Mercedes Shows the Car Industry Can’t Be Trusted

Daimler AG has served a profit warning on Friday which seems to be comprehensively sad. This seems to be the fourth profit warning within one year and follows the warning that was seen about three weeks ago. On top of the disclosed problems that were brought to light in the last warning, the company now shows massive new burdens on earnings, which are in connection to the consequences of the emission tampering allegations in relation to diesel cars. This could also prove to have legal consequences for Daimler.

The German firm has made about 1.6 billion euros, which roughly translates to $1.8 billion, showing a loss in the second quarter of the one year profits which are said to be significantly lower than last year’s estimate. The Mercedes Benz division will most probably eke out a return on sales estimating at 4% for the year. This value seems abysmal for a top premium auto manufacturing firm. The French mass market car maker Peugeot SA has achieved a double of this amount in recent times.

Oddly, the company has given up fewer than 1 billion Euros of market value this week, which has been suggested to be bad news for the investors. Some new issues which are arising are rare. Even so, the fall has provided the impetus of 7% on the last dividend to become divided by the share prices. This is not a sign of good faith in the markets for the company.

Daimler has distributed 40% of its net profits to shareholders within the year that passed, which puts the pay out at 3.5 billion euros. It is a reasonable assumption that the net profits of 2019 will not be higher than the last year, and the dividend will suffer as well. The Bloomberg Dividend Forecast has anticipated the pay out to be about 2.65 euros per share which is only one fifth of the total price. Daimler’s cash flow is now under a lot of pressure now, and this small price also seems generous for the current market scenario.


Howard Gonzales

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