Mercedes owner cuts its dividend as profits fall 22%

German carmaker Daimler has cut its dividend as fourth-quarter operating profit fell 22% as trade wars and rising costs for developing electric and self-driving cars hit profits at its Mercedes-Benz unit.

Daimler said the return on sales at Mercedes-Benz cars fell to 7.3% in the fourth quarter from 9.5% in the year-earlier period.

This, combined with a cut in the dividend from €3.65 a share to €3.25, disappointed analysts and sent shares more than 2% lower, underperforming Germany’s blue-chip Dax index.

Daimler’s shares have fallen by nearly 23% in the past 12 months.

“Daimler urgently needs efficiency measures,” Evercore ISI analyst Arndt Ellinghorst said. “At the moment, the profitability of both Mercedes-Benz passenger cars and trucks lags behind peers.”

Daimler said it was working on “counter-measures” to increase profits but could not mention details about possible cost cuts because these were still being worked out.”

For 2019, Mercedes-Benz Cars expects to achieve a return on sales of between 6% and 8% and a return on sales of between 5% and 7% 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% to 10% by 2021,” Daimler chief executive Dieter Zetsche said.

For 2019, Daimler said it expects a slight growth in unit sales, revenue and earnings before interest and tax (EBIT).

Daimler’s EBIT dropped to €2.67bn in the fourth quarter, below analysts’ expectations of €2.92bn.

Mercedes-Benz passenger car sales rose 4% in the fourth quarter but increased tariffs on vehicles exported from the US to China and delivery stoppages for individual diesel models hit demand and resulted in weaker prices.

Mercedes-Benz exported around 30,000 GLE and GLS sports utility vehicles from the US to China last year.

Daimler has no current plans to manufacture these models in China as a way to mitigate the impact of tariffs, Mr Zetsche said.

R&D spending rose 4.5% to €9.1bn last year as the carmaker prepares to launch its first fully electric sports utility vehicle this year.

Mercedes-Benz emerged as the biggest selling luxury brand last year with 2.31m new vehicle registrations, followed by BMW brand’s 2.12 million and Audi which posted registrations of 1.81m last year.

- Reuters