Daimler Shocks Investors With Profit Warning For 2018.
“Global demand for premium cars may have peaked and Daimler’s supply chain costs are likely to rise if the trade war intensifies,”
Daimler shocked investors with news the profits of the maker of Mercedes Benz autos and trucks would be cut by about 10% this year because of problems with its diesel engines.
This is its 2nd profit warning in 4 months.
Daimler has been under pressure this year from currency problems, the impact of possible tariff obstacles in China and new European Union fuel economy regulations.
Daimler’s 3rd quarter earnings before interest and tax (EBIT) fell 27% to €2.49 billion compared with the same period last year, following a 35% drop in profits at Mercedes cars.
Daimler warned full year EBIT earnings would be significantly below last year’s for the Mercedes subsidiary. Investors were miffed at the lack of detail from Daimler, which said the announcement was made because of ongoing governmental proceedings around the world regarding Mercedes-Benz diesel engines.
In the first nine months of 2018, Mercedes sales in Western Europe fell 5.8% to 619,414, and slumped 12.3% in September to 76,873, according to the European Car Makers Association. This was mainly because of problems with meeting new EU fuel economy regulations.
Mercedes is also being investigated for its diesel emissions in Europe and the U.S. Last month long time CEO Dieter Zetsche said he would step down in 2019 and become chairman from 2021. China car sales are slowing.
Investment researcher Evercore ISI said Daimler’s overall performance as fine.
“Daimler’s underlying performance during the quarter would appear to have been broadly in-line with expectations,” Evercore ISI analyst Arndt Ellinghorst said.
In a report headed “Clearing the Desk, One Quarter at a Time,” investment researcher Jefferies retained its “hold” recommendation on Daimler shares.
Reuters Breaking Views column was more gloomy.
“Global demand for premium cars may have peaked and Daimler’s supply chain costs are likely to rise if the trade war intensifies,” Breaking Views columnists Liam Proud and Antony Currie said.