Daimler warns on full-year fall in profits at Mercedes division

City A.M. Reporter
DAIMLER warned that profit would slip at its flagship Mercedes-Benz Cars division this year due to a deteriorating market in Europe and China, spooking investors in German rivals including BMW and Volkswagen.

“We are gearing up for a challenging environment,” chief executive Dieter Zetsche said.

Shares in both Daimler and BMW fell more than three per cent amid fears a broader China contagion could infect other premium brands and expose them to factors such as falling prices and excessive inventory.

Although key Mercedes markets such as Germany have only begun to contract since the start of the third quarter, Daimler had reassured investors in late July it still expected its cars business to achieve flat earnings this year.

“In light of ongoing disappointments, we view investor concerns about management as the biggest factor holding back a better share price performance,” the bank said.

Zetsche said earnings before interest and tax (Ebit) at the luxury unit would fall short of last year’s €5.2bn rather than match it.

Second-half Ebit at the Mercedes-Benz Cars unit will fall below the first-half result, when it earned €2.57bn, the chief executive added. This implies a shortfall of at least €60m for the full year.

Zetsche also reaffirmed full-year forecasts for the entire group.