Earnings call transcript: Daimler Truck Q4 2024 highlights revenue decline

Daimler Truck’s Q4 2024 earnings call revealed a decrease in revenue and earnings, with group revenues falling by 3% to €54.1 billion and adjusted EBIT dropping 31% to €3.6 billion. Currently trading at $17.96, the company maintains a relatively low beta of 0.6, indicating lower volatility compared to the broader market. According to InvestingPro analysis, Daimler Truck’s overall Financial Health Score stands at 2.44 (FAIR). Despite these declines, the company continues to focus on innovation and strategic initiatives, such as expanding its range of battery electric vehicles and restructuring its operations for greater efficiency.

Key Takeaways

• Group revenues decreased by 3% to €54.1 billion.
• Adjusted EBIT fell by 31% to €3.6 billion.
• Battery electric truck and bus sales increased by 17%.
• The company initiated a cost reduction program targeting €1 billion in savings by 2030.
• Daimler Truck holds a strong market position in North America and Europe.

Company Performance

Daimler Truck faced a challenging quarter, with revenues declining by 3% compared to the previous year. The company’s adjusted EBIT also saw a significant decrease of 31%. Despite these setbacks, Daimler Truck’s focus on innovation is evident, with a 17% increase in sales of battery electric trucks and buses. The company continues to hold a strong market position, particularly in North America and Europe, where it maintains a significant market share.

Financial Highlights

• Revenue: €54.1 billion, down 3% year-over-year.
• Adjusted EBIT: €3.6 billion, down 31%.
• Earnings per share: €3.64.
• Free cash flow of industrial business: €3.2 billion.
• Net industrial liquidity: €8.6 billion.

Outlook & Guidance

Looking ahead, Daimler Truck has set a unit sales guidance of 460,000 to 480,000 vehicles for 2025, with expected industrial business revenue between €52 billion and €54 billion. The company anticipates a return on sales adjusted between 8% and 10% and expects free cash flow to decrease by 10% to 25%.

Executive Commentary

CEO Karin Ratzwim emphasized the company’s commitment to building the world’s best truck and bus company, highlighting the importance of values and culture. Ratzwim also pointed out the challenges in transitioning to zero-emission transportation, noting that infrastructure, rather than vehicles, is the main hurdle. CFO Eva Schehera reiterated the company’s focus on maintaining a strong balance sheet and prioritizing cash generation.

Risks and Challenges

• Supply chain stability remains a concern, with potential impacts on production and delivery.
• Tariff impacts on Mexican truck imports could affect costs and pricing strategies.
• The ongoing transition to zero-emission vehicles requires significant infrastructure development.
• Regulatory uncertainties, such as the EPA 27 regulations, could pose challenges.
• Macroeconomic pressures and market saturation in key regions may impact growth.

Q&A

During the earnings call, analysts inquired about potential tariff impacts on Mexican truck imports and the uncertainties surrounding EPA 27 regulations. Daimler Truck executives also addressed questions on cost-cutting strategies in research and development and supply chain stability, providing insights into the company’s strategic focus moving forward.

Full transcript - Dollar Thrifty Automotive Group (DTG) Q4 2024:

Christian Hermann, Moderator/IR Representative, Daimler Truck: Good morning, ladies and gentlemen. This is Christian Hermann speaking. On behalf of Daimler Truck, I’d like to welcome you on both telephone and the Internet to our annual results global conference call. We are very happy to have with us today Karin Ratzwim, our CEO and Iffa Schehera, our CFO. Karin and Iffa will begin with an introduction directly followed by a Q and A session.

The respective presentation can be found on the Daimler Truck IR website. On our request, this conference will be recorded. The replay of the conference call will also be available as an on demand audio webcast in the Investor Relations section of the website. I would like to remind you that this telephone conference is governed by the safe harbor burden you will find in our published results documents. Please note, our presentation contains forward looking statements that reflect management’s current views with respect to future events.

Such statements are subject to many risks and uncertainties. If the assumptions underlying any of these statements prove incorrect, then actual results might be materially different from those expressed or implied by such statements. Forward looking statements speak only to the date on which they are made. With this, I would like to hand over to Kevin.

Karin Ratzwim, CEO, Daimler Truck: Thank you, Christian, and good morning, everyone. Thank you for joining our results call for the full year 2024. Before jumping into the numbers, I wanted to start with an update on my strategic priorities that I shared in our third quarter call in November. Regarding the succession for my previous role, I’m really happy that Achim Puchet has taken over as CEO of Mercedes Benz Trucks on December 1. Achim is a great leader and has built a great team in Brazil that has really turned around the business there.

He’s also a brave leader who doesn’t shy away from difficult decisions, and he has a very good business knowledge. So I’m sure that Achim is the right guy to take Mercedes Benz trucks to the next level. My second priority was to review our business setup and market opportunities. Since November, we’ve already taken two important decisions. The first one is a reorganization of the Mercedes Benz Trucks segment where we have merged our businesses in India and China into the Mercedes Benz Trucks business effective from January 1.

Regarding India, this means that the Barat Bands business is in the process of being integrated into Mercedes Benz trucks under Achim’s leadership. Regarding China, we’ve already announced that we’re assessing the future setup of our joint venture, and these activities are now also part of the Mercedes Benz trucks segment. So why are we doing this? Well, I’m convinced that this new structure will improve the ability of MB trucks to push scale and commonality of parts and components across several product platforms while still maximizing our regional strengths. It will also help us to fully leverage a global production and development network and improve our usage of best cost locations.

And it enables Mercedes Benz trucks to even better leverage our global talent pool. And finally, we also see opportunities to increase the export of Bharat Benz trucks into our global markets. Going forward, the results of the Mercedes Benz truck segment will therefore also include the results from our operations in India and China. Further details can be found in the appendix to our presentation. I mentioned there were two important decisions already taken since November.

The second one is our cost down Europe program. With this program, we’re aiming to reduce our annual recurring costs in Europe by more than EUR 1,000,000,000 at the latest until 02/1930. I want to say that we’ve already achieved a lot when it comes to cost reduction and performance improvement at Mercedes Benz Trucks in the past years. And our cost down Europe program is the next step towards a leaner and more effective operating model in Europe. It will increase our resilience and give us more financial flexibility to invest in new technologies, products and services.

In order to achieve this, we’re going to reduce all types of costs from material cost, research and development cost to operations, sales, headquarters and G and A as well as IT, and this also includes personnel costs. We started talks with the Works Council in February. And since these discussions are currently ongoing, we unfortunately cannot share details on specific measures in this call today. And we will get back to you as soon as we can. Please hold for

Eva Schehera, CFO, Daimler Truck: an operator.

Speaker 3: Hi. This is Oliver from the

Speaker 4: Ladies and gentlemen, please hold the line. The conference will continue shortly. Thank you.

Speaker 5: Moira.

Speaker 4: The line is open. You you may proceed.

Speaker 3: Okay. Okay.

Karin Ratzwim, CEO, Daimler Truck: I’m back again, and I don’t really know where I lost you. So I’ll keep talking about my strategic priorities, where I was mentioning the Dimitar Truck strategy. We are currently revisiting and adjusting the strategy, and we will introduce a strategy update at a Capital Market Day later this year. It will take place on July 8 in Charlotte, North Carolina. So please mark your calendars.

The last priority is one that never stops. We are and will continue to work on our values and our culture to become even stronger as a global team with the ambition to build the world’s best truck and bus company. With this, let’s move on to the results overview for 2024. The overall key message is that 2024 is another solid year for our group. Adjusted group EBIT comes to €4,700,000,000 and adjusted return on sales in our Industrial business is 8.9%.

Earnings per share amount to EUR 3.64. This include negative noncash onetime impacts of impairments on our joint venture, including related receivables in China and CellCentric as well as additional provisions for legacy legal proceedings. Eva will give you more details on that. As I said, it’s a solid year. However, 2024 varied across our segments.

Daimler Trucks North America and Daimler Buses continued with their very strong results. At Mercedes Benz Trucks, we’ve seen a mixed picture. In Brazil, performance was strong. It was based both on our successful restructuring as well as good market conditions. In Europe, however, the performance was impacted by lower demand in our Central European core markets and by challenges in adjusting the cost base to these lower volumes.

Performance and resilience were not satisfying, so we are addressing both issues with our cost down Europe program. Trucks Asia showed an operationally solid result in ongoing weak markets. Free cash flow of the industrial business was very strong in Q4 and increased to EUR 3,200,000,000.0, resulting in a net industrial liquidity of EUR 8,600,000,000.0. We continue to be a highly cash generative business. Now let’s look at key market developments in the past year.

In North America, the heavy duty Class eight market was slightly above average level despite the impact from the longest freight recession we’ve seen. In 2024, heavy duty market volume came to 308,000 units. Our Class eight market share is 39.8%, once again reaffirming our clear market leadership. In the important U. S.

Market, our share was 40.8%. Our vocational strategy is paying off. We’ve increased our vocational Class eight unit sales by more than 35% from twenty eight thousand to 38,000 units and with this increase the resilience of our North American business by reducing our dependency on the on highway market where we dominate. In Europe, heavy duty total market has decreased by 8% to 315,000. 20 20 four was still above the historical average of 300,000.

However, delayed registrations of vehicles sold in 2023 but registered in 2024 inflated the market while truck demand in Europe, especially in Central European markets like Germany, was weak throughout the year. We are continuing our pricing discipline and prioritizing profitability over volume, which helps to understand why our market share declined to 16.9%. This strategy is backed by our new Actros L with 3% improved fuel consumption and the new aerodynamic pro cabin, which had their start of production in November and where we’re now ramping up in the first quarter. Next are unit sales and order intake. Overall, the 2024 numbers are below prior year.

Sales are down by 12%. Orders are down only moderately by 2% after a significant order increase in Q4 by almost 30,000 units or 31% versus Q3. Our book to bill ratio increased from 81% in 2023 to 91% in 2024. As in previous quarters, the picture varies across segments. In North America, sales for the full year 2024 are down by 2% or almost 5,000 units.

In 2024, the U. S. Freight recession significantly impacted the order behavior of large customers in the heavy duty on highway segments. However, our strength and offering in vocational trucks continues to partly offset lower demand in the on highway segment. Orders were consistent with 2023 levels.

Although Q4 orders increased from Q3, the current order cycle remains below last year’s, predicting lower production for the first half of the year. Demand for our Western Star trucks continues to be strong. At Mercedes Benz Trucks, and these are now the figures before our segment reorganization as of January 1, unit sales dropped by 20% with a very different development in the two main regions. Sales were down by 35% in The EU 30 with sales in Germany, our most important market, being down 36%, while sales were up by 35% in Latin America and even 55% in Brazil. Total incoming orders are almost flat.

However, orders are down by 15% in EMEA and significantly up by 47% in Latin America. Order intake in the last weeks is in line with Q4 and if this trend continues, it would support better group sales starting in Q2. At Trucks Asia, unit sales are 22% lower due to ongoing weak key markets like India and Indonesia. Orders are down by 10%. At Daimler Buses, after a strong post COVID recovery, sales and order volumes have stabilized on a very solid level.

Now let’s look at our progress with zero emission vehicles. In 2024, we sold slightly more than 4,000 battery electric trucks and buses, 17% above prior year. Orders for our ZEVs amounted to 5,600 units, which is an increase by 22%. So the development is unchanged to previous quarters. There is still a significant ZEV growth, but it’s more modest than it has been in the last years.

Despite that, we keep pushing ahead with the transition to sustainable transportation. And as of today, DaimlerTrak already has 11 battery electric truck and bus models in series production, including long haul applications. A major challenge on the road to zero emission transportation is not a lack of vehicles, it is a lack of infrastructure. Today, there’s not even 1,000 public charging stations for battery electric trucks in Europe. And by 02/1930, ’30 ’5 thousand such charging stations will be needed.

This is why we have the following expectations to politics. First, we have to bring forward the revision of the CO2 targets for commercial vehicle manufacturers to 2025. In this revision, we need to link the CO2 targets by law to infrastructure expansion and we need to also link them to Europe wide CO2 toll for trucks. A toll relief for zero emission trucks is key for our customers because they’re rational people running their businesses on low margins, so they need to see cost parity with diesel. In other words, if CO2 targets are not linked to infrastructure expansion and Europe wide CO2 tolls, manufacturers like us will be penalized if we miss the CO2 targets even though we are delivering what we’re responsible for.

In addition to revising the CO2 targets, it of course also remains important that the infrastructure expansion urgently picks up speed. With this, I’d now like to hand over to Eva for a more detailed look at our financials.

Eva Schehera, CFO, Daimler Truck: Thank you, Karen, and good morning, everyone. Now let me walk you through our financial performance for the full year in the fourth quarter twenty twenty four. Let’s start with the group. Group revenues declined by 3% in 2024, reaching EUR 54,100,000,000.0. Group EBIT fell by 31% to EUR 3,600,000,000.0, while EBIT adjusted declined by 15% to billion.

Free cash flow of the industrial business grew by 12% to billion, resulting in a net industrial liquidity of billion at the end of twenty twenty four. Group EBIT adjusted was negatively impacted by a lower gross profit of the industrial business. Main negative driver was a 12% decrease in unit sales with the majority of the negative impact coming from Mercedes Benz trucks. Higher variable overhead, mainly driven by production inefficiencies and material cost increases, further burdened gross profit. The significant positive impacts from pricing and lower functional costs could not offset this.

Financial Services impacted group EBIT with minus EUR 79,000,000 versus 2023. Total adjusted items for the full year amounted to minus EUR 1,100,000,000.0. Thereof, minus EUR 152,000,000 were related to additional provisions for legacy legal proceedings, minus EUR867 million classified in the M and A category with minus EUR376 million attributed to spin off related costs, mainly IT with minus €328,000,000 A noncash impact of minus $281,000,000 resulted from the partial impairment of our joint venture CellCentric in quarter four. Due to the delayed development of the infrastructure for green hydrogen in the core regions Europe and The United States as well as the current uncertainty regarding the framework conditions in The USA, the carrying amount of the investment in our fuel cells joint venture, CellCentric, was impaired by that amount as of 12/31/2024. We remain convinced that hydrogen powered vehicles are an essential part of the CO2 neutral transport of the future if the European fleet targets are to be achieved.

Minus €189,000,000 related to our Chinese operations, primarily driven by a minus million valuation adjustment for receivables already reported in quarter three. Of the total adjustment, million impacted Mercedes Benz Trucks and EUR 33,000,000 Trucks Asia. The assessment of the future of our China operations is ongoing. We will update you once the decisions have been taken. Minus $55,000,000 are linked to restructuring, with half of it driven by your optimization program at our Trucks North America segment and the other half coming from a transformation and restructuring program in our Financial Services segment in North America.

Industrial business revenue decreased by 5% from EUR 53,200,000,000.0 in 2023 to EUR 50,700,000,000.0 in 2024. EBIT adjusted for the industrial business declined by 14% to EUR 4,500,000,000.0 with return on sales adjusted decreasing year over year by 100 basis points to 8.9%. Main positive EBIT contributors were Daimler Buses with $220,000,000 and Trucks North America with €173,000,000 compared to 2023. However, these gains could not compensate for the negative effects from Mercedes Benz Trucks with minus EUR $766,000,000 and Trucks Asia with minus EUR $224,000,000. 20 20 4 was another successful year for Trucks North America with an EBIT adjusted of 3,100,000,000 and return on sales adjusted of 12.9%, both up from the prior year level despite the market contraction and lower unit sales.

Year over year, the North American Class six twenty eight market declined by 5%, but our unit sales only contracted by two percent. The U. S. Freight recession continued to impact the heavy duty on highway segment. Our continued strength in the vocational and medium duty segments partly offset the on highway weakness.

A recovery of the market in the second half of this year is dependent on the resolution of the current regulatory uncertainties, including potential tariffs. Order intake for our vocational trucks maintained its momentum. For the full year 2024, positive pricing and a favorable customer mix offset cost increases from variable cost, labor and material. The change in the product mix from on highway to more vocational and medium duty trucks resulted in a headwind. After sales and the used truck business had a lower contribution to EBIT due to the weak freight environment in 2024.

Our strategy is paying off. We are reducing the dependency on the on highway cycles with our vocational strategy. Together with stringent cost management, we clearly see increased resilience in North America. The fourth quarter in twenty twenty four was impacted by lower volumes, increased material costs and FX headwinds. This was offset by pricing and customer mix resulting in a relatively stable EBIT adjusted of €737,000,000 and a return on sales adjusted of 12.3%, comparable to quarter four in 2023.

EBIT adjusted at Mercedes Benz decreased year over year from €2,200,000,000 to €1,400,000,000 in 2024, return resulting in a return on sales adjusted of 7.5%. Under the new segment composition, EBIT adjusted would have been billion and return on sales adjusted 6.4%. While we see an improvement compared to similar low volume market conditions in the past, it is also clear that a total 7.5% return on sales adjusted does not meet our expectations. Our Latin American business is now accretive. It shows that the profitability and resilience of Mercedes Benz in Europe is not yet at the level we aim for.

This is why we are targeting a recurring cost reduction in Europe of more than EUR 1,000,000,000 until latest 02/1930. As Karen mentioned, we will update you in the course of the year on specific measures and progress. Looking at the 2024 full year, EBIT adjusted was negatively impacted mainly by the lower volume, resulting in underutilization in production. Higher variable overhead costs and a normalization of the used truck business also weighed on EBIT. Positive pricing after sales as well as lower R and D expenses could not offset this.

Also, overall R and D, that means capitalized and expensed, were on a comparable level, a higher capitalization for transformation projects resulted in a positive impact of approximately EUR 100,000,000. Quarter 4 20 20 4 came in with a return on sales adjusted of 8.1% with an EBIT adjusted of EUR $430,000,000. Similarly to the full year, major headwinds in our quarter four results year over year came from the drop in volumes and higher manufacturing and material cost, whereas after sales FX pricing and lower R and D costs contributed positively. Trucks Asia reported an EBIT adjusted for 2024 of EUR 106,000,000 with a return on sales adjusted of 1.7%. Under the new segment composition, EBIT adjusted would have been EUR $231,000,000 and gross adjusted 4.6%.

With 125,000 units in 2024, total unit sales at Trucks Asia came in at minus 22% versus prior year. Excluding the impairment of our China joint venture as well as the respective losses recorded as an equity income, the return on sales adjusted would have been almost 300 basis points higher, close to 5%. This highlights the improved resilience within our Trucks Asia segment in a weak market environment across Asia. Both India and Indonesia experienced significant market declines in 2024 compared to 2023, driven by uncertainty around elections and restrained government spending in India. Also, the market in Japan remained weak with only a slight increase of 4%.

EBIT in 2024 was supported by strong pricing, growing after sales and lower SG and A expenses, driven by strict cost discipline. These effects only partially compensated negative impacts from significantly lower volume and FX headwinds. As disclosed already in quarter two, the EBIT adjusted also includes the full impairment of our China joint venture BFDA, which amounted to minus EUR120 million. In total, the negative impact from BFDA’s equity results, Burden Trucks Asia’s EBIT adjusted by minus million. The fourth quarter in ’20 ’20 ’4 showed positive impacts on EBIT from improvements in pricing, especially in Japan and international markets, stronger after sales as well as lower SG and A expenses year over year.

However, this could not compensate negative effects from lower volume of minus 15%. Daimler Buses delivered strong results in 2024, more than doubling its EBIT compared to 2023 with an EBIT adjusted of €434,000,000 and a return on sales adjusted of 8.3%. Market conditions improved across all segments, driven by strong customer demand and a continued recovery of the European coach market. 2024 marked the first year where CETIBs surpassed 50% share in the European city bus market. Daimler Buses maintained its market leadership in its core market, EU30, Brazil, Mexico and Argentina.

Unit sales grew by 2% year over year with incoming orders trending on the same level as previous year. The strong EBIT performance in 2024 was fueled by an improved mix, mainly from a higher share of cold sales, improved pricing, increased contribution from the after sales business, favorable FX developments as well as the positive impact from the remeasurement and sale of non core shareholdings, which had a positive impact of EUR25 million. Minor negative effects came from inflation related cost increases, particularly in manufacturing and personnel expenses. Q4 EBIT was supported by higher sales, stronger mix, better pricing and favorable FX effects, which more than offset inflation related cost increases. Let’s have a look at our financial services business.

EBIT adjusted decreased year over year from EUR $211,000,000 to EUR 133,000,000 and return on equity adjusted decreased from 9.1% to 5%. The result is highly impacted by the ongoing freight recession and additional risk provisions related to two specific customers in North America. Positive volume and margin development impacted profit profit positively, partially offsetting the negative credit cycle. In 2024, cash generation at all our industrial segments benefited from a significant improvement in working capital, primarily driven by a decrease in trade receivables and a reduction of inventories of finished and unfinished goods towards the year end. Reduction of trade payables due to lower production and purchasing volumes had an opposite effect, though to a much lesser extent.

Overall, these factors contributed to a positive working capital impact of EUR $897,000,000. As planned and in line with the ongoing transformation of the trucking industry, net investments in property, plant and equipment, intangible assets and financial investments had a negative cash effect, totaling EUR 1,800,000,000.0. The major drivers here were investments for our new global parts center in Germany, the Amplify battery cell manufacturing joint venture in The United States and investments into the ramp up of new components and vehicles like the e Axros 600 at Mercedes Benz Trucks. This resulted in a cash flow before interest and taxes for the industrial business of EUR 4,400,000,000.0 and an increase in the cash conversion rate adjusted from zero 0.8 one year ago to 1.1 in 2024. Cash taxes came in with minus EUR 1,600,000,000.0, resulting in a free cash flow of the industrial business of EUR 3,200,000,000.0.

Taking into account the adjustments from M and A transactions, restructuring measures and legal proceedings, adjusted free cash flow of the Industrial business stood at billion. Industrial net liquidity increased by billion to 6,000,000,000 compared to prior year. Main drivers were the free cash flow with the aforementioned positive contribution of EUR 3,200,000,000.0 and cash outs of EUR 1,500,000,000.0 for the dividend payment in Q2 twenty twenty four, EUR ’8 ’50 million on the ongoing share buyback program over the course of the year and EUR 500,000,000 for equity injections into the Financial Services segment. Net profit declined by 23% in 2024 from EUR 4,000,000,000 to EUR 3,100,000,000.0. This includes noncash onetime EBIT impacts from the impairment as well as valuation adjustments related to our Chinese operations and from the partial impairment of Centric of in total EUR $590,000,000.

As a result, earnings per share decreased by 21% to EUR 3.64. Free cash flow of the industrial business came in at EUR 3,200,000,000.0. Considering the non cash one time impact in EPS and the strong free cash flow, we will propose an unchanged dividend of per share to the Annual General Meeting on 05/27/2025. This proposal reaffirms our commitment to delivering consistent returns to shareholders, and it aligns fully with our capital allocation strategy with a target payout range of 40% to 60%. We remain dedicated to maintaining a strong balance sheet, prioritizing cash generation and ensuring a value driven capital allocation.

This marks the third dividend payment of Daimler Truck as a stand alone company. We will continue to maintain a strong balance sheet, focus on cash generation and adhere to a value creating capital allocation, investing in highest return on capital businesses and returning excess liquidity to shareholder. This remains a core principle of our capital allocation strategy, which is also supported by our ongoing share buyback program. Now let’s come to the outlook for 2025. As usual, our outlook is subject to further macroeconomic and geopolitical developments, in particular, potential effects of tariffs or the impact on market demand.

Depending on the outcome of the ongoing discussions on our China business with our partner, we expect further financial implications that are currently not included. Since discussions with the Works Council are ongoing, restructuring expenses from the cost down Europe program are not included. You will also notice that we harmonized all guidance metrics by shifting to quantitative guidance ranges, moving away from a mix that previously included qualitative guidance statements. The key factors driving the 2025 outlook are: the ongoing low freight rate environment in The U. S.

Is impacting on highway truck major markets are expected to remain weak throughout 2025. So for the full year 2025, we anticipate, unchanged from last year’s guidance, a range of 280,000 to 320,000 units for the heavy duty truck market in North America. For the European heavy duty truck market, we expect a range of 270,000 to 310,000 units. Now let’s move to the financial guidance for 2025. For our industrial business, we anticipate unit sales in a range of 460,000 to 480,000 vehicles and revenues from fifty two thousand to fifty four billion euros Return on sales adjusted of the Industrial business is expected in a range of 8% to 10%, and we anticipate free cash flow to decrease between 1025%.

All in all, we expect an operationally stable 2025 compared to 2024%. The second half of the year is assumed to be stronger than the first half, both in North America and at Mercedes Benz Trucks. Moving on to our segments. For Trucks North America, we expect unit sales in the range of 180,000 to 200,000 units, in line with our heavy duty market guidance, which is also expected around prior year level. Return on sales adjusted is anticipated to come in between 1113%.

Looking at the first quarter, we expect profitability at the upper end of the guidance range. It is reasonable to expect that persisting uncertainty around or implementation of tariffs would have an adverse impact on our volume and profitability projections. The ongoing uncertainty has already impacted order intake in the last few weeks, which might lead to a softer quarter, too. Given the limited visibility for the second half of the year and considering the new segmentation, we guide unit sales in a range of 160,000 to 180,000 units and a return on sales adjusted within a corridor of 5% to 7% for Mercedes Benz trucks. This now follows our new segment structure and compares to 2024 pro form a unit sales of 160,000 units and the 2024 return on sales adjusted of 6.4%.

The impact of the new segmentation for the full year 2025 amounts to approximately additional 30,000 units and a negative impact of 50 basis points in return on sales adjusted. Order intake has been improving since quarter four. However, given the low order intake in Q3 and before, we expect a slow start with regards to volume in quarter one. Together with the simultaneous ramp up of the Actros L with the Pro cabin and the e Actros 600, we expect Q1 return on sales in the lower half of the full year guidance range. For Trucks Asia, we expect unit sales between 210,000 units.

This compares to pro form a unit sales in the new segment composition of 103,000 units in 2024. We anticipate a return on sales adjusted of 4% to 6%. For quarter one, we expect an adjusted return on sales towards the lower end of the full year guidance range. The guided unit sales range for Daimler buses lies between 55,000 units with European line markets expected to stay on a high level. The European coach market increasing further and also higher market levels in Brazil and Argentina.

Return on sales adjusted is expected to come in between 89% between 810%. For the first quarter, we expect an adjusted margin at the mid point of the full year guidance corridor. For Financial Services, adjusted return on equity is anticipated to be in the range of 8% to 10% with an increasing EBIT due to further margin recovery, ramp up of European markets and easing of the negative credit cycle towards the second half of the year. For Q1 twenty twenty five, we expect a return on equity adjusted slightly below the guidance corridor. To conclude, I would like to invite you to our Capital Market Day on July 8 in Charlotte, North Carolina in The United States.

Please save the date. We look forward to seeing you there. As Karen mentioned, we will introduce an update of our corporate strategy, which we are currently revisiting in our Board of Management. Our updated strategy will provide the framework for not only making Daimler Truck stronger, but for making it the world’s best truck and bus company for our customers, for our shareholders and for our employees. With this, I’d like to thank you very much and we’re now looking forward to your questions.

Christian Hermann, Moderator/IR Representative, Daimler Truck: Thank you very much, Karin and IFA. Ladies and gentlemen, you may ask your questions now. The operator will identify the questioners by name, but please also introduce yourself and the organization you are representing. Please ask your questions in English. And as a matter of fairness, please really limit the amount of questions to a maximum of really two.

Now before we start, the operator will explain the procedure.

Speaker 4: Thank you very much. The first question comes from the line of Nikolay Khem from Deutsche Bank. Please go ahead.

Nikolay Khem, Analyst, Deutsche Bank: Yes. Good morning. Thank you for taking my questions. Nikolai from Deutsche. If I may also two questions and I will take them one by one.

So in your key regions, North America and Europe, you’ve got volumes essentially flat or slightly down, but industrial revenues are expected to increase by 2,000,000,000 to 3,000,000,000. Can you just give us a bit more color what’s driving this increase in the revenue guidance?

Eva Schehera, CFO, Daimler Truck: Hi, Nikolai. Thank you for your question. So as Karen mentioned, in Europe, the market last year was impacted by an effect where we also had market share we also had in the market units that were reflected in the overall market size, but they had been sold actually in the year before. This year, we do not see this effect to be this significant because we really see that backlogs are normalizing on all levels. We’re also starting the year now with a lower backlog compared to last year, but we have seen that the orders since the end of quarter three last year have been recovering quite a bit at Mercedes Benz Trucks.

And we believe that this will really help us also to potentially recover some market shares towards quarter two and then the second half of the year, which is why we expect the second half of the year to be stronger than the first half. And that’s why we believe overall, out of the market that we see for Europe, we will be able to have a higher number of unit sales also for looking at the whole Mercedes Benz segment, also outside of Europe, we do believe that Latin America will also have a growing market through the course of the year. And in Trucks North America, we have seen strong orders in quarter four, which you have also seen, I guess, looking at our numbers, which will also lead to a good quarter one. I also said that we’re guiding it at the upper end of the return on sales guidance range for that matter. And then we also see that recovery of the on highway business hopefully coming stronger and having an effect on our unit sales in the second half of the year.

Of course, this includes any potential impacts from tariffs, which would have an effect if it happened. But that taken aside, we do believe that the recovery of the on highway business would benefit us and that would be a stronger on highway business compared to previous year and then with vocational still remaining strong and that would make it an overall a higher volume year than last year.

Nikolay Khem, Analyst, Deutsche Bank: Okay. Got it. And my second one would be on the integration of China truck in India into Mercedes. So we can follow reasoning and it probably doesn’t make sense from a business perspective. But for us as external, it is now a bit more tough to follow the progress of Mercedes drugs in Europe.

So how can we track that going forward as an outsider and how can we track that you are actually making progress in the underlying business in Europe?

Karin Ratzwim, CEO, Daimler Truck: I think it’s also in our interest to be very transparent on our performance in Europe. So we will keep you informed. And I think Eva did a good bridge also to explain how the new segmentation affects the new the numbers, so to speak. So but for sure, good input and we’ll make sure to be as transparent as possible to show you how we are developing the European business.

Eva Schehera, CFO, Daimler Truck: And maybe, Nicolas, like just to add one thing, I mean, as Karen also mentioned in her speech and then I referred to it as well in my part, we will update you on our cost down Europe program during the course of the year and we have announced the Capital Market Day, so you can expect more transparency how we will bring our European business to a different performance level.

Nikolay Khem, Analyst, Deutsche Bank: Great. Thank you, Annen. Looking forward to see you in Charlotte the latest.

Eva Schehera, CFO, Daimler Truck: Thank you. Looking forward to it.

Speaker 4: The next question comes from Klas Bergelin from Citi. Please go ahead.

Klas Bergelin, Analyst, Citi: Thank you. Hi, Karin and Eva, Klas at Citi. So my first question is, is on North America and the guide looking at the margin of 11% to 13%. I hear you that you have reduced your dependency on the highway side through the strong growth in vocational, but it’s still a big part of your business and fleet demand is particularly weak at the moment as we understand it where you have a strong market share. I hear you on the second half sort of caveat that you are assuming a second half recovery.

And I know that the mix was already negative, as you said, Eva, in 2024, but could we still but could still get more negative, right? And I’m just trying to understand the mix implication here given the margin guide of 11% to 13%, which is pretty solid. I assume that you threw in that caveat that we need to see sort of a second half recovery including a pre buy, I would assume. Just want to clarify that.

Eva Schehera, CFO, Daimler Truck: Sure. Klas, hi and happy to answer that. So what helps us now in quarter one, which of course also leads to the guidance of the upper end of the margin corridor in North America for quarter one is that in quarter one actually we expect a fairly good mix towards on highway heavy duty business because of these large orders that we have received in quarter four last year. And now obviously, the question is how will that continue? We have seen that positive order momentum move into quarter one, but then I’ve also commented that in recent weeks, because of the uncertainty related to tariffs, obviously, order momentum has really decreased.

But we believe, generally, if we take tariffs aside, the recovery of the on highway business is on its way with a positive effect on mix. And as I said in quarter one, we do expect to see it then. When it comes to the pre buy related to EPA ’27, obviously, a lot has been going on in recent days. And we’ve obviously done also a lot of sensitivity analysis. What I can say is our full year guidance for Trucks North America is not dependent on an EPA 27 pre buy in the second half of the year of 2025.

It’s really the effect of tariffs that we need to exclude from the guidance, but the EPA 27 pre buy is not something we are dependent on in this year because we would believe the recovery of the on highway business would support us there and also a continuously strong vocational business.

Klas Bergelin, Analyst, Citi: All right. Okay. No, that’s very clear. Obviously, the first quarter sales and margin will be a little bit backward looking. I mean, depending on what will happen with the orders in sort of in the months ahead.

But okay, then I understand how you think. My second one

Eva Schehera, CFO, Daimler Truck: Maybe, Klaus, just to comment that because quarter one, you’re absolutely right, but maybe just repeating from what I said in the speech regarding quarter two because I want to make that clear. This weaker order behavior of our customers due to the uncertainty around tariffs in the last couple of weeks, that might impact quarter two then from a volume and margin perspective.

Klas Bergelin, Analyst, Citi: Okay. Very good. My second one is on tariffs and thinking about Mexico. Obviously, it’s a very fluid situation to say the least. And I I don’t know if you can say what have you done so far?

You’re obviously very flexible in your assembly. You can move back capacity to The U. S. How long would it take? I guess, you will run extra shifts in The U.

S. To compensate initially, but if you could share some thoughts on the potential sort of transition back into The U. S. In terms of capacity? Thank you.

Karin Ratzwim, CEO, Daimler Truck: Hi, Klas. Karin here. Yes, we have assembly factories in The US as well as in Mexico. What’s good in the situation we face right now is that we can produce all models in The US or in Mexico. So for sure, we are preparing ourselves for different scenarios.

And we can ramp up more in The U. S. If that would be required. And we’re looking at it both from kind of a shorter term perspective, how we could increase capacity in The U. S.

And also in the longer term perspective, what we could do. But I would say it’s a little bit too early to pull the levers, but we are definitely prepared and following what will happen with the tariff situation.

Klas Bergelin, Analyst, Citi: Thank you. Super quick follow-up on the margin in Trucks North America in the first quarter. Are you planning to sort of overproduce initially to build some inventory ahead of all of this? Or is that not baked into the guide?

Eva Schehera, CFO, Daimler Truck: Well, I mean, what we’re obviously doing is that the orders that we have right now for the quarters for the quarter one, we will make sure that we ship all trucks we can until the end of the month from Mexico into The U. S. I mean, I think that’s obvious, but that also doesn’t mean that we can now prepone a lot of orders because with our order cycle, it’s not just possible to do it that quickly, but obviously, wherever we can, we will minimize our risk to deliver what we can in quarter one.

Klas Bergelin, Analyst, Citi: Thank you.

Speaker 4: The next question comes from the line of Michael Espinal from Jefferies. Please go ahead.

Michael Espinal, Analyst, Jefferies: Thanks. Good morning, Karen, Eva and Christian. Michael from Jefferies here. Just two on orders, one Europe, one North America. Europe orders now look to have been strong across kind of all industry players, which has continued into 2025.

What would you like to see to become a bit more confident in the European cycle?

Karin Ratzwim, CEO, Daimler Truck: Yes. Hi. I can take that one. I think we, as you mentioned, we have seen an improved order situation in Q4 and also moving into Q1. But we are now back to more than normal cycle of ordering, which means we still lack a little bit visibility into the second half of the year.

But I would say if the order intake continues on the level where we are now, we will be more confident as we move forward. We don’t honestly really need an uptick, but we need to stay on the level where we are, and let’s see how it develops in the next four to eight weeks that will give us more visibility on the second half of the year as well.

Michael Espinal, Analyst, Jefferies: Okay. Great. And then one on North America orders. When we speak to some industry participants, it sounds like cab rules around EVs and ICE vehicles are holding back orders in kind of the six carb states. Do you have a sense of how much orders might have might be being held back at the moment from that kind of EVICE ratio rule?

Karin Ratzwim, CEO, Daimler Truck: To be very transparent on the electric truck side, the order intake is very low in the American market as customers are anticipating that the benefits that have been for electric trucks and buses might not be there in the future. What we see generally on the order side is, as Eva mentioned as well, we are very, very pleased to have the exemption from the tariffs with the USMCA that really helps us bring trucks across the border right now. But, of course, for customers ordering now, the order cycle is typically six to eight weeks for on highway and, of course, longer for the vocational because they go to bodybuilders. So that makes them somehow uncertain in the current situation to place new orders, because we don’t exactly know, what it will look like six to eight weeks out. So of course, what customers do is they look what’s available in the dealer stock.

We also see more movements on the used truck side, and that’s what makes the situation a little bit difficult to predict at the moment, especially then regarding Q2.

Michael Espinal, Analyst, Jefferies: I mean, I think we spoke to some dealers that said they can’t put orders in for ICE vehicles because they’re covered under that CARB rule where you can only make orders for ICE when you sell an EV.

Karin Ratzwim, CEO, Daimler Truck: I mean, as I said, I think electric trucks is a very small portion of our overall order book for The US, so I don’t see any significant effects of of that.

Christian Hermann, Moderator/IR Representative, Daimler Truck: Okay. Thank

Speaker 4: you. The next question comes from Danila Colsa from Goldman Sachs. Please go ahead.

Karin Ratzwim, CEO, Daimler Truck: Hi, good morning.

Danila Colsa, Analyst, Goldman Sachs: Thank you so much for taking my questions. I have two as well and it’s clarifications of things you spoke about before, so I’ll ask them one at a time. So just to go back to the guidance in The U. S, you’ve mentioned that you have implied in the second half a strong recovery on highway side. And just wanted to go back to which indicators do you see that point towards that?

And if that doesn’t happen because of the situation or tariffs or something else, what is factored in the bottom end of the guidance? Is there sort of still a growth in the second half or flat or down?

Eva Schehera, CFO, Daimler Truck: Yes, Daniela. Hello. Good question. So obviously, we did see in quarter four that really the market on highway side was turning. Of course, there’s still only a slight recovery in freight rates, but we really did see it on our order improvement.

And we do believe it would have continued into quarter one had it not been for that uncertainty that we see in the market right now that Taryn also alluded to. So now the question is what could happen with tariffs and how could that impact it? I already said that from an EPA twenty seven perspective, looking at a potential pre buy, that’s where our guidance does not depend on that. On a tariff side, there’s like a huge range of scenarios for sure that could happen. So that’s very difficult to indicate right now how it would impact our guidance.

That’s not really something we can predict right now because we do not have the details available to do the calculations also when it comes to potential calculation methodologies for tariffs or retaliatory tariffs and so on.

Danila Colsa, Analyst, Goldman Sachs: Sorry, maybe I didn’t express myself clearly. The second the bottom end of guidance that has a recovery in the second half?

Eva Schehera, CFO, Daimler Truck: The bottom end of the guidance well, I mean the generally better half of the second year, that’s what it has in there. But it would be more like continuing the trend that we see in the first quarter because as I said, we expect the first quarter to be a good one, then potentially a bit of a weaker second quarter because of the reduced order levels that we’ve seen over the last couple of weeks and the lower volumes resulting from that. And then the second half more continuing on the course of the quarter one how we expect it right now. And that would then overall make it a better second half. Is that clear?

Danila Colsa, Analyst, Goldman Sachs: Understood. That’s very clear. And my second question is just on Mercedes Benz and how to think about the guidance for 25% and then what’s after? Just I think in the appendix you have you show that you’ve done 10% cut off those fixed costs, which I think the target was 15% originally. Should we think about the remaining 5% impacting 25%?

Or have these been rolled over into the $1,000,000,000 and effectively we should think about all of these just by 02/1930?

Eva Schehera, CFO, Daimler Truck: It’s a mix of that. So we have achieved minus 10% of fixed cost reduction versus the 2019 base in 2024, which is a good improvement versus ’23. But yes, we are not on track to reach the target of minus 15 by 2025, which is why we have started the cost down euro program. Because with this program, we believe we will bring then Mercedes Benz to the level where it needs to be, also closing the gap to our best performing peers. We said now that this more than EUR 1,000,000,000 target we expect to achieve by 02/1930, but that obviously doesn’t mean that it will take until 02/1930 to see any effect.

We believe that will be a good improvement over the year. Also hope to see some effect already in ’twenty six. In ’twenty five, it will probably be limited out of this program because we’re currently still in discussions also with the Works Council. But we will update you then, at our Capital Market Day most likely with more details also on the ramp up of the savings and how they will come in and how that will also impact the profitability of Mercedes Benz before 02/1930.

Speaker 4: The next question comes from Miguel Borrega from BNP Paribas exon. Please go ahead.

Karin Ratzwim, CEO, Daimler Truck0: Hi, good morning, everyone. Miguel Borrega from BNP Paribasag. And a few questions for me. First on, again, on EPA 27, which has just been repelted. Can you give us more color on the potential implications besides the pre buy?

You’ve made some investments to comply. So are you still going to implement these changes and get the price offset for that? Or are you going to abandon these changes entirely?

Eva Schehera, CFO, Daimler Truck: I think on the investment, I can comment and then I’ll hand it over to Karen on the overall EPA 27 implications. So we said before that our engine is very that our engine compared also to the competitive environment positions us well when it comes to complying with EPA 27. So from an investment perspective, I do not see impacts now on our results. I mean, we were also asked before whether there would be potential impairments if EPA 27 shouldn’t come. So there is nothing to the likes of that and we’re well positioned.

If EPA 27 comes, we have the engine. And if it doesn’t, it will also not have an impact on any investments or anything because we do not have anything on the balance sheet for EPA twenty seven related investments. And with that, I’ll give it to Karen.

Karin Ratzwim, CEO, Daimler Truck: Thank you. Yes, I mean, there were a lot of announcements coming, I think, two days ago regarding EPA and future regulations. So we are, of course, very active to understand exactly how the regulations will be formulated. But maybe to mention two of them, the first one, greenhouse gas phase three, where the statement that came on Wednesday night said this will be reconsidered. Let’s see.

It it sounds like that might not come then, which means and that rule would stipulate that we sell a certain amount of zero emission trucks. So I think this would not be bad if that was reconsidered as the kind of enabling conditions for zero emission trucks in The U. S. Aren’t there right now in terms of cost parity and in terms of infrastructure. With regards to the EPA NOx rules, they used a slightly different wording, reevaluate, which means it could mean many different things.

It could mean, as Eva said, that the the rule is off the table. It could also mean that it it will stay without changes. And it could be somewhere in between, which is that you keep the rule, but you you adjust, for instance, on the warranty conditions or or on the in use testing procedures or something like that. But I would say we’re prepared for all three of those different scenarios. And as Eva said, we do not expect that that significantly affects our guidance in any way.

Karin Ratzwim, CEO, Daimler Truck0: Thank you. And then again on the tariffs, and this is a two part question. First on the Mexican imports, what kind of impacts are you expecting if these are really implemented? I get you on you can produce trucks from The U. S.

And Mexico, any truck model, but does it mean that trucks coming from Mexico will effectively be 25% more expensive or are there ways around it? Because this would obviously impact your competitiveness relative to peers who don’t have any Mexican production. And then on steel and aluminum imports, the tariffs on that, how are you preparing for a potential wave of raw material cost inflation? Is there room to offset this with additional prices in The U. S?

Speaker 4: Ladies and gentlemen, please hold the line. The conference will continue shortly. Thank you.

Karin Ratzwim, CEO, Daimler Truck1: You

Speaker 4: The line is open. You may now proceed.

Karin Ratzwim, CEO, Daimler Truck: Okay. So we’re back again. Thank you, Miguel, for the question. I think I captured it before we dropped out. Just to say a couple of words then on tariffs.

As you rightly pointed out, there’s not just one tariff. There is a lot of different tariffs that we’re looking at. First one, steel, aluminum, copper. This is one where I think everyone in the industry faces and it’s something we will eventually have in our pricing. We also have everyone in the automotive industry a lot of parts that are manufactured in Mexico that go across the border.

Many also have a lot of parts manufactured in Canada or also running assembly in Canada. So this is something I think we face as an industry. And then you had this specific question on trucks built in Mexico. It’s still a little bit uncertain how the tariff system would work. For instance, as you know, we are building engines in Detroit that we are then sending across the border to Mexico, putting them into the truck and and sending the truck back to The US.

And as for the moment, it’s a little bit unclear if if American parts in a Mexican assembled truck would be able to, if you can then get some drawbacks on that because it’s American content or not. So I will just say we are looking at this, of course, following it very closely, but to really quantify exactly how this will pan out is very difficult at the moment. And then let’s also see we also follow what happens with the EU tariffs that could also affect both our cost situation and of course, adjustments that we will need to make in pricing to our customers.

Karin Ratzwim, CEO, Daimler Truck0: Thank you very much. And then if I can squeeze just one more in terms of order intake for Mercedes Benz in Q4, which was very strong, up 76% year on year. Can you give us some color on the breakdown between Europe and LatAm? In other words, was Europe up year on year during Q4? And maybe comment also on Germany, please?

Thank you very much.

Karin Ratzwim, CEO, Daimler Truck: Yeah. We don’t actually disclose that breakdown, but I will say we are pleased to see an improvement in Europe as well as in Germany. Something we also follow is, of course, the mix between on highway and vocational or rigid trucks, which was also something we were pleased with. So I think it’s a pretty good mix, which gives us some confidence going into 2025.

Speaker 4: The next question comes from the line of Kirunda Shagil from Morgan Stanley. Please go ahead.

Speaker 3: Good morning. Shagil from Morgan Stanley. Thanks for taking my question. I just want to go back to the guide. So a stable volume outlook and a lower margin at the midpoint for North America.

How are you thinking about pricing across heavy duty on highway and vocational as well as medium duty? And then can you tell us about the mix impacts for the year? And how does pricing changes for EPA ’27 goes away completely?

Eva Schehera, CFO, Daimler Truck: So overall, pricing for North America, we will have positive pricing effects from ’24 to ’25. We had already issued our model year ’25 price list last year after Labor Day. And our guidance, as I said before, is not dependent on any EPA pre buy effect and also not any price increases related to that. So we see generally and we’ve seen it in quarter four better demand on highway side. And so the mix in 2020, the mix in 2025 could be more towards on highway with still strong vocational sales and bit of a lower medium duty contribution compared to ’24.

Speaker 3: Thank you. And then one more. So a few investors were expecting a new share buyback program today. Could you confirm you’re still committed to shareholder returns despite the uncertainty? And then could you remind us how you think about the size of potential future programs given the strong free cash flow generation this year?

Eva Schehera, CFO, Daimler Truck: Sure. Happy to do that. I mean, obviously, our current share buyback program, the second part of the 2,000,000,000 program that we had announced at the last Capital Markets Day in 2023, that still runs until August year. So also there, I think, it’s not the time right now to announce the new one while the old one is still running. But as I said during my part of the speech, we have a high focus on returning also cash to shareholders.

And I think we have been able to deliver a very attractive free cash flow this year, also then leading to a higher net industrial liquidity that was million euros higher than in the previous years. And of course, we are looking generally into a mix of dividends and share buybacks when it comes to cash returns. And we announced the Capital Market Day in July. So potentially, that would be a point in time when you could expect an update.

Speaker 3: Thank you very much. And then the last one, just in terms of CapEx for the year ahead, what’s driving the lower free cash flow guide on growing earnings? Are there any one else to consider there?

Eva Schehera, CFO, Daimler Truck: Yes. We do have higher investments in 2025 compared to 2024. And we are obviously in a big transformation of the trucking industry right now. And so ’twenty five is expected to be a year with higher invests and that is weighing on the free cash flow. So that is one factor there for the lower free cash flow guide.

Obviously, we’ve also had a very strong quarter four, where we were able to also really significantly reduce inventories And that is also affect why now it balances a bit out in 2025.

Speaker 3: Thank you very much.

Speaker 4: The next question comes from the line of Haimal Bundia from UBS. Please go ahead.

Karin Ratzwim, CEO, Daimler Truck2: Good morning and thank you Karen, Eva and Christian for taking my questions. Hamal Bundia from UBS. I think Daniel alluded to it earlier, but I just wanted to get a bit more color on the cost savings for Mercedes Benz Europe. How should we think about the cadence of these savings? Would it be fair to say they’re more front load front end loaded?

And also, apologies if I misheard, but I think I heard that part of the cost savings would be R and D. Would this mean that certain technology investments could be scaled back? And I’ll follow-up my second question after. Thank you.

Eva Schehera, CFO, Daimler Truck: So if I understood you correct, you’re asking about the more than $1,000,000,000 recurring cost reduction that we’re targeting for Mercedes Benz trucks whether that would be front or back end loaded. I mean, we are obviously still in the discussions with the Works Council on the target pictures and the exact measures. And as Karen said, we cannot really give you more details today. But once we have concluded on our discussions, then we would share more details, and that would probably be at the Capital Markets Day. But, of course, we target to do it as quickly as possible.

I think that’s fair to say. And when we talk about cost cutting in R and D, that it’s not about investing less in technology and innovation and the transformation. It is about streamlining, simplifying processes and becoming more efficient. So that is the portion when we talk about R and D.

Karin Ratzwim, CEO, Daimler Truck2: Understood. Thank you. And in terms of the margin guidance for Mercedes Benz, could you give us a bit more color on where you’d expect Europe, Brazil and now the recent additions of China and India to fall individually within the 5% range, please?

Eva Schehera, CFO, Daimler Truck: Yes. So we commented on the new segmentation that has a negative impact of about 50 basis points this year. So also that’s the impact that you can expect on the guidance range of that new segment setup. Brazil, we commented in my part of the speech, has been accretive in the last year. We also do expect it to be accretive this year.

And then in Europe, we do expect a stabilization, but it is still from a coming from a weak market environment. So overall, a recovery in Europe with really significant higher margins would also really expect a better market environment and then the initiatives from our cost down Europe program to come in, which would be then more towards 26% in the years to come when we would see that improvement in Europe in return on sales.

Karin Ratzwim, CEO, Daimler Truck2: Understood. Thank you very much.

Speaker 4: The next question comes from the line of Jose Maria Zumendi from JPMorgan. Please go ahead.

Speaker 5: Thank you very much. A couple of questions, please. Can you comment a little bit on the industrial performance and R and D buckets on the bridge for 2025? Should we expect R and D again to be a tailwind in 2025? And how should we think about industrial performance?

And then second question, maybe Karen, can you just go back a little bit to the rationale of merging China, India into MBTrux? I was actually hoping we’ll get more transparency on the European business and the margin between Europe and LATAM. And now I see emerging the other regions. But I’m sure there’s a rationale from a, I don’t know, brand perspective, economies of scale, positioning, etcetera. Can you explain a little bit the rationale of changing the reporting structure?

Thank you.

Eva Schehera, CFO, Daimler Truck: So very quickly to the first one. So R and D, it will be a headwind in 2025. As I said earlier, it will be higher investments. And then with Karen for the second part?

Karin Ratzwim, CEO, Daimler Truck: Yeah. I mean, we definitely do this because we think it’s the right thing for the business. And I’m sorry if it causes some frustration on trying to understand our numbers. As I commented before, we will for sure try to support you to still understand our business as as good as possible. I think it makes a lot of sense from a business perspective to do this this shift.

First of all, the Bharat Benz trucks comes from an Mercedes Benz Axor platform. So I do see a lot of opportunities to find more commonality across the global Mercedes Benz trucks, Brazil, India, and Europe. Also, it enables us to look more flexibly on our production locations to see might there be things, for instance, that we could produce in India that’s produced in other parts of the world today. We also do it because we want to leverage our global talent pool better and to see where we can, where we basically find the best people also for the future, things like software digitalization. And also, I see a huge potential to increase the export of the Barrett Benz portfolio into, let’s say, kind of traditional Mercedes Benz markets as a second brand and to broaden our offering there.

So from a business logic, it makes a lot of sense.

Speaker 4: The next question comes from the line of Nick Hosben from RBC. Please go ahead.

Karin Ratzwim, CEO, Daimler Truck3: Yes. Hi, everyone. Nick Hausman from RBC. Thank you for taking the questions. Two quick ones, please.

Firstly, I was wondering if you could just comment about the level of restructuring costs that you’re expecting in 2025? I appreciate that with the European cost down program, you can’t be too specific right now, but maybe in terms of M and A and IT restructuring costs, whether we should expect any more legal costs, that kind of thing?

Eva Schehera, CFO, Daimler Truck: So on the cost on euro program, as we said, that we cannot comment on yet because the discussions are ongoing. On the overall, yes, on the overall M and A related part with like the remainder of the spin off related costs, that that should go down versus, versus 2024 and 2025 because we had major shift overs of IT systems already in ’24 with the HR systems. And now in January, we went live with our S4HANA ERP migration in Germany. And so then you will see a wind down of costs in 2025.

Karin Ratzwim, CEO, Daimler Truck3: Okay, great. And then just on the outlook for free cash flow in the industrial business this year, you’re calling for a decline of 10% to 25%. Is that just against the tough comparison level in 2024? Or is there anything else that we should be thinking about there?

Eva Schehera, CFO, Daimler Truck: Yes. As I said before, so it’s the very strong quarter four that we had with a significant reduction of in entries. And then in 2025, we also have a higher level of investments compared to 2024. So those are the two main aspects driving it.

Karin Ratzwim, CEO, Daimler Truck3: Great. Thank you very much.

Speaker 4: Next question comes from the line of Jonathan Day from HSBC. Please go ahead.

Karin Ratzwim, CEO, Daimler Truck1: Hi. Good morning. Thanks for taking my question. You talked a bit about pricing in North America. I was wondering if you could talk a little bit about pricing trend in other parts of the world in particular in Europe, given the potentially recovering market and also in buses as well, please?

Karin Ratzwim, CEO, Daimler Truck: Thank you, Jonathan. Karen here. So for Europe, we expect stable pricing. We have not taken in a lot of increases during the market situation. But we believe it will be stable and we will continue to prioritize pricing over market share.

On the bus side, similar?

Eva Schehera, CFO, Daimler Truck: Yes. On the bus side, I mean, obviously, positive market environment with growth in 2025 to be expected and also positive pricing effects out of this.

Karin Ratzwim, CEO, Daimler Truck1: Great. Thank you. And then maybe just a quick follow-up. Supply chains, can you just perhaps give us a bit of an update on where you are now with supply chains in Europe and The U. S?

And are there any supply chain issues that we should know about or have they all completely sort of settled down there?

Karin Ratzwim, CEO, Daimler Truck: Yes. In terms of supply chain, it’s always exciting, but I would actually say for the moment there is nothing critical as for the time being.

Karin Ratzwim, CEO, Daimler Truck1: Great. Thank you very much.

Speaker 4: The next question comes from the line of Frank Wheeler from LBBW. Please go ahead. Mr. Biller, your line is open. You may now proceed.

Karin Ratzwim, CEO, Daimler Truck0: Hello. Can you hear me now? Hello?

Christian Hermann, Moderator/IR Representative, Daimler Truck: Yes, we can hear you.

Karin Ratzwim, CEO, Daimler Truck0: So the question is about the tax rate. So in the fourth quarter, there was a positive tax income here. What was the reason here for the tax income? And what should we expect for the years to come at the tax rate?

Eva Schehera, CFO, Daimler Truck: Yes. So in 2024, we had overall a much lower effective tax rate than twenty three percent. We had 25% in 23%. We had 19% in 24%. And that is the low tax rate is because of the reversal of the valuation allowance and nondeductible impairment from SailCentric and our Chinese joint venture.

So without these effects, the effective tax rate would have been around 26%.

Karin Ratzwim, CEO, Daimler Truck0: And that’s the rate we could expect for the years to come, right?

Eva Schehera, CFO, Daimler Truck: Yes, around this area, yes.

Karin Ratzwim, CEO, Daimler Truck0: Yes. Thank you.

Christian Hermann, Moderator/IR Representative, Daimler Truck: Ladies and gentlemen, thank you very much for your questions and for being with us today. Thank you, Karen and Difa, for taking the questions and answering. Apologies for the slight technical glitch at the beginning. If you have any other questions or missed something, IR, of course, remains as always at your disposal. We’re looking forward to staying in touch with you.

And latest, we’ll see you hopefully in Charlotte at our Capital Market Day. The media call will follow right now at 10:45 CET. Have a great day and stay healthy. Thank you. Goodbye.

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