Daimler slashed its dividend on Wednesday after fourth-quarter operating profit plunged by 22 percent, due to trade wars, increasing costs for developing electric cars and an industry downturn that has dented even the most profitable automakers.
Daimler stated the return on sales at Mercedes-Benz cars dropped to 7.3 percent in the fourth quarter from 9.5 percent in the year-earlier duration as emissions tests led to provide bottlenecks and costs for luxury vehicles deteriorated.
This, together with a cut in the dividend for the 2018 financial year to 3.25 euros a share from 3.65 euros the earlier year, disappointed experts and sent the German automaker’s shares down over 2 percent.
Mercedes-Benz sold 2.31 million passenger cars in 2018, making it the top-selling premium automotive brand in last year, although some analysts are asking how much longer German producers can dominate the luxury car industry.
Daimler stated it was working on “countermeasures” to boost profits but could not specify information about possible cost cuts as they were still being worked out.
“Daimler’s 2018 results, dividend cut and 2019 guidance encapsulate everything that’s going on in autos right now. Daimler finished 2018 quite weakly. Growth has stalled and expenses are increasing. Free cash flow is deteriorating and visibility is poor,” stated Max Warburton, an analyst at Bernstein Research.
The profitability of Daimler’s cars department lagged peers and although trucks recovered, the profitability was also below that of competitors, Evercore ISI analyst Arndt Ellinghorst stated in a note talking about the German automaker’s earnings.
Daimler expects 1.45 billion euros ($1.7 billion) in headwinds from boosted currency and commodities costs in 2019, Chief Financial Officer Bodo Uebber stated.