Daimler Truck flexes financial muscle a year after going solo

BOSTON — Daimler Truck is promising more shareholder value and forecast revenue growth of 40%-60% in the second half of the decade as it transitions from diesel trucks to zero-emissions powertrains in its major markets.

In its first Capital Markets Day since splitting off from Daimler AG and former parent Mercedes-Benz in December 2021, Daimler Truck executives took analysts through their plans while affirming financial goals for 2025.

Daimler Truck North America (DTNA), known internally as Truck North America, is the company’s most profitable business unit. That partially explains the choice of meeting with analysts in the U.S. Daimler Truck trades only on the Frankfurt Stock Exchange where it is among 40 blue chip stocks included in the Deutsche Boerse AG German Stock Index (DAX). Shares are available over the counter in the U.S. where the price closed slightly lower Tuesday.

“Daimler Truck is doing very well,” Martin Daum, chairman of the board of management, said in a news release Tuesday. “We are increasing our guidance for 2023. We are firmly on track to deliver on our 2025 ambitions. And we are ready to take Daimler Truck to the next level by 2030 — aiming for above 12% adjusted return on sales” when economic conditions are positive.

Return on sales estimates raised for all Daimler business units

Daimler said it has raised its goal for adjusted return on sales (ROS) in 2023 to 8.5%-10% from 7.5%-9%. That is largely due to an improved supply chain, strong pricing and a growing service business. Higher ROS is expected in all business units:

Trucks North America (DTNA): 11%-13% from 10%-12%.
Mercedes-Benz (European-branded trucks): 8%-10% from 7%-9%
Trucks Asia: 4%-6% (from 3%-5%)
Daimler Buses, 3%-5% from 2%-4%)

The company expects to deliver on its previously announced 2025 ambition of more than 10% adjusted ROS for its industrial business in favorable conditions as fixed costs and capital spending decreases while service revenue rises.

In the second quarter ended June 30, Daimler Truck reported a 9% increase in worldwide unit sales to 131,888 from 120,961 in the same period a year ago. DTNA sold 50,618 units, up 14.7% from 44,124 a year ago. Mercedes-Benz rose 1.1%; Trucks Asia gained 9.2% and Daimler Buses grew 21.8% to 6,181 units. Daimler reports second-quarter earnings on Aug. 1.

The company announced a stock buyback of up to 2 billion euros ($2.2 billion) over the next 24 months.

“Daimler Truck is transforming for sustainable growth — to the benefit of our employees, our customers and our shareholders,” Daum said.

Achieving the adjusted ROS goal in 2030 requires cost discipline, smart allocation of capital and smoothing the boom-and-bust cycles endemic to the trucking industry, CFO Jochen Goetz said.

One approach to containing costs is the recent memorandum of understanding that would merge Daimler Truck and Toyota Motor Corp. Japan-based Mitsubishi Fuso Truck & Bus Corp. and Toyota’s Hino Motors brands.

Daimler plans to add hydrogen internal combustion engines

Daimler applies a twin focus of powertrain and electronics and software development toward its goal of selling only zero-emissions trucks and buses in its major markets by 2039. Three powertrains — diesel, battery-electric and hydrogen power — compete for resources.

Internal combustion engines (ICE) powered by hydrogen will be added to the Detroit engine lineup even though they have limited use cases, such as heavy haul. Daimler’s decision to outsource medium-duty engine production globally to Cummins freed up resources to add hydrogen ICE, Goetz said in a media roundtable after the presentations to analysts concluded. A recent decision by the European Union to consider hydrogen ICE as zero-emissions engines helped Daimler decide to pursue the technology, which is relatively simple to do on an existing powetrain.

Cummins also is working on hydrogen ICE as part of its fuel agnostic engine strategy. Werner Enterprises signed a deal with Cummins in September to purchase 500 hydrogen ICE engines when the product is available in 2027.

With proper regulations in place, Daimler said it could build on existing diesel engine platforms — as Cummins is doing with its X15 engine — and provide the technology quickly.