Daimler Reports Q4 Earnings Increase on Strong Pricing

DTNA Order Book Almost Full Even as Market Normalization Reduces Sales
Daimler cabs on train
New trucks loaded onto a train at the customer delivery center outside the Daimler AG truck factory in Woerth, Germany. (Alex Kraus/Bloomberg News)

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Profits at Daimler Truck AG jumped 120% year-over-year in the fourth quarter of 2023 on strong demand plus higher prices and margins. But executives at the original equipment manufacturer see a normalization of the truck market in 2024, especially in North America.

“Customers are now ordering the vehicles when they need them, rather than reserving slots far in advance,” Daimler Truck Chairman of the Board Martin Daum said in a call following the release of the results March 1.

“Reasons for the normalization include the persistent challenging economic conditions and the absence of catch-up effects from pent-up demand that was exceptionally high during the previous two years,” Daum said.

“Nevertheless, we are satisfied with the current order intake for the [ongoing first quarter of 2024] and the following Q2. For North America, we are almost sold out for the first half of the year,” he said.

Daimler Truck posted a $1.322 billion profit in the final three months of 2023, a 120% jump from $598.2 million in 2022.

The owner of Class 8 truck brands Freightliner and Western Star posted revenue of $16.2 billion in Q4, up 1% compared with $16.02 billion a year earlier.

Daimler Truck sold 140,132 vehicles in the final three months of 2023, down 10% compared with 155,072 in the year-ago period.

The company’s orders in Q4 totaled 107,969, a decrease of 21% from 137,135 a year earlier.

In North America, the company reported revenue of $6.49 billion in Q4, a decrease of 3% from $6.67 billion in the same period 12 months earlier.

Daimler Truck sold 48,256 vehicles in the region in the final quarter of 2023, 4% less than the 50,007 sold in the year-ago period. Of those Q4 sales, 39,055 were in the United States, down 8% compared with 42,457 a year earlier.

Freightliner and Western Star won a 36.9% share of the North American Class 8 market in Q4, compared with 38.9% a year earlier, according to calculations by the parent company.

Daimler Truck North America produced 45,508 vehicles in Q4, down 6% year-over-year from 48,453 units.

The company’s return on sales in the region in Q4 was 12%, compared with 11.9% a year earlier.

For the full-year period, DTNA posted a 12.3% return on sales, up from 10.8% in 2022.

Raising margins across the company’s business unit has been a key goal for Daum and the executive team, with DTNA’s 2025 target coming in at 12%.

The unit benefited from higher prices, positive impacts of warranties and improved material cost efficiency, but took a hit from lower sales volume due to supply constraints and inflation-related cost increases, particularly personnel costs, the parent company said.

At the end of 2023, DTNA employed 28,833 staff, up 2% compared with 28,227 a year earlier.

In full-year 2023, Daimler Truck posted a $4.31 billion or $5.01 per diluted share profit, a 44% jump from $2.99 billion, $3.51, in 2022.

Revenue rose 10% year-over-year to a record $60.58 billion in 2023 from $55.16 billion in 2022 on the back of higher prices plus an increase in sales and more profitable product mix.

The company sold 526,053 vehicles in 2023, 1% more trucks and buses than 2022’s 520,291 units.

“We could have achieved even higher financial results, if we had engaged in opportunistic pricing,” Daum said during the earnings call. “In 2023, demand often exceeded supply, and we could have taken advantage of this situation, yet we deliberately decided against it because we are convinced customer trust is key for the long-term success of the company. Therefore, we do not want to risk this trust. We rather want to strengthen it.”

The Leinfelden-Echterdingen, Germany-based company’s orders in 2023 totaled 426,910, a decrease of 18% from 522,837 a year earlier. Incoming orders and order backlog decreased due to a normalization of demand, it said.

In North America, the company sold 193,236 vehicles in 2023, up 5% compared with 184,417 in 2022. Of those Q4 sales, 162,949 were in the United States, up 3% compared with 157,878 a year earlier.

In 2023, industrywide North American Class 8 sales rose 7% year-over-year to 331,423, which Daum said during the earnings call was a very high level, but due to “significant supplier constraints, particularly in the second half,” DTNA was unable to take full advantage of the growth levels, which meant its market share fell to 39.1% from 40% in 2022.

That said, DTNA has a “high quality order book” in North America as replacement demand remains strong in the on-highway segment while there is similar demand for new vocational trucks, the parent company said.

Daimler Truck anticipates unit sales in 2024 in a range between 490,000 and 510,000, compared with 2023’s 526,053 vehicles.

DTNA’s truck sales in 2024 are expected to be between 180,000 and 200,000, and the margin on those trucks is forecast to be in an 11% to 13% range.

“We are confident in increasing our market share, especially in the vocational segment with our all-new Western Star trucks,” Daum said. “Our order intake for 2024 looks very promising.”

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