The pandemic remains a challenge of historic proportions, Daimler AG executives said during a shareholders meeting conducted via the Internet after it was postponed from its original date in April as COVID-19 spread across Europe.
During the meeting, shareholders were asked to accept a sharp decline in the company’s dividend, a vital matter to the company’s German shareholders. The dividend was cut to 90 euro cents from the 3.25 euros in 2019 from the company’s earnings during 2018.
Earnings declined during the past financial year, mainly due to substantial extraordinary expenses, in part due to the diesel-emission scandal which continues to haunt the company, while unit sales remained at the prior-year level. Net profit attributable to the shareholders of Daimler AG amounted to 2.4 billion euros, compared to 7.2 billion euros in 2018.
Daimler, however, intends to maintain its course in the challenging economic conditions and continuing to invest in the key technologies of the future to successfully shape the transformation, according to Manfred Bischoff, chairman of the supervisory board told the company’s shareholders.
“Despite all the challenges presented by the corona pandemic, we must not neglect the key tasks of the transformation. Electrification and digitization in all their forms are the main technological tasks and continue to require high funding. Not least, COVID-19 has once again made it clear that we must be more careful with our environment if we want to avoid causing enormous damage to ourselves in the long term. Daimler’s goal continues to be emission-free mobility,” Bischoff said.
Ola Källenius, Daimler’s CEO, who took over from Dieter Zetsche in April 2019, also emphasized that the company has maintained its stability through difficult times and actually begun to see its sales grow in China, which is now the company’s most important market.
“I know that many of you would have liked a higher dividend. However, Daimler was significantly impacted by special reporting items that reduced our earnings in 2019. One thing is certain: The current dividend level is also not what we in the Board of Management have in mind for the long term,” he said, noting some experts were advising Daimler to eliminate the dividend.
Källenius also said against the backdrop of the worldwide effects of the COVID-19 pandemic, Daimler expects negative adjusted Group EBIT and a negative free cash flow in the industrial business in the second quarter.
Also, as forecast in the first quarter, revenue will decrease significantly although the development of revenue in recent weeks, particularly in the passenger car business, gives cause for cautious optimism. The early adjustment of production and the measures introduced to limit costs and expenses had a positive effect on cash flow and liquidity.
Bischoff noted the necessary investments in the future can no longer be generated through increased revenue and “normal” efficiency gains.
The Board of Management has therefore adopted a program to improve the cost structure. Cost discipline covers all areas of the company and is an essential prerequisite for a financially successful future,” Bischoff added.
In order to streamline processes and structures and to improve financial strength, Daimler launched a comprehensive initiative across all divisions and the Group at the end of 2019. The respective measures are being implemented at full speed and their positive effects are already being felt. “Our previous efficiency goals covered the upcoming transformation, but not a global recession. That is why we are further refining our course,” Källenius said.
The IMF anticipates the worst worldwide recession for almost 100 years in 2020. The group’s unit sales, revenue and earnings are likely to be lower this year than in 2019.
Källenius confirmed Daimler is preparing to sell plant in Hambach, France. “One potential buyer with whom we are holding talks is Ineos. The primary goal is to give the site good prospects for “the future,” he said.