Mercedes 2015 Annual Report Download - page 149

156 B | COMBINED MANAGEMENT REPORT | OUTLOOK
Free cash flow and liquidity
The anticipated development of earnings in the automotive
divisions will have a positive impact on the free cash flow of
the industrial business also in 2016. With regard to the free
cash flow in the year 2015, it is necessary to consider that it
was affected by extraordinary contributions to the German
and American pension plan assets of €1.2 billion as well as by
the acquisition of stakes in the digital mapping business,
HERE, and in the US telematics provider, Zonar Systems, in a
total amount of €0.7 billion. As we will continue and intensify our
investment offensive in products and technologies, the free
cash flow of the industrial business adjusted for special items
should be significantly lower in 2016 than the comparable
amount of €5.9 billion in 2015. We assume, however, that it will
be significantly higher than the dividend distribution in the
year 2016.
For the year 2016, we aim to have liquidity available in a volume
appropriate to the general risk situation in the financial mar-
kets and to Daimler’s risk profile. When measuring the level of
liquidity, we give due consideration to possible refinancing
risks caused for example by temporary distortions in the finan-
cial markets. We continue to assume, however, that we will
have very good access to the capital markets and bank markets
also in the year 2016. We want to cover our funding needs in
the planning period primarily by means of bonds, commercial
paper, bank loans, customer deposits in the direct banking
business and the securitization of receivables in the financial
services business; the focus will be on bonds and loans
from globally and locally active banks. In view of the very good
liquidity situation of the international capital markets and
our strong creditworthiness, we expect a continuation of very
attractive refinancing conditions in 2016. An additional goal
is to continue securing a high degree of financial flexibility.
Dividend
We aim to achieve a sustainable dividend development also
in the coming years. In setting the dividend, our target is
to distribute approximately 40% of the net profit attributable
to Daimler shareholders.
At the Annual Shareholders’ Meeting on April 6, 2016, the
Board of Management and the Supervisory Board will propose
an increase in the dividend to €3.25 per share (prior year:
€2.45). This represents a total distribution of €3.5 billion (prior
year: €2.6 billion) and is by far the highest dividend paid out
in the Company’s history. With this proposal, we are letting our
shareholders participate in the Company’s success while
expressing our confidence about the ongoing course of busi-
ness.
Investment
In order to achieve our ambitious growth targets, we will expand
our product range in the coming years and develop additional
production and distribution capacities. We also want to make
sure that we can play a leading role in the far-reaching
technological transformation of the automotive industry. This
applies in particular to the digital connectivity of our products
and processes along the entire value chain. For this purpose,
we will once again significantly increase our already very high
investment in property, plant and equipment in the year 2016.
The Mercedes-Benz Cars, Daimler Trucks and Mercedes-Benz
Vans divisions will account for this increase. In addition to capital
expenditure, we are developing our position in the emerging
markets by means of targeted financial investments in our hold-
ings. That includes the expansion of our car production
capacities in China, together with our partner BAIC.
At the Mercedes-Benz Cars division, we will significantly
increase our capital expenditure in 2016. The most important
projects include the new E-Class family, the successor
models to the current compact class and new gasoline and
diesel engines. Substantial investment is planned also for
the expansion of our German production sites as competence
centers, as well as for the expansion of our international pro-
duction network. Daimler Trucks will mainly invest in successor
generations of existing products, the expansion and modern-
ization of the plants, and new global component projects in 2016.
At Mercedes-Benz Vans, the focus will be on further deve -
loping the existing model range, expanding the sales-and-service
organization and establishing production of the Sprinter in
the United States. Key projects at Daimler Buses are advance
expenditures for new models and product enhancements
and the new bus plant in India.
Research and development
With our research and development activities, our goal is to
further strengthen Daimler’s competitive position against the
backdrop of upcoming technological challenges. We want to
create competitive advantages above all by means of innovative
solutions for low emissions and safe mobility – for example in
the fields of autonomous driving, hybrid drive, electric mobility
with batteries and fuel cells, and the connectivity of our
vehicles and services. In addition, we intend to utilize the growth
opportunities offered by worldwide automotive markets with
new and attractive products. In order to achieve these goals,
we will once again significantly increase our total expenditure
for research and development in 2016. At Mercedes-Benz Cars,
a large part of that expenditure will flow into the renewal
and expansion of our model range. In addition, we will invest
considerable amounts in new low-emission and fuel-efficient
engines, alternative drive systems, the connectivity of our vehi-
cles and innovative safety technologies. At Daimler Trucks,
the focus will be on activities in the areas of emmission standards
and fuel efficiency, as well as expenditure for tailored products
and technologies for the Brazilian market and for the FUSO
product portfolio. Also at Mercedes-Benz Vans and Daimler
Buses, an important area of research and development is to
meet future emission standards and to increase fuel efficiency.
One focus at Mercedes-Benz Vans will be on the connectivity
of products and processes, and alternative drive systems will
play an important role at Daimler Buses.