Mercedes 2010 Annual Report Download - page 103

Management Report | Daimler AG | 99
Profitability
The development of business in the year 2010 was primarily
driven by the recovery of the world economy. The main automo-
tive markets developed positively with a generally high level
of demand. Unit sales were higher than the prior-year levels for
all types of vehicle. After the prior year was severely impacted
by the financial and economic crisis, Daimler AG posted a profit
on ordinary activities of €5.6 billion in 2010 (2009: loss of
€4.4 billion).
The improved result is primarily due to the increased unit sales
of vehicles, a favorable sales structure and the improvement
in financial income/expense.
Revenue increased by €15.8 billion to €63.0 billion. The revenue
generated by sales of passanger cars increased by €11.7 billion
to €46.1 billion due to higher unit sales and structural effects.
As a result of the worldwide recovery of demand, Daimler AG
also recorded a substantial increase in revenue generated by
sales of trucks and vans of €4.1 billion to €16.9 billion.
The result of operations in the car business was a significant
profit in 2010. This was mainly due to high volumes of unit sales
and an advantageous product mix. Better pricing also had a posi-
tive impact on earnings. There was an opposing, negative effect
on earnings from increased research and development expenses.
Sales of new cars increased by 21% to 1,256,000 units* in 2010
(2009: 1,038,000 units). Car sales increased significantly, partic-
ularly in the United States and China and in the premium and luxury
segments. Sales rose of the S-Class by 78% to 84,000 units and
of the E-Class by 47% to 320,000 units.
The result of operations for trucks and vans was also significantly
better than in the prior year due to higher unit sales. Unit sales
of vans increased due to the positive market development by 39%
to 208,000 vehicles. Unit sales of trucks reached 77,000 vehi-
cles (2009: 53,000)*. The growth in unit sales of trucks and vans
was mainly based on the Actros (62%), Axor (33%) and Sprinter
(50%) model series.
Condensed statement of income of Daimler AG
Dec. 31,
2010
Dec. 31,
2009
In millions of euros
Revenue 63,002 47,177
Cost of sales (including R&D expenses) - 5 4, 241 -44,503
Selling expenses -4,907 -4,389
Administrative expenses -2,194 -2,178
Other operating income/expense 923 -68
Financial income/expense 3,024 -403
Profit/loss on ordinary activities 5,607 -4,364
Extraordinary income 254 –
Income tax expense -462 -401
Profit/loss for the year 5,399 -4,765
Transfer from the capital reserve -4,765
Transfer to retained earnings -2,699 –
Balance sheet profit/loss 2,700 –
Financial income/expense improved by €3.4 billion to €3.0
billion, primarily due to improved income from equity invest-
ments. The increase in investment income is mainly the result
of higher profit contributions from the domestic and foreign
subsidiaries of Daimler AG.
Cost of sales (excluding R&D expenses) increased at a lower
rate than revenue by 22.8% to €50.0 billion (2009: €40.7 billion).
The increase in cost of sales was primarily due to the increase
in material expenses caused by the higher unit sales. It was espe-
cially apparent in direct materials and the expense of purchased
services.
Research and development expenses, which are included
in cost of sales, increased from €3.8 billion to €4.2 billion, but
decreased as a proportion of revenue from 8.0% to 6.7%. The
increase in research and development expenditure was mainly
the result of higher expenses for purchased goods and services.
One focus of R&D expenditure was on activities for the reduction
of fuel consumption and CO2 emissions, as well as the develop-
ment of alternative drive systems. Other important projects were
for the revision and extension of the product portfolio, in partic-
ular the S-/SL-Class, the C-Class, the A-/B-Class and the smart.
Cars accounted for €3.0 billion (2009: €2.8 billion) and trucks
and vans accounted for €1.2 billion (2009: €1.0 billion). At the
end of the year, approximately 16,000 people were employed
in the area of research and development.
* The unit sales of Daimler AG include vehicles invoiced to companies of
the Group which have not yet been sold on to external customers by those
companies. Vehicle sales by production companies of the Daimler Group
are not counted in the unit sales of Daimler AG.