Daimler AG has been forced to cut its 2019 earnings outlook after increasing the money set aside to cover issues related to its diesel vehicles by hundreds of millions of euros.
“Daimler AG reassessed the earnings expectations for the 2019 financial year for the Mercedes-Benz Vans division and the Group,” the German automaker said in a statement released over the weekend
“Relevant for the reassessment is an increase in expected expenses in connection with various ongoing governmental proceedings and measures with regard to Mercedes-Benz diesel vehicles,” the company added.
Specifically, the company said the company’s earnings before interest and taxes, EBIT, is now “expected to be in the magnitude of the previous year.”
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The increase in the provision is likely to be “a high three-digit million euro amount,” it added.
The profit warning came after German authorities reported that Daimler must recall 60,000 Mercedes diesel cars in Germany after regulators found that they were fitted with software aimed at distorting emissions tests.
Daimler and its principal unit, Mercedes-Benz Cars, has always denied that “cheated” on emission tests for vehicles using diesel engines like Volkswagen AG did. Daimler has already spent millions of euros on defending itself against the and has been ending its reliance on the diesels once touted by the German auto industry.
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Daimler also disclosed that Mercedes-Benz vans, which expected to lose money this year, will see its loss grow from minus 2% return on sales to a minus 4% return on sales
In April, Daimler said it was facing an increasingly challenging economic environment. The group’s total unit sales decreased by 4% to 773,800 passenger cars and commercial vehicles. Revenue exchange-rate changes, revenue remained at the prior-year level.
Daimler’s first-quarter EBIT 2.8 billion euros well below the prior-year figure of 3.335 billion euros. Earnings per share dropped to 1.96 euros from 2.12 euros in the first quarter of 2018.
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Earnings at all the automotive divisions decreased significantly compared with the first quarter of last year, the company said.