Daimler's diesel troubles trigger new profit warning

By Edward Taylor FRANKFURT (Reuters) - German carmaker Daimler AG said its operating profit would fall by over 10 percent this year, its second earnings warning since June, blaming 'government proceedings and measures in various regions' as a crackdown on diesel emissions takes 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.

Reuters October 20, 2018 00:05:35 IST
Daimler's diesel troubles trigger new profit warning

Daimlers diesel troubles trigger new profit warning

By Edward Taylor

FRANKFURT (Reuters) - German carmaker Daimler AG said its operating profit would fall by over 10 percent this year, its second earnings warning since June, blaming "government proceedings and measures in various regions" as a crackdown on diesel emissions takes 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 gives details on what was behind the latest warning in a statement rushed out ahead of the scheduled release of quarterly earnings next 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 around Mercedes' use of banned cooling agent R134a, analysts at Evercore ISI said.

The Stuttgart-based owner of Mercedes-Benz is being investigated for its diesel emissions in Europe and the United States, and last month announced 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 two-year low.

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 tyre maker Michelin cut its full-year market forecasts on Thursday.

RUSH RELEASE

Daimler rushed out the release of third-quarter earnings figures that fell well short of market expectations.

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 U.S. authorities into emissions.

In May, German prosecutors searched Daimler offices as part of a fraud probe related into possible manipulation of exhaust-gas 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 United States Environmental Protection Agency asked Mercedes-Benz to explain emissions levels in some of its diesel cars.

The Stuttgart-based company also reported lower unit sales from its vans division due to delivery delays; and the need to recognise costs related to a European Court of Justice ruling on vehicles using an old coolant.

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 due to a 35 percent EBIT fall at Mercedes-Benz Cars to 1.37 billion euros.

($1 = 0.8724 euros)

($1 = 0.8702 euros)

(Reporting by Douglas Busvine; editing by Thomas Seythal, Edward Taylor and Keith Weir)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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