Daimler’s operating profit to fall due to crackdown on diesel

by SpeedLux

Daimler stated its operating profit would decrease by over 10 percent this year, its second earnings warning since June, putting blame on “government proceedings and measures in various regions” as a crackdown on diesel emissions takes a toll.

Daimler cautioned investors it expected its full-year earnings prior interest and tax to be “significantly below” 2017’s level. Revenues at Mercedes-Benz Cars, its main contributor, will similarly fall “significantly below” the prior-year level.

Analysts at Evercore ISI stated in a note that the profit warning was not caused by a slowdown in business, since demand for Mercedes-Benz cars remains huge, but was caused by one-off factors such as regulatory and court rulings.

The company did not provide details on what was behind the recent warning in a statement rushed out before the scheduled release of quarterly earnings next week.

A hit of up to 400 million euros ($460 million) was associated with government proceedings into diesel and a European Court of Justice ruling around Mercedes’ use of prohibited cooling agent R134a, analysts at Evercore ISI stated.

The Stuttgart-based owner of Mercedes-Benz is being investigated for their diesel emissions in Europe and the United States, and last month announced CEO Dieter Zetsche would step down next year to become chairman from 2021.

The warning from Daimler follows economic growth in China, a major market for automakers, slowed to its weakest quarterly pace since 2009.

Adding to concerns regarding the broader sector, Swedish truckmaker Volvo forecast slower demand for trucks in Europe and China in 2019, where as French tire maker Michelin slash its full-year market forecasts on Thursday.

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