Profitability

Daimler AG posted an income from ordinary activities of €5.1 billion, which is slightly lower than in the prior year (2011: €5.5 billion). The development of earnings reflects the reduction in operating profit to €1.4 billion (2011: €3.1 billion) and an opposing effect from the increase in financial income.

Revenue increased by €3.2 billion to €72.7 billion. Revenue in the car business increased by 8% to €53.2 billion, due to higher unit sales. The revenue generated by sales of trucks and vans decreased by 3% to €19.5 billion.

In a more difficult economic environment, especially in the second half of the year, earnings in the car business were lower than in 2011. Further growth in unit sales had a positive impact on earnings. We achieved high growth rates particularly in the compact-car segment, with SUVs and with shipments in the United States. Earnings were adversely affected primarily by a less favorable model mix and by measures taken to enhance the products’ attractiveness. There were other negative impacts from expenditure for new technologies and new vehicles. The car division’s unit sales increased by 4% to 1,357,000 vehicles in 20121. Following the successful market launch of the A-Class in Europe and the strong sales of the B-Class, the compact-car segment posted growth in unit sales of 31% to 238,000 units1. Due to the great popularity of the new SUVs, unit sales of the M-, R-, GL-, GLK- and G-Class increased by 9% to 273,000 units1. Unit sales in the E-Class segment decreased to 273,000 vehicles for lifecycle reasons (2011: 297,000)1.

Earnings from trucks and vans were also lower than in the prior year due to lower unit sales. Unit sales of 96,000 trucks were close to the prior-year level (2011: 99,000)1. 249,000 vans were sold (2011: 254,000)1.

Cost of sales (excluding research and development expenses) increased by 9.2% to €59.8 billion (2011: €54.8 billion). The changed product mix, expenses for the enhancement of products’ attractiveness and for new technologies and products led to higher cost of sales.

Research and development expenses, which are included in cost of sales, of €4.8 billion were at the prior-year level (2011: €4.8 billion); as a proportion of revenue, they amounted to 6.6% (2011: 6.9%). These expenses are primarily caused by the renewal of the product portfolio, especially with regard to the compact class and the S-, E- and C-Class. In addition, we are continuously working on new generations of engines and alternative drive systems. At the end of the year, approximately 17,000 people were employed in the area of research and development.

Selling expenses increased to €5.9 billion in 2012 (2011: €5.7 billion). The increase was caused by the higher volume of business and the related higher expenses for purchased services, as well as higher shipping and IT costs.

General administrative expenses increased by 6.4% to €2.6 billion (2011: €2.4 billion). This development was mainly the result of higher expenses for IT services and consulting.

The net other operating income improved by €0.5 billion to €1.8 billion. The change compared with the prior year was mainly the result of reclassifying license income of €0.4 billion; in the prior year, it had been classified under revenue. In addition, higher income was realized from recharging costs to third parties and companies of the Group. There was an opposing, negative effect from the lower income from currency translation.

Financial income improved by €1.4 billion to €3.7 billion, mainly due to higher net income from investments in subsidiaries and associated companies and higher net interest income. This increase primarily reflects the higher profit transfer from Daimler Luft- und Raumfahrt Holding AG following the sale of approximately 7.5% of the shares of EADS.

The income tax benefit for 2012 amounts to €0.4 billion (2011: expense of €0.7 billion). One of the reasons for the lower income tax expense in 2012 is the lower pre-tax profit, which also includes a large gain on the sale of EADS shares that is almost tax free. There were also tax benefits from the tax assessment of previous years.

Net income improved compared with the prior year from €4.8 billion to €5.5 billion. This increase is primarily due to special factors from the sale of EADS shares and from income tax benefits from the assessment of previous years.

1 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.