Mercedes 1998 Annual Report Download - page 22

BUSINESS REVIEW
18
DaimlerChrysler was very successful in 1998. We further improved the earning power of the company: Operating profit rose by
€ 2.4 billion to € 8.6 billion and net operating income increased from € 5.3 billion to € 6.6 billion. Return on net assets (after taxes)
reached 11.6% (1997: 10.2%). Revenues increased by 12% to
€ 131.8 billion. Almost all business units contributed to this growth.
On the basis of this favorable earnings trend, we are proposing at our shareholders' meeting to declare a dividend of
€ 2.35 per share
for the 1998 financial year.
B U S I N E S S R E V I E W
EARNING POWER INCREASED. DaimlerChrysler achieved an
operating profit of € 8.6 billion in 1998. This represents an
increase of 38% over the comparable figure of € 6.2 billion for
1997. The net operating income, the basis for calculating the
return on capital employed (after taxes) increased from € 5.3
billion to € 6.6 billion. This means that at 11.6% (1997: 10.2%)
we easily surpassed the minimum yield (9.2%) required to cover
capital costs and increase the value of the Group. Since we stan-
dardized the controlling instruments in the DaimlerChrysler
Group to conform with internal requirements and adjusted the
minimum return on investment to the corresponding trends in
the international capital markets, these values are not
comparable with the figures published by Daimler-Benz and
Chrysler in 1997.
Almost all divisions contributed to the rise in operating profit.
The growth in the Commercial Vehicles and Aerospace divisions
was especially pronounced. The vehicles business contributed
around 83% of the operating profit, while the other business
areas contributed 17%. (Page 56)
A €€
€€
€ 2.35 DIVIDEND PROPOSED. On the basis of the favorable
trend in earnings in the operating business, we are proposing to
our shareholders to declare a dividend of € 2.35 (DM 4.60) per
share for 1998. Former Daimler-Benz shareholders would
receive a substantially higher distribution than in the past,
while the dividend for former Chrysler shareholders would
remain at the high level of previous years.
SLOWER GROWTH OF THE WORLD ECONOMY. The trend in the
overall global economic environment was less favorable than
the trend of business at DaimlerChrysler. The world economy
grew by only 1.8% in 1998, after 3.4% in 1997. This represents
the lowest growth rate since 1982. The recession in Japan and
the economic and financial crisis in various newly industria-
lizing countries in Asia and in Russia were the main reasons.
The business conditions have also become noticeably unsettled
in South America as well, particularly in Brazil.
On the other hand, the overall economic situation in Western
Europe and in North America continued to be stable. The U.S.
economy, as in 1997, grew by 3.9%, supported by persistent
vigorous spending by consumers and by high levels of
investment activity. In Western Europe, economic performance
grew by 2.8%. The main impetus came from the countries in
which the euro was introduced on January 1, 1999. Another
driving factor in economic growth in Western Europe was
increasing domestic demand.
The international exchange rate structure was on average
relatively stable in 1998, despite certain fluctuations between
the dollar, yen and European currencies during the year. As a
result the impact of changes in exchange rates on the business
trend at DaimlerChrysler was smaller than in previous years.