Last Friday, Daimler, the German luxury car maker, issued its second profit warning in four months today. The announcement sent the shares of the company to a five-year low. It warned that costs that are related to polluting diesel engines would be dragging down the earnings of the company.
The owner of Mercedes-Benz which this year had to recall more than 770,000 diesel cars across Europe which it said had been equipped with illegal software to conceal high levels of harmful nitrogen oxide gases (NOx). said that costs coming from “government proceedings and measures in various regions” that are affecting its diesel vehicles were to blame. In June, German regulators forced Daimler to recall, and carry the costs of retrofitting, some 774,000 vehicles
It said that it now expects its full-year earnings before interest and tax to be “significantly below” as compared to last year’s level. It also said that it sees earnings at its main earnings contributor, Mercedes-Benz Cars, “significantly below” than last year’s level.
The share price of Daimler steeply declined on the news from €52.10 to €49.50 prior to recovering some of its losses.
Sxap, the European auto sector index dropped by 3.8 percent to record a two-year low.
The profit warning came after the economic growth in China, one of its major markets, slowed to its weakest quarterly pace since 2009. It said that the company was already forced to trim its outlook for a first time four months ago, blaming the new tariffs that were imposed on cars that are exported from the United States to China as part of the festering trade dispute of Donald Trump, the President of the United States of America, with Beijing.
Daimler disclosed that its third-quarter earnings before interest amounted to €2.49 billion (£2.19 billion), which is down by 27 percent from the €3.41 billion that was recorded in the same quarter of the previous year, largely due to a 35 percent earnings before interest decline at Mercedes-Benz Cars to €1.37 billion.