Mercedes 1998 Annual Report Download - page 61

ANALYSIS OF THE FINANCIAL SITUATION
57
While the business units Automotive Electronics and MTU/
Diesel Engines, which are included in the Other segment, were
able to post further improvements in profitability, the situation
at Rail Systems continued to be unsatisfactory in 1998. The
financial results of Rail Systems were negatively impacted
by further restructuring measures and goodwill write-offs.
In January 1999, we agreed with ABB to take over its 50%
stake in Adtranz. We believe we will be able to implement the
necessary structural measures faster and more decisively in
order to improve the earning power of the world’s leading rail
technology company more quickly. The results of this segment
also include gains on disposals of the semiconductor activities
and the sale of two buildings at Potsdamer Platz. In addition,
the expenses for corporate research functions are included in
the results of this segment.
INCREASE IN FINANCIAL RESULTS. In 1998, the financial
results reached € 0.8 billion and were 21% higher than in 1997;
however, there were significant changes in their makeup.
Income from affiliated, associated and related companies de-
clined by € 0.6 billion to € (0.1) billion. The financial income
for the year 1997 included the gain from the disposal of the
stake in Cap Gemini Sogeti. In addition, the income of Airbus
Industrie declined noticeably due to invoicing factors. Whereas
interest income at € 0.7 billion was less than the amount for
1997 due to lower interest rate levels, other financial results at
€ 0.1 billion (1997: minus 0.8 billion) are positive. In 1997,
especially due to the appreciation of the US dollar against the
D-Mark, other financial results were burdened by the settle-
ment and valuation of foreign exchange contracts which did not
qualify for hedge accounting. The improvement in 1998 over
1997 reflects the upward revaluation of the D-Mark in relation
to the US dollar in 1998.
COMPARABLE GROUP NET INCOME CLEARLY IMPROVED. The
net income reported in the income statement is € 4.8 billion, a
decrease of € 1.7 billion from 1997. However, net income fig-
ures for 1998 and 1997 include non-recurring items and are
therefore not comparable. The net income for 1997 included tax
benefits amounting to € 2.5 billion resulting from the special
distribution of € 10.23 (DM 20.00) per share of Daimler-Benz
AG and from the reversal of valuation allowances on deferred
tax assets. The net income for 1998 is reduced by costs
amounting to € 401 million (after taxes) related to the imple-
mentation of the merger. If adjusted for these non-recurring
items, the net income for 1998 at € 5.2 billion is 29% higher
than the comparable figure of € 4.1 billion for 1997. The 1998
extraordinary result of € 129 million is related to Daimler-
Chrysler Corporation’s early extinguishment of borrowings
carrying a high interest rate which would have run until the
year 2020. After adjusting for the special items, earnings per
share increased from € 4.28 in 1997 to € 5.58 in 1998.
DISTRIBUTION OF € 2.35 PER SHARE. Due to the favorable
trend in earnings in the operating business, we are proposing
to our shareholders at the Annual General Meeting to be held
on May 18, 1999 to declare a dividend of € 2.35 (DM 4.60) per
share for the 1999 fiscal year. On the basis of an aggregate
share capital entitled for dividends of € 2,561 million the total
distribution amount will reach € 2,356 million.
1,993
4,212
946
652
392
623
(146)
(79)
8,593
Passenger Cars
(Mercedes-Benz, Smart)
Passenger Cars and Trucks
(Chrysler, Plymouth, Jeep®, Dodge)
Commercial Vehicles
(Mercedes-Benz, Freightliner,
Sterling, Setra)
Chrysler Financial Services
Services
Aerospace
Other
Eliminations
DaimlerChrysler-Group
1,716
3,368
342
586
246
284
(225)
(87)
6,230
Operating Profit
by Segments 97
€
98
€
98
US $
2,338
4,942
1,110
765
460
731
(171)
(93)
10,082
in Millions