions of €

Mercedes-Benz Mobility

In the second quarter of 2022, Mercedes-Benz Mobility reached an adjusted Return on Equity (RoE) of 17.1% despite a weakening economic environment. The new business of Mercedes-Benz Mobility declined by 18% to €14.1 billion due to the impact of supply bottlenecks and the slightly decreased proportion of leased and financed vehicles in Group unit sales. Also, the prior-year figures still included the Daimler commercial vehicle business that has since been spun off and hived down. Total portfolio as of June 30 slightly increased to €135.0 billion compared to year-end 2021. Adjusted EBIT decreased to €0.6 billion driven by increased credit risk provisions due to the weaker macroeconomic outlook and by the lower volume.

Mercedes-Benz Mobility	Q1-2022	Q1-2021	Change 22/21	YTD2022	YTD2021	Change 22/21
Revenue*	6,715	6,874	-2%	13,497	13,840	-2%
New business*	14,115	17,191	-18%	28,655	33,955	-16%
Contract volume (June, 30)*	134,986	150,596	-10%	134,986	133,687**	+1%
EBIT*	624	924	-32%	1,357	1,668	-19%
EBIT adjusted*	624	930	-33%	1,357	1,621	-16%
Return on Equity (RoE) in %	17.1	23.9	-6.8%pts	18.6	22.1	-3.5%pts
Return on Equity (RoE) adjusted in %	17.1	24.0	-6.9%pts	18.6	21.4	-2.8%pts
* in millions of € ** Year-end figure 2021

Outlook

The geopolitical and macroeconomic conditions continue to be characterised by an exceptional degree of uncertainty, including the war in Ukraine, its impacts on supply chains, and the development of prices for raw materials and energy. Further effects due to the rapidly changing situation in Russia and Ukraine are not currently known but could possibly have substantial negative consequences for business activities, should it escalate beyond its current state. In addition, the continued very high inflationary pressure for consumers and companies and the associated central bank increases in interest rates as well as ongoing bottlenecks in global supply chains make the outlook more difficult. Not least the further course of the pandemic, in particular in China, holds uncertainties for the expected development of the market.

Despite the macro risks, Mercedes-Benz continues to see healthy and high quality demand for its products for the second half of the year, in all core markets. Order books are solid and healthy demand is driven by a strong product portfolio which is further developing during the course of the year. Demand is seen remaining higher than supply.

Mercedes-Benz Cars

Mercedes-Benz Cars continues to expect a slight sales increase. Pricing and mix are expected to remain on a high level, with top-end vehicle sales growth seen at more than 10% year-on-year.

Between January and June, Mercedes-Benz Cars achieved an adjusted Return on Sales of around 15%. For the second half of the year, it is the ambition of the company to continue with this run rate, using the levers at its disposal on top-line and cost. However, material costs, higher research and development expenses and effects from the used car business are assumed to result in a negative effect of around 2 RoS points versus the H1 run rate, in the second half of 2022. Taking into account further potential market environment headwinds related to macro uncertainties, the company’s guidance for adjusted RoS for Mercedes-Benz Cars for the full-year is now at 12%-14%, rather than the 11.5% and 13% seen earlier. The target is to continue to compensate such risks through net pricing.

The cash conversion rate for Cars remains unchanged at between 0.8 to 1.0. Research and development spending is now expected to be “significantly above” the prior-year level, mainly due to the development of the MMA and AMG.EA platforms. Investments in property, plants & equipment are now expected to be “significantly below” the prior-year level, rather than “at the prior-year level.”

Mercedes-Benz Vans

Sales are expected to remain “slightly above” the 2021 level and the adjusted Return on Sales is expected to remain at 8% to 10%. Investments in property, plants and equipment and research and development are expected to remain “significantly above” prior-year levels due to spending to upgrade existing combustion engine platforms and to develop the electric VAN.EA platform.

Mercedes-Benz Mobility

The adjusted Return on Equity is seen in the range of 16% to 18%. Negative effects on EBIT are expected due to higher refinancing costs and lower contract volumes. Furthermore, the cost of credit risk is expected to trend towards its long-term average level.

Mercedes-Benz Group

Revenue this year is now seen “significantly above” the 2021 level, up from a previously expected “slightly above.” EBIT is now seen “slightly above” the prior-year level, rather than “at the prior-year level.” Free cash flow from the industrial business is now expected to be “at the prior-year level”, from a previously expected “slightly below” the 2021 level.

Link to press information “Sales figures Q2 2022”:
Mercedes-Benz Cars: group-media.mercedes-benz.com/Sales-Q2/cars
Mercedes-Benz Vans: group-media.mercedes-benz.com/Sales-Q2/vans

Link to capital market presentation Q2 2022: group.mercedes-benz.com/q2-2022

Further information on Mercedes-Benz Group AG is available at:
group-media.mercedes-benz.com and group.mercedes-benz.com

Forward-looking statements:

This document contains forward-looking statements that reflect our current views about future events. The words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” “may,” ”can,” “could,” “plan,” “project,” “should” and similar expressions are used to identify forward-looking statements. These statements are subject to many risks and uncertainties, including an adverse development of global economic conditions, in particular a decline of demand in our most important markets; a deterioration of our refinancing possibilities on the credit and financial markets; events of force majeure including natural disasters, pandemics, acts of terrorism, political unrest, armed conflicts, industrial accidents and their effects on our sales, purchasing, production or financial services activities; changes in currency exchange rates, customs and foreign trade provisions; a shift in consumer preferences towards smaller, lower-margin vehicles; a possible lack of acceptance of our products or services which limits our ability to achieve prices and adequately utilize our production capacities; price increases for fuel or raw materials; disruption of production due to shortages of materials, labour strikes or supplier insolvencies; a decline in resale prices of used vehicles; the effective implementation of cost-reduction and efficiency-optimization measures; the business outlook for companies in which we hold a significant equity interest; the successful implementation of strategic cooperations and joint ventures; changes in laws, regulations and government policies, particularly those relating to vehicle emissions, fuel economy and safety; the resolution of pending governmental investigations or of investigations requested by governments and the outcome of pending or threatened future legal proceedings; and other risks and uncertainties, some of which are described under the heading “Risk and Opportunity Report” in the current Annual Report or in the current Interim Report. If any of these risks and uncertainties materializes or if the assumptions underlying any of our forward-looking statements prove to be incorrect, the actual results may be materially different from those we express or imply by such statements. We do not intend or assume any obligation to update these forward-looking statements since they are based solely on the circumstances at the date of publication.

Mercedes-Benz Group at a glance

Mercedes-Benz Group AG is one of the world's most successful automotive companies. With Mercedes-Benz AG, the Group is one of the leading global suppliers of premium and luxury cars and vans. Mercedes-Benz Mobility AG offers financing, leasing, car subscription and car rental, fleet management, digital services for charging and payment, insurance brokerage, as well as innovative mobility services. The company founders, Gottlieb Daimler and Carl Benz, made history by inventing the automobile in 1886. As a pioneer of automotive engineering, Mercedes-Benz sees shaping the future of mobility in a safe and sustainable way as both a motivation and obligation. The company's focus therefore remains on innovative and green technologies as well as on safe and superior vehicles that both captivate and inspire. Mercedes-Benz continues to invest systematically in the development of efficient powertrains and sets the course for an all-electric future: The brand with the three-pointed star pursues the goal to go all-electric, where market conditions allow. Shifting from electric-first to electric-only, the world’s pre-eminent luxury car company is accelerating toward an emissions-free and software-driven future. The company's efforts are also focused on the intelligent connectivity of its vehicles, autonomous driving and new mobility concepts as Mercedes-Benz regards it as its aspiration and obligation to live up to its responsibility to society and the environment. Mercedes-Benz sells its vehicles and services in nearly every country of the world and has production facilities in Europe, North and Latin America, Asia and Africa. In addition to Mercedes-Benz, the world's most valuable luxury automotive brand (source: Interbrand study, 20 Oct. 2021), Mercedes-AMG, Mercedes-Maybach, Mercedes-EQ and Mercedes me as well as the brands of Mercedes-Benz Mobility: Mercedes-Benz Bank, Mercedes-Benz Financial Services and Athlon. The company is listed on the Frankfurt and Stuttgart stock exchanges (ticker symbol MBG). In 2021, the Group had a workforce of around 172,000 and sold 2.3 million vehicles. Group revenues amounted to €168.0 billion and Group EBIT to €29.1 billion.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726006091/en/

Han Tjan, phone +1 212 909 9063, han.tjan@mercedes-benz.com

Andrea Berg, phone +1 917 667 2391, andrea.a.berg@mercedes-benz.com

Tobias Just, +49 711 17 41341, tobias.just@mercedes-benz.com

Edward Taylor, +49 176 30 94 1776, edward.taylor@mercedes-benz.com

Benjamin Kraft, +49 176 3095 7277, benjamin.b.kraft@mercedes-benz.com

Source: Mercedes-Benz Group AG

FAQ

What were the key financial results for Mercedes-Benz in Q2 2022?

Mercedes-Benz reported a 7% revenue increase to €36.4 billion and an adjusted EBIT rise of 8% to €4.9 billion.

How did Mercedes-Benz address supply chain challenges in Q2 2022?

Mercedes-Benz enhanced supply chain resilience by reducing gas consumption and transitioning towards renewable energy sources.

What is the outlook for Mercedes-Benz's revenue and EBIT in 2022?

The outlook for 2022 has improved, with revenue and EBIT expected to be ‘significantly above’ prior-year levels.

What impact did semiconductor shortages have on Mercedes-Benz's sales?

Semiconductor shortages led to a 7% drop in sales, impacting the ability to fulfill strong customer demand.

How did electric vehicle sales perform for Mercedes-Benz in Q2 2022?

Electric vehicle sales surged by 134%, with 25,200 fully electric vehicles sold in the second quarter.