A third profit warning from Daimler

22 January 2020

22 January 2020

Daimler has issued a profit warning ahead of its next financial earnings release, highlighting the damage of recent investigations into emissions cheating.

The new profit warning, its third relating to 2019 figures, comes as the company revealed that earnings before interest and taxes (EBIT) fell by around 50% to €5.6 billion for the year. This is before another €1.5 billion in legal and governmental costs related to diesel fines and other issues are added.

Sales up

Daimler said that it expects the return on sales at Mercedes-Benz Cars, which includes the Smart brand, to slump to 4% in 2019, compared to 7.8% in 2018.

At Mercedes-Benz Vans, the company expects the return on sales to decrease to -15.9% from 2.3%, while the trucks division will see a fall to 6.1% from 7.2%.

One-off costs of €300 million for a review of its vans product portfolio as well as another €300 million for the realignment of its Your Now mobility services, which it shares with BMW, are included in the preliminary figure, Daimler said in a statement.

The carmaker saw sales in Europe grow in 2019, up to 2.34 million units according to the latest ACEA data. This represents the ninth consecutive yearly increase, helping the company to cement its position as the market leader in premium cars.

Ongoing problems

However, Daimler has been open with its financial struggles over the last 12 months. The carmaker was the first, and so far only, company to highlight the serious impact that falling diesel sales and the introduction of WLTP had caused to its European fleet CO2 average, showing how it is on course for a big fine with the 2021 EU CO2 targets.

Its new CEO, Ola Källenius, is seeking to shore up the business following a drop of 22% in the German carmaker’s operating profit during Q4 2018. This was blamed on trade wars, industry downturn and the rising cost of electric vehicle (EV) development. Initially, he announced plans to save €6 billion to bring the company onto a better financial footing.

Recalls and fines

In Q2, the company said it expected a drop of €1.6 billion before interest and taxes in Q2, blaming the need to provide an extended recall in connection with issues surrounding Takata airbags, which itself will cost €1 billion. 

Towards the end of last year, Daimler announced a large number of job cuts, blaming the need to invest further in electric vehicle (EV) development as the reason why it needed to divert funds from its workforce costs.

The company was also forced to pay a fine for diesel emissions cheating and is facing a lawsuit from its investors.