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TEHRAN, Feb 07 -Daimler cut its dividend on Wednesday after fourth-quarter operating profit plunged by 22 percent, hit by trade wars, rising costs for developing electric cars and an industry downturn that has dented even the most profitable carmakers.
TEHRAN, Young Journalists Club (YJC) -Daimler said the return on sales at Mercedes-Benz cars fell to 7.3 percent in the fourth quarter from 9.5 percent in the year-earlier period as emissions tests led to supply bottlenecks and prices for luxury vehicles deteriorated.
This, combined with a cut in the dividend for the 2018 financial year to 3.25 euros a share from 3.65 euros the previous year, disappointed analysts and sent the German carmaker’s shares down more than 2 percent.
Mercedes-Benz sold 2.31 million passenger cars last year, making it the top-selling premium automotive brand in 2018, although some analysts are questioning how much longer German manufacturers can dominate the luxury car industry.
Daimler said it was working on “countermeasures” to increase profits but could not mention details about possible cost cuts because they were still being worked out.
“Daimler’s 2018 results, dividend cut and 2019 guidance encapsulate everything that’s going on in autos right now. Daimler ended 2018 quite weakly. Growth has stalled and costs are rising. Free cash flow is deteriorating and visibility is poor,” Max Warburton, an analyst at Bernstein Research, said.
The profitability of Daimler’s cars division lagged peers and although trucks recovered, the profitability was also below that of rivals, Evercore ISI analyst Arndt Ellinghorst said in a note discussing the German carmaker’s earnings.
Daimler expects 1.45 billion euros ($1.7 billion) in headwinds from increased currency and commodities costs this year, Chief Financial Officer Bodo Uebber said.
For 2019 Mercedes-Benz Cars expects to achieve a return on sales of between 6 percent and 8 percent and a return on sales of between 5 percent and 7 percent 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 percent to 10 percent by 2021,” Daimler Chief Executive Dieter Zetsche said in a statement.
For 2019 Daimler said it expects a slight growth in unit sales, revenue and EBIT.
To counter falling sales and shrinking profits, carmakers are showing increased willingness to explore strategic alliances with rivals as a way to spread the cost of developing next generation cars, buses and trucks.
Source: Reuters
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