Daimler’s diesel emissions woes trigger new profit warning
German carmaker Daimler AG said its operating profit would fall by more than 10 percent this year, its second earnings warning since June, blaming “government proceedings and measures in various regions” as a crackdown on diesel emissions took a toll.
Daimler warned investors it expected its full-year earnings before interest and tax to be “significantly below” last year’s level. Earnings at Mercedes-Benz Cars, its main contributor, will likewise fall “significantly below” the prior-year level.
Analysts at Evercore ISI said in a note that the profit warning was not triggered by a slowdown in business, since demand for Mercedes-Benz cars remains high, but was caused by one-off factors such as regulatory and court rulings.
The company did not give details on what was behind the latest warning. The statement was rushed out ahead of the scheduled release of quarterly earnings this week.
A hit of up to 400 million euros ($460 million) was related to government proceedings into diesel and a European Court of Justice ruling on Mercedes’ use of banned cooling agent R134a, analysts at Evercore ISI said.
The owner of Mercedes-Benz is being investigated for its diesel emissions in Europe and the US, and last month it announced that Chief Executive Dieter Zetsche would step down in 2019 to become chairman from 2021.
The company’s shares fell to a five-year low on the news, dragging other European auto stocks lower, before paring some of the losses. The European auto sector index fell 3.8 percent to a twoyear low on Friday.
The warning from Daimler came after economic growth in China, a major market for carmakers, slowed to its weakest quarterly pace since 2009.
Adding to concerns about the broader sector, Swedish truckmaker Volvo forecast slower demand for trucks in Europe and China next year, while French tire maker Michelin cut its fullyear market forecasts on Thursday.
The profit warning comes amid friction between the German government and carmakers over who pays for expensive retrofits of new exhaust systems for polluting older vehicles, and an ongoing probe by US authorities into emissions.
In May, German prosecutors searched Daimler offices as part of a fraud probe related into possible manipulation of exhaustgas after-treatment in diesel cars.
A spokesman for the Stuttgart prosecutor’s office on Friday said there was “nothing new” to say about this investigation, which is ongoing.
In February 2016 the US Environmental Protection Agency asked Mercedes-Benz to explain emissions levels in some of its diesel cars.
The company also reported lower unit sales from its van division due to delivery delays.
Daimler said its third-quarter earnings before interest amounted to 2.49 billion euros ($2.85 billion), down 27 percent from 3.41 billion in the year-earlier period.