FRANKFURT: Luxury carmaker Daimler cut its profit forecast for the fourth time in 13 months on Friday, as it set aside more money to cover a regulatory crackdown on diesel emissions and vehicle recalls related to Takata airbags.
The German automaker is among a raft of blue-chip firms to issue a profit warning this week, adding to concerns about the severity of an economic slowdown, particularly in China where confidence has been hit by an ongoing trade war.
The maker of Mercedes-Benz cars said it would post a second quarter operating loss and that 2019 results would be “significantly” lower than last year, compared with its previous forecast for a broadly unchanged performance.
It also blamed lower-than-predicted growth in automotive markets, as well as slower product ramp-ups that have affected availability this year.
Analysts said deteriorating cashflow would make it hard for Daimler to keep paying a high dividend. Philippe Houchois at Jefferies said Daimler’s dividend would need to be cut to around 50 cents per share, down from 3.25 euros in 2018. The warning is the second since Ola Kaellenius took over from long-standing Daimler CEO Dieter Zetsche in May.
“In finance, some call it ‘to throw in the kitchen sink’... well Daimler just threw in the dining room table, the fridge and the polished silver,” Evercore ISI analysts wrote in a note.
Daimler shares fell as much as 4.5 per cent to a six-month low of 44.54 euros. At 1110 GMT, the stock, which has dropped about 22 per cent in the past three months, was down 0.8 per cent. German carmakers, among global leaders in diesel technology, have been caught in the crosshairs of courts and regulators after Volkswagen admitted in 2015 to using engine control devices to cheat US diesel emission tests.
Daimler’s diesel pollution levels are being investigated by prosecutors in Stuttgart, Germany, where it is headquartered, as well as by the US Environmental Protection Agency (EPA) and the California Air Resources Board (CARB).
The pressure to clean up combustion engines has come at a time when the industry has to invest heavily in electric and self-driving vehicles, cope with slowing growth in China, weak markets in Europe and a rise in global trade tensions.
Daimler said it expected to take an extra 1.6 billion euros hit related to “ongoing governmental and court proceedings and measures relating to Mercedes-Benz Diesel vehicles in various regions.” It did not give further details. — Reuters
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