Thursday November 11, 2021
New DAX candidate
Daimler announces stock market premiere of the truck division
Daimler spins off the truck and bus division. The stock market debut is in four weeks. The company announces competitive returns to investors. The company has been trimmed for this for months.
The car manufacturer Daimler is sending its truck division to go public on December 10th after the spin-off. “One month before the planned IPO, we are ready for independence,” said CEO Martin Daum. At a capital market day, the commercial vehicle manufacturer confirmed its goal of a group-wide double-digit return by 2025 under good market conditions and broken down the figures for the individual regions: For the most profitable market North America, the company is aiming for an adjusted return on sales of twelve percent, Mercedes-Benz Trucks in Europe ten percent and Truck Asia nine percent. Most recently, Trucks in Europe had the lowest margin of the three regions at 4.5 percent. The target for the difficult bus business is 7.5 percent.
In the past few years, the truck division generated a return of around six percent, while the Swedish competitor Scania, which belongs to the VW subsidiary Traton, usually achieved more than ten percent. “We are determined to achieve higher profitability and to win the race towards zero emissions with full commitment,” said Daum. In the coming year it should take a step forward: After an expected range of six to eight percent this year, Daum has announced seven to nine percent for 2022.
Dax candidate
The Daimler Group will split the commercial vehicle business from the auto business by the end of the year. After the truck’s IPO, the remaining Daimler AG will be renamed Mercedes-Benz Group AG from February. The main objective of the transaction is a higher market value for the business areas that will be separated from one another in the future. Both companies are expected to be included in the leading index Dax, which has expanded to 40 stocks. At the beginning of October, the shareholders approved the split. In the first quarter of 2022, the company wants to “qualify” for the Dax. As a target for the dividend distribution policy, Daimler Truck is aiming for a payout ratio of 40 percent. Daimler shareholders receive one additional share in Daimler Truck Holding AG for every two shares.
The division of the conglomerate into two companies focused on their respective segments met with applause on the stock exchange. Analysts said that the truck business, which is often poorly profitable, is likely to exercise more cost discipline and improve its key figures under the investor spotlight.
In order to increase profitability, fixed costs should be reduced. The long-standing target of a 15 percent reduction compared to 2019 is now to be achieved in 2023, two years earlier than previously planned. In Europe in particular, costs are to be reduced. The company is making progress in this area, said Karin Rädström, head of the region. In terms of personnel costs, half of the targeted sum of 280 million euros has already been achieved. Management posts have been cut, material costs have been cut.
Mercedes-Benz is concentrating on the more profitable heavy truck and expanding its range of services. In the coming years, investments will be diverted from combustion engines to emission-free drives. As with medium-duty engines, a partnership is also sought for heavy-duty engines, explained Daimler Truck.
With the switch to climate-friendly commercial vehicles, the Swabians continue to drive both on battery electrics and on hydrogen-powered fuel cell trucks. Daimler is building a filling station network for the latter together with the oil companies Shell, BP and Total Energies.