Cash flows

Cash provided by operating activities (See table 3.29) of minus €1.1 billion was lower than in the prior year. There were negative effects from the lower net profit before income taxes and the higher volume of new business in the area of leasing and sales financing. The increase in working capital was slightly higher than in the prior year. The comparatively low increase of inventories and the decrease of trade receivables did not fully offset the development of trade payables. Positive effects resulted from lower income-tax payments (€2.1 billion; 2011: €2.8 billion); the prior year was significantly affected by payments of income taxes for previous years in North America. The year-on-year comparison is also affected by significantly lower contributions to pension funds (€1.1 billion; 2011: €2.0 billion).

3.29

Condensed consolidated statement of cash flows
  2012 2011 12/11
In millions of euros     Change
       
Cash and cash equivalents at beginning of year 9,576 10,903 -1,327
Net cash from operating activities -1,100 -696 -404
Net cash used in investing activities -8,864 -6,537 -2,327
Net cash from financing activities 11,506 5,842 5,664
Effect of exchange-rate changes on cash and cash equivalents -122 64 -186
Cash and cash equivalents at end of year 10,996 9,576 1,420

Cash used for investing activities (See table 3.29) amounted to €8.9 billion (2011: €6.5 billion). The increase compared with the prior year was primarily the result of higher investments in property, plant and equipment and intangible assets. In addition, there were significantly higher overall (net) outflows from purchases and sales of securities carried out in the context of liquidity management. The flows of payments for sales and acquisitions of equity interests led to a net cash inflow in 2012, while acquisitions significantly exceeded sales in the prior year. In 2012, shares in EADS and MBtech Group were sold and Daimler also made capital contributions to Engine Holding and the joint venture of Daimler Trucks in China.

Cash flows from financing activities (See table 3.29) resulted in a net cash inflow of €11.5 billion (2011: €5.8 billion), which almost solely reflects new borrowing (net). There was an opposing effect from the higher dividend paid to the shareholders of Daimler AG and from the increased dividend payments to shareholders of non-controlling interests of subsidiaries.

Cash and cash equivalents increased compared with December 31, 2011 by €1.4 billion, after taking currency translation into account. Total liquidity, which also includes marketable debt securities, rose by €4.7 billion to €16.6 billion.

The parameter used by Daimler to measure the financing capability of the Group’s industrial activities is the free cash flow of the industrial business (See table 3.30), which is derived from the reported cash flows from operating and investing activities. On that basis, a correction is made in the amount of the cash flows from the acquisition and sale of marketable debt securities included in cash flows from investing activities, as those securities are allocated to liquidity and changes in them are thus not a part of the free cash flow.

3.30

Free cash flow of the industrial business
  2012 2011 12/11
In millions of euros     Change
       
Net cash from operating activities 7,527 7,346 +181
Net cash used in investing activities -8,166 -6,263 -1,903
Changes in marketable debt securities 2,699 -36 +2,735
Other adjustments -608 -58 -550
Free cash flow of the industrial business 1,452 989 +463

Other adjustments relate primarily to additions to property, plant and equipment that are allocated to the Group as their beneficial owner due to the form of their underlying lease contracts. Effects from the financing of dealerships within the Group have also been adjusted. Other adjustments include acquisitions of non-controlling interests in subsidiaries, which are reported as part of cash used for financing activities.

The free cash flow of the industrial business amounted to €1.5 billion in 2012.

The positive profit contributions of the industrial business were offset by the increase in working capital, defined as the net change in inventories, trade receivables and trade payables, with a total amount of €0.8 billion. Positive effects resulted from the sale of trade receivables of companies in the industrial business to Daimler Financial Services. High investments in property, plant and equipment and intangible assets as well as capital contributions to Engine Holding and the joint venture of Daimler Trucks in China led to cash outflows. Other positive effects resulted from the sale of shares in EADS and MBtech Group. In addition, income tax and interest payments reduced the free cash flow of the industrial business.

The net liquidity of the industrial business (See table 3.31) is calculated as the total amount as shown in the balance sheet of cash, cash equivalents and marketable debt securities included in liquidity management, less the currency-hedged nominal amounts of financing liabilities.

3.31

Net liquidity of the industrial business
  Dec. 31, 2012 Dec. 31, 2011
12/11
In millions of euros   Change
       
Cash and cash equivalents 9,887 8,908 +979
Marketable debt securities 3,841 1,171 +2,670
Liquidity 13,728 10,079 +3,649
Financing liabilities -2,883 2,275 -5,158
Market valuation and currency hedges for financing liabilities 663 -373 +1,036
Financing liabilities (nominal) -2,220 1,902 -4,122
Net liquidity 11,508 11,981 -473

To the extent that the Group’s internal refinancing of the financial services business is provided by the companies of the industrial business, this amount is deducted in the calculation of the net debt of the industrial business.

Compared with December 31, 2011, the net liquidity of the industrial business decreased by €0.5 billion to €11.5 billion. The reduction was mainly caused by the free cash flow and the payment of the dividend to the shareholders of Daimler AG for the year 2011.

Net debt at Group level (See table 3.32), which primarily results from the refinancing of the leasing and sales financing business, increased by €8.3 billion compared with December 31, 2011. The increase was primarily the result of the higher volume of new business in the area of leasing and sales financing and the payment of the dividend for the year 2011. There was also an impact from the positive free cash flow of the industrial business.

3.32

Net debt of the Daimler Group
  Dec. 31, 2012 Dec. 31, 2011
12/11
In millions of euros   Change
       
Cash and cash equivalents 10,996 9,576 +1,420
Marketable debt securities 5,598 2,281 +3,317
Liquidity 16,594 11,857 +4,737
Financing liabilities -76,251 -62,167 -14,084
Market valuation and currency hedges for financing liabilities 665 -369 +1,034
Financing liabilities (nominal) -75,586 -62,536 -13,050
Net debt -58,992 -50,679 -8,313