Daimler Shares Dive After Another Profit Warning.
“Unfortunately, Daimler has to write off 2019, a year that should have been an opportunity to generate cash and prepare for the severe challenges of EU CO2 compliance in 2020/21”
Mercedes Benz parent Daimler’s shares plunged Friday after the luxury car, truck, van and bus manufacturer said it expects a 2nd quarter loss, in part because of an increase in costs connected with a recall of Takata airbags.
Daimler will report its formal 2nd quarter financial report July 24.
Daimler shares were down 1.5% in mid-morning trading at 47.81 euros in Europe after falling an initial 2.7%.
The company warned said it now expects a 2nd quarter loss before interest and taxes (EBIT) of 1.6 billion euros ($1.8 billion) after a 2.6 billion euro ($2.9 billion) profit in the same period last year.
Last month Daimler cut its profit forecast for the third time in 12 months.
Daimler said it now expects earnings before interest and taxes (EBIT) in 2019 to be significantly below the prior year level, compared to a previous forecast of a result close to last year’s profit. Provisions for an extended recall in connection with Takata airbags will increase by around 1 billion euros, Daimler said.
Shareholders in both Daimler and its main rival BMW have been bracing themselves for financial results in the next weeks that will underline gloomy long-term profit prospects.
Daimler and BMW are both facing leadership uncertainty, although the former at least has new management in charge, while BMW must wait a while to find out who is its new CEO.
Ola Kaellenius took over as CEO of Daimler AG in May, replacing Dieter Zetsche, who faced mandatory retirement but will return as chairman of the supervisory board in 2021. BMW CEO Harald Krueger announced in July he would not stay on beyond April 2020.
Daimler and BMW have presided over formidable profit performances, but the good times have come to an end.
Before Friday’s news, Daimler had a profit target of between 6 and 8% for 2019.
Investment researcher Evercore ISI said it appears Daimler’s new management is trying to clear the decks for action.
“(it’s) the Big Cleanup. Looks like the new management team’s intention is to fully clean up and address key issues in the company. Whether this is the final warning for the year remains to be seen,” Evercore ISI analyst Arndt Ellinghorst said.
“What is obvious is the fact that management’s credibility might have suffered more if it had only partially warned two weeks ago, reported a weak Q2, had weak/vague post-Q discussions with investors and then was forced to warn again with Q3,” Ellinghorst said.
“Unfortunately, Daimler has to write off 2019, a year that should have been an opportunity to generate cash and prepare for the severe challenges of EU CO2 compliance in 2020/21. From a relative and competitive position, Daimler has manoeuvred itself into a difficult spot,” he said.