Annual Report 2017

Statement of income

The Group’s total revenue increased by 7.2% to €164.3 billion in 2017; adjusted for exchange rate effects, it increased by 7.8%. The revenue growth primarily reflects the strong demand for our products at Mercedes-Benz Cars and Daimler Trucks, as well as the increased contract volume at Daimler Financial Services. Further information on the development of revenue is provided in the “Business development” section of this Combined Management Report. (See table B.17)

Cost of sales amounted to €130.0 billion in 2017, increasing by 7.2 % compared with the previous year. The rise in cost of sales was caused by higher business volumes and consequentially higher material expenses. The higher material expenses also reflect increased prices of raw materials. Personnel expenses and depreciation of equipment on operating leases also increased. At Daimler Financial Services, the higher interest-rate level led to higher refinancing costs. Cost of sales also includes expenses for voluntary service activities and expenses for a specific vehicle recall of €0.4 billion. Further information on cost of sales is provided in Note 5 of the Notes to the Consolidated Financial Statements. (See table B.17)

Overall, gross profit of 20.9 % was at the same level as in the previous year.

Due to the growth in unit sales, selling expenses increased by €0.7 billion to €13.0 billion and includes higher expenses for marketing. As a percentage of revenue, selling expenses decreased slightly from 8.0 % to 7.9 %. (See table B.17)

General administrative expenses of €3.8 billion were above the level of the previous year (2016: €3.4 billion). The increase was mainly due to higher expenses for personnel and consulting. As a percentage of revenue, general administrative expenses increased slightly to 2.3 % (2016: 2.2 %). (See table B.17)

Research and non-capitalized development costs increased by €0.7 billion to €5.9 billion in 2017. They were mainly related to the development of new models, advance expenditure for the renewal of existing models, and the further development of fuel-efficient and environmentally friendly drive systems, as well as safety technologies, autonomous driving and the digital connectivity of our products. As a proportion of revenue, research and non-capitalized development costs increased from 3.4 % to 3.6 %. Further information on the Group’s research and development costs is provided in the “Research and development” section of the “Sustainability” chapter of this Combined Management Report. (See table B.17)

Other operating income increased to €2.8 billion (2016: €2.4 billion). This is primarily attributable to income of €0.4 billion from the sale of property, plant and equipment. Other operating expense decreased in the year 2017 to €1.0 billion (2016: €1.3 billion), due in particular to expenses connected with a legal proceeding of €0.4 billion in 2016. Further information on the composition of other operating income and expense is provided in Note 6 of the Notes to the Consolidated Financial Statements. (See table B.17)

In 2017, our share of profit from equity-method investments was significantly higher than the prior-year level at €1.5 billion (2016: €0.5 billion). The increase was primarily due to improved earnings at Beijing Benz Automotive Co. Ltd. (BBAC) and the reversal of the impairment of €0.2 billion of the shares in BAIC Motor (2016: negative impact from the impairment of €0.2 billion of the investment in BAIC Motor). (See table B.17)

Other financial expense/income worsened from income of €0.3 billion to an expense of €0.2 billion. This significant change is primarily the result of the gain of €0.6 billion recognized in the previous year from the contribution of the equity interests in Renault and Nissan at fair value into the German pension-plan assets. Those gains were previously presented within other comprehensive income/loss. (See table B.17)

Net interest expense amounted to €0.4 billion (2016: €0.3 billion). (See table B.17)

The tax expense of €3.4 billion (2016: €3.8 billion) stated under income tax expense decreased despite the increase in profit before income taxes. The effective tax rate for 2017 was 24.0 % (2016: 30.1 %). This was mainly a result of the law signed in 2017 for a comprehensive tax reform in the United States. Due to the reduction in the nationwide federal corporate income tax rate for US companies, the future net tax liabilities of the US-subsidiaries of Daimler had to be remeasured with the new tax rate. The remeasurement resulted in an income tax benefit of €1.7 billion. Opposing the positive impact from the US tax reform, tax expenses were recognized in 2017 in connection with the interpretation of tax laws. (See table B.17)

Net profit for the year improved to €10.9 billion (2016: €8.8 billion). Net profit of €0.3 billion is attributable to non-­controlling interests (2016: €0.3 billion). Net profit attributable to the shareholders of Daimler AG amounts to €10.5 billion (2016: €8.5 billion), representing an increase in earnings per share to €9.84 (2016: €7.97). (See table B.17)

The calculation of earnings per share (basic) is based on an unchanged average number of outstanding shares of 1,069.8 million.

B.17 Statement of income1

  Consolidated Industrial Business2 Daimler Financial Services
  2017 2016 2017 2016 2017 2016
In millions of euros            
             
Revenue 164,330 153,261 140,555 132,601 23,775 20,660
Cost of sales -129,999 -121,298 -109,767 -103,600 -20,232 -17,698
Gross profit 34,331 31,963 30,788 29,001 3,543 2,962
Selling expenses -12,965 -12,226 -12,224 -11,577 -741 -649
General administrative expenses -3,809 -3,419 -2,816 -2,702 -993 -717
Research and non-capitalized development costs -5,938 -5,257 -5,938 -5,257 - -
Other operating income 2,824 2,350 2,621 2,200 203 150
Other operating expense -1,042 -1,298 -999 -1,267 -43 -31
Share of profit from equity-method investments, net 1,498 502 1,497 503 1 -1
Other financial expense, net -230 275 -230 250 0 25
Interest income 214 230 214 229 - 1
Interest expense -582 -546 -577 -540 -5 -6
Profit before income taxes 14,301 12,574 12,336 10,840 1,965 1,734
Income taxes -3,437 -3,790 -4,151 -3,235 714 -555
Net profit 10,864 8,784 8,185 7,605 2,679 1,179

thereof attributable to non-controlling interests

339 258        

thereof attributable to shareholders of Daimler AG

10,525 8,526        

1 The columns „Industrial business“ and „Daimler Financial Services“ represent a business point of view.

2 The industrial business comprises the vehicle segments Mercedes-Benz Cars, Mercedes-Benz Trucks, Mercedes-Benz Vans and Daimler Buses. Intra-group eliminations between the industrial business and Daimler Financial Services are generally allocated to the industrial business.

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