Annual Report 2017

Value added

As described in the Performance measurement system section of the Corporate Profile chapter in chart B.03, the cost of capital is the result of net assets and cost of capital expressed as a percentage, which is subtracted from earnings in order to calculate value added. The tables B.20 and B.21 show value added and net assets for the Group and for the individual divisions. Table B.22 shows how net assets are derived from the consolidated statement of financial position.

The Group’s value added increased by €2.0 billion to €7.2 billion in 2017, representing a return on net assets of 22.9 % (2016: 19.1 %). This was once again substantially higher than the minimum required rate of return of 8 %. The significant increase in value added was mainly due to the growth in the divisions’ EBIT. In addition, a positive effect came from the decrease in income-tax expenses caused by the reduction in the nationwide federal corporate income tax rate for US companies as a result of the law signed in 2017 for a comprehensive tax reform in the United States. The increase in average net assets was mainly attributable to higher investment in fixed assets and had only a slight negative impact on value added.

B.20 Value added

  2017 2016 17/16
In millions of euros   % change
       
Daimler Group 7,246 5,243 +38
       
Mercedes-Benz Cars 6,330 5,431 +17
Daimler Trucks 1,369 935 +46
Mercedes-Benz Vans 895 962 -7
Daimler Buses 126 143 -12
Daimler Financial Services 518 439 +18

B.21 Net assets (average)

  2017 2016 17/16
In millions of euros   % change
       
Mercedes-Benz Cars 23,975 22,345 +7
Daimler Trucks 8,421 8,448 -0
Mercedes-Benz Vans 2,385 1,739 +37
Daimler Buses 978 887 +10
Daimler Financial Services1 11,165 10,000 +12
Net assets of the divisions 46,924 43,419 +8
Equity method investments2 941 555 +70
Assets and liabilities from income taxes3 2,141 3,372 -37
Other reconciliation3 -1,492 -292 +411
       
Daimler Group 48,514 47,054 +3

1 Total equity.

2 To the extent not allocated to the segments.

3 To the extent not allocated to Daimler Financial Services.

B.22 Net assets of the Daimler Group at year-end

  2017 2016 17/16
In millions of euros   % change
       
Net assets1      
Intangible assets 12,742 11,145 +14
Property, plant and equipment 27,914 26,314 +6
Leased assets 18,711 17,433 +7
Inventories 24,492 24,426 +0
Trade receivables 9,737 8,977 +8
Less provisions for other risks -16,512 -15,325 +8
Less trade payables -11,655 -10,853 +7
Less other assets and liabilities -27,789 -26,727 +4
Assets and liabilities from income taxes1 1,719 2,935 -41
Total equity of Daimler Financial Services 12,378 10,448 +18
       
Daimler Group 51,737 48,773 +6

1 To the extent not allocated to Daimler Financial Services.

Value added at Mercedes-Benz Cars increased by €0.9 billion to €6.3 billion, primarily reflecting the positive earnings development due to the increased sales of new vehicles, positive exchange-rate effects and income in connection with the remeasurement in the equity investment in THERE Holding B.V. Opposing effects resulted from advance expenditure for new technologies and future vehicles, expenses for the expansion of production capacities and a disadvantageous development of raw-material prices. Furthermore, expenses for voluntary service activities and for a specific vehicle recall had a negative impact on earnings. In the year 2016, EBIT included expenses in connection with Takata airbags and expenses in connection with the remeasurement of inventories. There was a slight negative impact on value added from the increase in average net assets to €24.0 billion primarily caused by higher investments in fixed assets.

Daimler Trucks’ value added was significantly higher than in the previous year at €1.4 billion (2016: €0.9 billion). This development was primarily the result of the positive development of earnings due to increased unit sales in the NAFTA region, the sale of real estate in Japan and efficiency improvements. Higher expenses for raw materials and expenses for the fixed-cost optimization had a negative impact on EBIT. Average net assets were close to the prior-year level.

At Mercedes-Benz Vans, value added decreased by €0.1 billion to €0.9 billion. This development was the result of the increase in average net assets caused by higher investments in fixed assets and higher inventories. Despite increasing expenses for product ramp-ups and production material, as well as the negative impact of the termination of a contract-manufacturing arrangement, EBIT remained at the prior-year level due to the positive development of unit sales.

The value added of the Daimler Buses division was slightly lower than in the previous year at €126 million (2016: €143 million). This primarily reflects the increase in average net assets due to higher inventories. EBIT was at the high prior-year level, due to further efficiency enhancements and increasing unit sales in Latin America.

Daimler Financial Services’ value added of €0.5 billion was above the prior-year level at €0.4 billion. The division’s return on equity amounted to 17.6 % (2016: 17.4 %). The development of value added primarily reflects the higher earnings resulting from increased contract volume and a better cost-of-risk situation. On the other hand, a higher interest-rate level, the expansion of businesses activities and exchange-rate effects impacted earnings negatively. In addition, average equity increased by €0.1 billion.

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