Daimler misses forecast as new technology costs soar
Daimler’s profit growth will be damped in 2018 by spending on new technologies such as electric and autonomous vehicles, it said on Thursday, as it missed quarterly earnings forecasts and reported a lower margin on its Mercedes-Benz cars.
An expected rise in unit sales and revenue in 2018 will be countered by spending on new cars and technologies, the German vehicle maker said, forecasting earnings before interest and tax (ebit) would come in at a similar level to 2017.
Evercore ISI analyst Arndt Ellinghorst said Daimler’s results and guidance flagged investment and exchange rate challenges likely to hit profitability across the industry.
“Of course, we are aware of many of these burdens, but to see it black and white is still shocking,” Ellinghorst said.
Most major car makers are ramping up spending on electric vehicles and autonomous driving technologies, as well as services such as car-sharing, amid tightening emissions regulations and competition from the likes of Uber and Google.
Daimler said it faced currency headwinds — partly from the euro’s rise against the US dollar, renminbi and yen — of up to €1bn in 2018, as well as €200m in extra raw material costs and a further €1bn in investments to “secure the future”.
Ellinghorst calculated this could amount to an additional €300m-€400m in extra restructuring costs and a rise of up to €700m in research and development spending.
“Daimler is not alone. It will be harder for all companies to maintain their profitability,” said Ellinghorst, who has an “outperform” rating on Daimler shares.
Daimler’s ebit for the fourth quarter through December was flat at €1bn, missing the average forecast of €3.65bn in a Reuters poll. The return on sales at its Mercedes-Benz cars division shrank to 9.7% from an unusually high 10.7% a year earlier, even as unit sales rose 4%.
In 2018, Mercedes-Benz will post a slight rise in unit sales and flat ebit at its cars division, Daimler forecast, while operating profit at the vans business will dip.
Despite a continued rise in demand for cars in China in 2018, Daimler said it expected more moderate demand in the first months of the year.
It also said it had set aside €3bn towards its German pension plan. It will pay a dividend of €3.65 a share for 2017, compared with analysts’ consensus forecast for €3.53.
Daimler shares were trading 1.6% lower at €72.52 by 2.27pm, underperforming the German blue-chip DAX index, which was up 0.1%.