Daimler hit by drop in Mercedes profits
Despite increase in sales, tariffs and trade wars diminish German carmaker's earnings
Stuttgart — Daimler cut its dividend as fourth-quarter operating profit fell 22% as trade wars and rising costs for developing electric and self-driving cars hit profits at Mercedes-Benz Cars, the company said on Wednesday.
Daimler said the return on sales at Mercedes-Benz Cars fell to 7.3% in the fourth quarter from 9.5% in the year-earlier period.
This, combined with a cut in the dividend from €3.65 a share to €3.25, disappointed analysts and sent shares 2% lower to €52.02, underperforming Germany’s blue-chip DAX index which was trading 0.22% lower.
“Daimler urgently needs efficiency measures,” Evercore ISI analyst Arndt Ellinghorst said on Wednesday. “At the moment the profitability of both Mercedes-Benz passenger cars and trucks lags behind peers.”
Daimler said it was working on “countermeasures” to increase profits but could not mention details about possible cost cuts because these were still being worked out.
For 2019 Mercedes-Benz Cars expects to achieve a return on sales of between 6% and 8% and a return on sales of between 5% and 7% for Mercedes Vans, Daimler said.
“With our guidance for Mercedes-Benz Cars and Mercedes-Benz Vans we are below our long-term target margins. We cannot be satisfied with this. Our goal is to return to our target margin corridor of 8% to 10% by 2021,” Daimler CEO Dieter Zetsche said.
For 2019 Daimler said it expects a slight growth in unit sales, revenue and earnings before interest and tax (EBIT).
Daimler’s EBIT dropped to €2.67bn in the fourth quarter, below analysts’ expectations of €2.92bn.
Mercedes-Benz passenger car sales rose 4% in the fourth quarter but increased tariffs on vehicles exported from the US to China and delivery stoppages for individual diesel models hit demand and resulted in weaker prices.
Mercedes-Benz exported about 30,000 GLE and GLS sports utility vehicles from the US to China in 2018. Daimler has no current plans to manufacture these models in China as a way to mitigate the impact of tariffs, Zetsche said.
Research and development spending rose 4.5% to €9.1bn in 2018 as the carmaker prepares to launch its first fully electric sports utility vehicle in 2019.
Mercedes-Benz emerged as the biggest selling luxury brand in 2018 with 2.31-million new vehicle registrations, followed by BMW’s 2.12-million and Audi which posted registrations of 1.81-million 2018 .