Good morning, everyone. Welcome to this conference on our Q1 results 2022. We hope everyone on the line is fine and healthy. On this conference call, I would like to welcome the CFO of Daimler Truck, Jochen Goetz. My name is Jörg Howe. I'm the Head of Global Communications of Daimler Truck AG. As mentioned previously by Christian Herrmann, Jochen Goetz is joining this call today from his home office, as he needs to stay in quarantine. This morning, we published our press release and the Q1 presentation on our website. You might very well have followed today's analyst conference call prior to this media Q&A. Jochen Goetz will now briefly explain the most important figures and our business outlook. Following this, we look forward to your questions. First, a few more notes.
This whole call is conducted in English, so please be so kind to ask your questions in English as well. The operator will explain the procedure for registering your questions again in a moment. Our conference call will end around 10:15 A.M. Now, Jochen, the floor is yours.
Yes. Thanks, Jörg, and very warm welcome from my side. If you look on Q1, what are the most important things to mention? Overall, I would say it was a quite positive development. If you look from a sales perspective, we sold 109,000 trucks, significantly above the number we have sold last year with 101. A strong development here, especially driven by North America, but also by Europe. Incoming orders, demand, still very strong, on a high level, not as high as last year, but it was extraordinarily high. In discussions with our customers, we still see strong demand and more requests to get trucks earlier or more trucks. Still on the other side, the supply chain, especially semiconductor, is still a restricting factor, but overall good.
With that, we also ended the quarter with a record high in order backlog. We don't see cancellations. We don't see move-outs. We are also at that point of time very confident that we have a solid order backlog, not only in numbers but also content-wise. Supply chain, as I just mentioned, is still the limiting factor. We see improvements in the quarters to come. Our customers, our suppliers now confirming numbers, which was not the case in the past. There is improvement, but as I said, it's a limiting factor and was a limiting factor in Q1. We still were able to increase revenues. It's not only sales, but also pricing, which is very important to cover the costs we have on the raw material side and on the energy side.
Overall, our EBIT increased to EUR 651 million compared to EUR 580 million the respective quarter last year. The return on sales of 5.9% whereas the 6.3% last year. Main driver for the lower return on sales is the increased cost we had year-over-year. We expect to cover that with price increases in the US starting with Q2 and in Europe starting with Q2, increase fees. Fo r the quarter, from an outlook perspective, not too many news. We still confirm our outlook for 2022. That's true for the market environment in North America and in Europe, the two most important markets. We increase our guidance on revenue. That's mainly driven by a stronger US dollar as well as price increases we have now baked into our forecast.
With that, we also uplift our guidance on the EBIT. Instead of a slight decrease, we are now on prior year level. EBIT adjusted, we see a significant increase. No changes on the segment guidance. Everything the same, that was true for the free cash flow. With that, strong start in the year. Good recovery. Still a lot of challenges ahead of us, but we are confident, and therefore we confirm the guidance. With that, as a short introduction, I would hand back to Jörg.
Thank you very much, Jochen. Ladies and gentlemen, we will now begin the Q&A session. Please state your name and media outlet at the beginning. Take your time for your questions and ask them slowly and clearly. The operator will now explain the exact procedure. Thank you very much.
If you wish to ask a question, please press zero and one on your telephone keypad. Please press zero and two on your telephone keypad if you wish to withdraw the question. One moment, please. We are now registering your questions.
We are going to start with Markus Grabitz from the Stuttgarter Zeitung. Go ahead, Markus.
Good morning. Thank you for taking my question. I have a question regarding the technology. Daimler Truck is a founding member of the H2 Engine Alliance, and my question is, is Daimler committed to develop an H2 engine? If so, can you put a date to it?
First of all, Daimler Truck is clearly committed to an economy which is based on H2. There are basically two technical solutions possible. Our clear main path still is the fuel cell. With that, you're well aware of that, we joined forces with Volvo and established a cellcentric joint venture where we produce fuel cells for hydrogen engine trucks. That's the clear prime path. There we expect around 2027 to have serious product. Second is a discussion for some applications. You can think about construction areas very restricted in space in the truck. Their H2 engine could be an alternative. We are developing or exploring the opportunities. There are no final decision made, but it's a technical alternative which we cannot finally decide on today. No concrete decisions made and no timing for potential H2 engine decided so far.
Thank you.
Welcome.
Okay, next one in line is Markus Engemann from dpa-AFX. Go ahead, Markus.
He has no question. Please go ahead with the next one.
Okay, we go further on to Markus Klausen from Dow Jones. Go ahead, Markus.
Hi, good morning. Many thanks. I have a question regarding the price increases you're making in light of the high cost of raw materials. Is it correct to say that you are reducing prices again when the cost of raw materials should drop significantly? The second question is about the margin outlook for this year that you have deteriorated. Is it fair to conclude that the higher cost will be fully offset by the higher cost of raw materials? Thank you.
Yes. Thanks for your question. Regarding the first one, price increases. Look, when we went back to our customer and saying, we are doing very unusual move, we even adjust pricing for trucks we have in the order backlog, which we normally don't do. The reason for that was a significant, call it extraordinary increase in raw material and in energy costs. The customer understand because they obviously also see what's going on in the world. With that, we increased the price not only once, but meanwhile also a second time. They also have a clear expectation, if that's the driver for the price increase, it's not just increasing profits, but cover the cost, that if the costs go away, also the price goes away.
That's a clear understanding of the customer, and it's by the way, also our clear understanding. The answer to your question is yes. If we see a totally different cost level, that cost-driven price increase would also go away. Second question on the margins, which is somehow similar. You are absolutely right. In our margin assumptions is baked in that what we know today from a raw material perspective, from an energy perspective, and that's not only the spot prices as we speak, but also the expectation we in our purchasing department have for the rest of the year. That's baked into the guidance. We expect from a full year perspective to cover that with price increases in the major markets in Europe and North America, especially.
From a quarterly perspective, I mentioned that in the speech on analyst call, we were not able to recover full cost in Q1. That will change when price increases kicks in in the U.S. in Q2 and in Europe in Q3. From a full year perspective, you're right. We want to recover or regain the cost increases pricing.
Okay. Next one is Alexander Jungert from Mannheimer Morgen. Go ahead, please.
Hi, and good morning. I have two questions. The first one is, how many eActros has been sold in Q1 , and how is your target for the whole year? The second question is, how long do I have to wait for a new eActros? Thank you.
When you look on the eActros and start with the question about how long do you have to wait, w e are producing the eActros on the same line and on the Actros itself. We are restricted on the number we can produce by the semiconductor. If you wait for a normal Actros, meanwhile 8-9 months, you don't get an eActros at the earlier point of time because chips also affect the eActros. The limiting factor here at the moment is not that we are not able to deliver a truck because of the e components. That's not a problem. It's more, call it, the common problem for the truck. The chips are missing.
From a demand perspective, we haven't sold that many in Q1. That was also not anticipated because we are ramping up. It's important that when we are talking to customers, they understand the concept of the vehicle. At the beginning, there was quite often one or two trucks which are sold. Now they are testing the trucks to see the progress, and now the second wave of orders are coming in. It's not a major number. We disclose the numbers overall, but we don't disclose numbers for specific products. We are very happy with the demand and even more important with the feedback we get from the customers when it comes to technical capabilities of the eActros.
Okay.
Thanks.
Thank you. Now we go on to Victoria Waldersee from Reuters. Go ahead, please.
Hello, this is Victoria Waldersee. Can you hear me all right?
Yes.
Great. I have a quick question on the Mercedes-Benz Kamaz stake. Firstly, has there been any advancement on that front in terms of discussions with Russian authorities? Secondly, would the strategy which we saw yesterday was adopted by Renault to just sell its majority stake to a Russian institute with a buyback option be a possibility, for you with this stake? Thank you.
Well, first of all, we still stick to what we said. We wound down all our operations in Russia, and we have seen that in the numbers. We did an impairment on our joint venture as well as on the receivables. With that, we have no assets remain in Russia when it comes to balance sheet items. Well, we are in constant discussions with our partners how to proceed, but for obvious reasons, I will not share any details on the question how we want to proceed, because we have ongoing negotiations with them. We are exploring all options which are possible. It's also the question what's possible if you are in touch with a sanctioned company, which Kamaz is. As I said, we are in constant talks, but nothing to report right now.
Thank you.
Okay. Next one is Ilona Wissenbach, also from Reuters, the German arm.
Good morning, on Herr Götz . I would like to ask, can you clarify, you mentioned in the analyst call the raw material cost, and probably this also including the energy cost for the whole year, would sum up to a high triple-digit million euro amount, and that the price increases are double-digit in Europe and the US, with starting in the US and later to kick in in Europe. Is that right?
Yes, exactly. That's exactly what I could confirm that these are the numbers we have baked into our guidance of what we see from today's perspective. Exactly right.
Okay. Perhaps one question on your customers. Do you expect that there are repercussions of the inflation and energy cost rises on them, which might then hit demand in the long- term, as there are expectations that there is entrenched inflation probably?
Well, our assumption is, and you said rightfully long- term, short- term. Short- term, we don't see any impact because anyway the demand is not the determining factor at the moment for sales. It's anyway the supply chain. Demand would be much stronger. What we see, and it could be a change, especially in U.S., but also in Europe. Normally, what you have seen in the past is if demand is super strong, you see a spike, and then you see a couple of years with lower demand afterwards. The demand in 2021 could not be fulfilled. The demand in 2022 cannot be fulfilled. It means two years basically demand is postponed now into 2023 a nd the trucks are aging. That means they are more expensive, more maintenance, no parts.
There is additional demand basically created in 2023 from the years earlier. We also don't get used trucks at the moment because the demand is that high. What we see is that basically an extended cycle in strong demand, which is a positive and takes a little bit away from the cyclicity we have normally in our business. We see that positive from a customer perspective. They understand that raw material has to be passed through. They will do the same, and we see it if we purchase basically transport services. There is already an increase. At the very end, this increase in raw material and energy will be passed through from an OEM to a fleet and from a fleet to the end customer. I think that's the truth.
At the end, the consumer has to pay a higher price because of this increased input costs for raw materials. That's what happens from our perspective. We are now somehow back in an inflationary world, which we had for a long, long time in Europe and North America. We are no longer used to it because the last one and a half decade had basically no inflation. I think that's the overall change what happens right now.
Thank you.
The next one is Franz Hubik from Handelsblatt. Go ahead, Franz.
Yes, thanks for your time, Jochen. Two questions from my side, please. First of all, the EBIT of your business in Asia is shrinking quite significantly. Can you give us a little more insight about what are the reasons here? My second question is, once again, the margin guidance. I'm not sure if I really understand what's going on here. From my perspective, you raised the revenue and the EBIT guidance, and you mentioned in your press statement that you are still super focused in terms of cost discipline. Why are you not able to translate those positive developments in a higher margin guidance?
Thanks for the question. On Asia, a couple of things happened. First of all, demand in two major markets in Asia is pretty weak. There are two different reasons for that. Let me start with China. In China, we had implementation of a new regulation, first of July last year. We saw a super strong demand in the first half of 2021. After this huge pre-buy effect, weak markets in the second half, and that continued in Q1 . Really weak markets in China, and that hits us indirectly via our joint venture, BFDA, which is part of the Asian segment.
What we also see is in China, due to the fact that the majority of the major cities are closed, if you will, the demand not only from the pre-buy effect, but also for the market demand is rather weak. That’s one big driver. The other one is that in Asia, there are two things ongoing. One is a bigger emission scandal with one of our competitors, so strong demand there. Second, we were limited on semiconductors in Asia. As I mentioned, we made a conscious decision to allocate chips wherever we can when we talk about common chips to the regions where we have higher margins. That’s mainly U.S. and North America. B asically moved away chips from Asia.
These are the two main reasons for that. Structurally, we have no problem. On the cost side, we are on our plan, same is true for aftermarket, but it's really the demand piece which limits us in Asia. Regarding the guidance, first of all, if you look on the revenue, that was a reference point, there are two major things. One is pricing and the other one is currency. These are the two main drivers for an increased guidance on the revenue side. We uplift the EBIT guidance. I mentioned that. If you look on an as-book level, from slightly below prior year, we are now on prior year levels. Therefore, we uplifted our profit on that one .
No change on the adjusted one because we are already on significant and more than significant. We don't have. Then on the relative number, return on sales you're referring to, well, as we said, we are increasing prices to cover costs. That basically means, it's a higher revenue, but there's only a minor margin in because we only want to cover costs, and that's the only thing we can also transport to the customers. With that out of this price increase, we increase revenue, but it has no major impact on the relative number. That's the reason why we stay within that. Also keep in mind, a guidance between 7% and 9% is quite a broad range. There's still movement within, but nothing which led to an overall change of the guidance. That's the explanation.
I have no more questions left. If anyone wants to ask something, you can do now. We are waiting a little bit, or you can afterwards contact the Daimler Truck Communications team, and we are at your disposal for the rest of the day and maybe for the rest of the night if you want to. There is no one left. I thank you very much, Jochen.
You're welcome, J örg .
We hope to see you soon here in Leinfelden-Echterdingen. Thank you very much, ladies and gentlemen, for your participation. I wish you all a good day, and of course, stay safe and see you soon as well. Thank you so much. Bye-bye.