Costs focus keeps Mercedes Q2 profit up

Mercedes-Benz Group sales in the second quarter of 2022 increased 7% year over year to EUR 36.4 billion (Q2 2021: EUR 34.1 billion) and adjusted EBIT increased by 8% to 4.9 billion EUR (EUR 4.6 billion) as the company focused on luxury vehicles, EVs and premium vans. A relentless focus on cost helped offset the lower sales and higher raw material costs, the automaker said.

Due to the situation in Ukraine, it has been committed to protecting supply chains and maximizing “the potential for reducing or replacing the use of natural gas in vehicle production”. In Sindelfingen, where the EQS, S-Class and Mercedes-Maybach are produced, the paint shop could operate without gas supply in an emergency.

“Mercedes-Benz sees a gas reduction potential of around 50% in Germany with no impact if regional pooling is possible. The company’s long-term goal is to transition from gas to electricity and other renewable energy sources,” the company said in a statement.

Mercedes Benz cars

Sales declined 7% to 487,100 vehicles from 521,200, although net prices improved and product mix remained favorable, increasing sales by 8%, adjusted EBIT by 20% and adjusted return on sales to 14.2%.

The automaker said demand could not be met due to semiconductor and logistical challenges, which drove unit sales in the “top-end luxury” segment from 77,900 to 75,500 vehicles.

Unit sales of so-called luxury cars reached 272,600 (266,200), of which the entry-level volume for luxury cars fell from 177,100 from 139,100 to 139,100.

Sales of electrified models rose 16% to 57,600.

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%
of that xEV 63,600 59,400 +7% 137,600 121.700 +13%
of which 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 Taxes (CFBIT)* 2.393 2290 +4% 4.240 4.558 -7%
Cash flow before interest and taxes (CFBIT) adjusted* 2,948 2,495 +18% 4.628 5.442 -15%
Adjusted cash conversion rate 0.8 0.8 0.6 0.8
* in millions of EUR

Mercedes-Benz vans

Unit sales in the second quarter were stable at 100,100 vehicles worldwide (98,400). Adjusted EBIT remained flat at EUR 0.4 billion, thanks to strongly improved net prices, which partly offset higher raw material prices and production inefficiencies mainly caused by semiconductor shortages.

Demand for electric vans, especially in the commercial sector, increased by 84% to 3,500 units powered by the eSprinter and eVito. Deliveries of the new T-Class started in the second quarter.

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% points 9.4 10.2 -0.8% pts
Return on Sales (RoS) adjusted in % 10.1 11.4 -1.3% points 11.3 10.6 +0.7%pts
Cash Flow Before Interest and Taxes (CFBIT)* 254 201 +26% 632 -95
Cash flow before interest and taxes (CFBIT) adjusted* 333 299 +11% 770 485 +59%
Adjusted cash conversion rate 0.8 0.7 0.9 0.7
* in millions of €

Outlook

Mercedes said: “Geopolitical and macroeconomic conditions are still characterized by an exceptional degree of uncertainty, including the war in Ukraine, its impact on supply chains and the evolution of raw material and energy prices. Further effects from the rapidly changing situations in Russia and Ukraine are unknown at this time, but could potentially have a substantial negative impact on business activities should it escalate beyond the current state.

In addition, continued very high inflationary pressures on consumers and businesses and the associated rate hikes by the central bank, as well as persistent bottlenecks in global supply chains, are making the outlook more difficult. Last but not least, the further course of the pandemic, especially in China, creates uncertainties for the expected development of the market.

Despite the macro risks, Mercedes-Benz continues to see healthy and quality demand for its products in all core markets for the second half of the year. Order books are solid and healthy demand is driven by a strong product portfolio that continues to develop over the course of the year. Demand continues to exceed supply.”

Mercedes-Benz cars

Mercedes-Benz Cars continues to expect a slight increase in sales. Pricing and mix are expected to remain at a high level, with auto sales growing more than 10% year-on-year.

Cars achieved an adjusted Return on Sales of approximately 15% between January and June and aims to achieve that in H2. However, it is believed that material costs, higher research and development costs and effects of the used car industry result in a negative effect of about 2 RoS points relative to the H1 run rate.

The full year outlook for the adjusted RoS is now at 12%-14%, up from the 11.5% and 13% seen earlier.

Van sales are expected to remain “slightly above” 2021 levels and the adjusted RoS is expected to remain at 8% to 10%. Investments in real estate, factories and equipment and research and development are expected to remain “significantly above” last year’s levels due to spending to upgrade existing combustion engine platforms and to develop the electric VAN.EA platform.

This year’s group sales are now seen “significantly above” the 2021 level, up from a previously expected “slightly above”. EBIT is now seen as “slightly above” last year’s level, rather than “at last year’s level”.

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