Daimler trucks
The manufacturer’s sales increased, but there are problems with free cash flow.
(Photo: Bloomberg)
Logistical problems, of all things, are clouding Daimler Truck’s business. In concrete terms, the global number one among manufacturers of heavy articulated lorries and buses is struggling with full warehouses because there is a lack of truck drivers and semiconductors. The Swabians are currently unable to deliver thousands of finished vehicles to their customers.
This is reflected in the balance sheet of the independent subsidiary of the car manufacturer Mercedes-Benz. That means: In the first quarter, Daimler Truck actually didn’t make any money, but burned 628 million euros in the industrial business. The free inflow of funds (free cash flow) is negative, in the second quarter the minus is even 756 million euros.
Free cash flow is one of the most important financial indicators, especially for shareholders. Finally, it shows whether a company has sufficient liquidity to be able to pay out a dividend, for example. Daimler Truck is therefore trying to classify the currently unpleasant development. For the year as a whole, the free inflow of funds should be around plus 1.6 billion euros.
It is said that several special factors are responsible for the current minus. Accordingly, there was a one-off payment of 250 million euros to the group’s pension fund in the second quarter following the spin-off of Mercedes-Benz. In addition, unusually high income taxes were incurred.
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However, the main reason for the EUR 2.1 billion drop in free cash flow compared to the previous year is a “temporarily” significantly higher inventory – which in turn is due to the ubiquitous shortage of truck drivers.
Daimler Truck: Thousands of trucks just stand around
According to CFO Jochen Goetz, there are currently several thousand trucks just lying around in the Daimler Truck plants, which could in principle be delivered immediately. “It’s a huge amount, a three-digit million amount of stocks,” says Goetz.
In Germany alone there is currently a shortage of between 80,000 and 100,000 truck drivers, estimates the Federal Association of Road Haulage, Logistics and Disposal (BGL). Many transport companies now have to turn down orders and shut down vehicles because there simply isn’t any staff available to run them, explains Dirk Engelhardt, spokesman for the BGL board.
Russia’s war of aggression against Ukraine is likely to have exacerbated the personnel shortage in the logistics industry that has existed for years. For the whole of Europe, the industry association International Road Transport Union (IRU) is forecasting an increase in the proportion of vacant driver positions from ten to 14 percent for 2022. To put this into context: last year, the industry was unable to find staff for more than 380,000 open jobs.
Daimler trucks
The truck manufacturer is currently able to push through higher prices.
(Photo: dpa)
The fact that the bottlenecks in logistics are now slowing down even giant trucks like Daimler Truck is a warning sign. For years, the industry has been demanding that working conditions for truck drivers be improved and their jobs made more attractive. Because there are hardly any young people who are willing to put up with the many traffic jams and deadline pressure, especially since the wage level is comparatively low.
Sales increase by almost 20 percent
At least Daimler Truck sees only short-term restrictions for its business. Basically, things are going well for the Swabians, also thanks to increased prices. In the first half of the year, the group was able to increase sales to around 22 billion euros. This corresponds to an increase of almost one fifth compared to the previous year.
“We have not seen any cancellations so far, customers accept higher prices,” said CEO Martin Daum. Since there is an inflationary environment in the long term, there are good arguments for maintaining prices even if cost pressure from the raw materials side eases. “We will definitely hold the prices to get back to normal margins,” said Daum.
Although sales only rose by six percent at the same time, operating profit (EBIT) adjusted for special effects increased more than twice as much. In the second quarter alone, the bottom line was around one billion euros.
The world’s largest truck manufacturer believes that the availability of semiconductors will improve in the coming weeks and does not anticipate any production outages as a result of a possible gas emergency. Overall, Daimler Truck confirms its outlook and expects an adjusted return on sales of up to nine percent in the industrial business.
However, the group emphasizes that the forecast depends on the effects of the Ukraine war, higher inflation and rising interest rates on the global economy. There is also an extraordinary amount of uncertainty due to the corona pandemic.
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