Mercedes 2004 Annual Report Download - page 32

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Financial income
Financial loss for 2004 was €1,077 million, compared with a
financial loss of €2,792 million in 2003.
The loss from investments decreased by €1,831 million to a loss
of €606 million (2003: loss of €2,437 million), reflecting the
impairment recognized on the Group’s equity investment in EADS
of €1,960 million in the prior year. In 2004, there was a positive
effect from the significant increase in the profit contribution from
EADS as well as a gain of €252 million from the disposal of the
Group’s 10.5% equity interest in Hyundai Motor Company (HMC).
Charges arose from the proportionate share of the losses record-
ed by Toll Collect and MMC. The decreased contribution from
MMC was caused by charges from the operating business as well
as impairments recognized on capitalized deferred tax assets.
Together with the effects from the dilution of the Group’s interest
in MMC and related currency hedging effects, financial income
was debited from MMC with a negative amount of €580 million
(2003: negative amount of €281 million). As the Group ceased to
account for the investment in MMC using the equity method on
June 29, 2004, it has had no effect on financial income since that
date.
The net interest loss of €300 million was lower than the net
interest loss for the prior year (€390 million).
Other financial loss amounted to €171 million (2003: Other
financial income of €35 million). The decrease compared with
the prior year was due in particular to the write down of loan
receivables due from debis AirFinance.
Income taxes
In 2004, the Group recorded an income tax expense of €1,177
million, compared with an expense of €979 million in 2003.
Related to income before income taxes of €3,535 million (2003:
€596 million), the effective tax rate was 33.3% after 164.3%
in the prior year. In 2004, the effective tax rate was positively
affected by the tax-free gain realized on the sale of the 10.5%
investment in HMC, higher contributions to earnings from EADS
which are almost tax-free, and tax-free gains included in
net periodic pension costs and net postretirement benefit costs.
Non-tax deductible losses arising from our investments in
MMC and debis AirFinance partially offset this development.
The high effective tax rate in the prior year was primarily due
to the fact that the impairment recognized on the carrying value
of the Group’s investment in EADS was not tax deductible.
In combination with the low pre-tax earnings, this impairment
caused a substantial increase in the arithmetical tax rate. In
2003, the effective tax rate was also increased by the non-tax-
deductible losses of the equity-method investments.
Additional information on income taxes can be found in Note 9
to the consolidated financial statements.
Net income
The DaimlerChrysler Group recorded net income of €2,466
million in 2004, compared with €448 million in the prior year.
The increase in net income of €2,018 million resulted from earn-
ings improvements in the operating business and also from a
higher financial income, which had been significantly impacted in
the prior year by, among other factors, the impairment of the
book value of the Group’s investment in EADS (€1,960 million).
Based on the reported net income, earnings per share amounted
to €2.43 (2003: €0.44).
Development of Earnings
1.5
3.0
4.5
6.0
7.5
9.0
2004200320022001
Operating profit
Net income
In billions of €
0.3
0.6
0.9
1.2
1.5
2004200320022001
In €
Dividend per Share